US tariffs: A legal setback, but is anything really changing?

The United States’ tariff policy has taken another turn after the Supreme Court ruled against President Trump’s use of emergency powers to impose broad “reciprocal” tariffs.

While the ruling removes one legal pathway, it does not mean tariffs are ending. The administration moved quickly to introduce a new global tariff under a different law, first at 10%, then signalling an increase to 15%.

A question of process vs policy

CBA Head of Foreign Exchange, International & Geoeconomics Joseph Capurso said the shift is more about process than policy.

“The court’s decision changes how tariffs are applied, but not the broader direction,” Capurso said. “The administration has acted quickly to keep tariffs central to its trade strategy.”

Tariffs set to edge higher

CBA expects the overall US tariff rate to rise from 9% late last year to around 12% under the new framework. Because some imports attract no tariffs, others low or high tariffs, US businesses adjust the source and type of imports to minimise their costs.  These adjustments mean the ‘effective’ tariff rate is lower than the ‘headline’ tariff rate. 

The new tariffs can only stay in place for 150 days unless Congress extends them, setting up a political debate in the months ahead.

“With elections approaching, tariffs are likely to remain front and centre,” Capurso said.

What it means for Australia and prices

For Australia, the direct impact is expected to be limited. While the effective US tariff rate on Australian exports may edge higher under the new framework, previous experience shows the actual rate paid tends to sit below headline levels. . For example, the Australian government agreed to a 10% tariff rate.  However, the effective tariff rate has not exceeded 9% and was 6% in December 2025.

“For Australia, the implications are modest,” Capurso said.

“We don’t expect the court’s ruling to materially change the outlook for Australian exports to the US in the short term.”

Different effects across countries

Most economies are expected to face slightly higher tariffs and a small drag on growth. Canada and Mexico are likely to feel a larger impact given their close trade ties with the US.

China stands out as the exception. Its effective tariff rate is estimated to fall from 29% to 23%.

“China is the relative winner in this reshuffle,” Capurso said.

“While tariffs remain elevated, the overall burden on Chinese exports eases compared with the previous setup.”

Financial markets have been relatively calm, reflecting that both the court decision and the policy response were widely anticipated.

“This is unlikely to be the last twist,” Capurso said. “Trade policy will remain a key source of uncertainty for the global economy this year.”