Supreme Court Strikes Down Trump Tariffs, Putting $350B Korea Deal in Limbo

What happens when the foundation of a $350 billion deal crumbles overnight? That's the question facing South Korea and other US trading partners after the Supreme Court delivered a stunning 6-3 ruling Friday, declaring Donald Trump's sweeping emergency tariffs unconstitutional.

The decision doesn't just invalidate a policy—it potentially unravels a web of international agreements that Trump secured using these tariffs as leverage. For Korea, which committed to investing $350 billion in the US in exchange for reducing tariffs from 25% to 15%, the ruling creates an unprecedented diplomatic puzzle.

The Constitutional Roadblock

Chief Justice John Roberts delivered the court's reasoning with surgical precision: "IEEPA contains no reference to tariffs or duties." The International Emergency Economic Powers Act of 1977, Trump's legal justification for the tariffs, simply doesn't authorize what the president claimed it did.

The ruling's breadth surprised many. Roberts, joined by two fellow conservative justices, rejected Trump's assertion that he could unilaterally impose "tariffs of unlimited amount, duration, and scope." The court demanded clear congressional authorization for such extraordinary presidential power—authorization that doesn't exist.

Trump had framed his April 2, 2025 tariff announcement as "Liberation Day," arguing that trading partners' lack of "reciprocity" and their trade barriers created "large" and "persistent" deficits that posed an "unusual" and "extraordinary" threat to US national security. The Supreme Court wasn't buying it.

Korea's $350 Billion Dilemma

For South Korea, the ruling creates a fascinating case study in modern diplomacy. The bilateral deal seemed straightforward: Seoul invests $350 billion in American infrastructure and manufacturing, Washington reduces Korean product tariffs from 25% to 15%. But what happens when half the bargain becomes constitutionally invalid?

Cheong Wa Dae issued a carefully worded response, saying it would "comprehensively review the court decision and consider its response in a direction that best serves national interests." Translation: they're scrambling to figure out what comes next.

Victor Cha from the Center for Strategic and International Studies offers an intriguing political angle. With local elections approaching in June, President Lee Jae-myung could face domestic pressure to abandon the Washington trade deal entirely if the reciprocal tariffs disappear. Why honor a $350 billion commitment if the promised benefits evaporate?

Trump's Legal Scramble

The Trump administration isn't conceding defeat. Multiple workarounds are under consideration: Section 232 of the 1962 Trade Expansion Act for national security-based tariffs, Section 301 of the 1974 Trade Act for country-specific duties, and Section 338 of the 1930 Tariff Act for discriminatory trade practices.

Each option comes with complications. They require different justifications, procedures, and face their own legal challenges. More critically, with midterm elections looming, the administration faces the politically toxic "affordability" issue—voters feeling the pinch from higher prices.

The financial stakes are enormous. Penn Wharton Budget Model economists estimate over $175 billion in tariff collections could require refunding. That's not just an accounting problem; it's a potential campaign liability.

The Broader Unraveling

Trump's IEEPA tariffs weren't just about trade deficits. He wielded them as diplomatic weapons: pressuring Mexico, Canada, and China on fentanyl trafficking; curbing India's Russian oil purchases; securing deals with Japan and the European Union. All these arrangements now face uncertainty.

The court's composition makes the ruling particularly significant. This wasn't a predictable liberal-conservative split. Two conservative justices joined the majority, suggesting the issue transcended partisan politics and touched fundamental constitutional principles about executive power limits.

The New Trade Reality

What emerges from this legal earthquake? A world where presidential trade authority faces stricter judicial oversight. Where international partners must navigate not just political promises but constitutional constraints. Where $350 billion investment commitments hang in legal limbo.

For global markets, the ruling introduces a new variable: US trade policy isn't just subject to electoral cycles but constitutional review. Partners like Korea, Japan, and the EU must now factor judicial risk into their diplomatic calculations.