Trump warns of significant impact if US reverses trade agreements

Trump warns of significant impact if US reverses trade agreements

President Donald Trump has warned that the United States might have to "unwind" trade deals with major trading partners, including the European Union, Japan, and South Korea, if the Supreme Court rules against the legality of his tariffs. This warning came as the administration plans to challenge a recent appeals court ruling that deemed many of Trump's tariffs illegal.

Trump made these comments during a meeting with Polish President Karol Nawrocki, indicating that a loss in the Supreme Court case could significantly impact the U.S. economy. He stated that the U.S. could become "unbelievably poor again" if the tariffs are struck down, potentially leading to the invalidation of trade agreements that have been negotiated in recent months.

The Supreme Court ruling addressed the legality of what Trump calls "reciprocal" tariffs, first imposed in April, as well as a separate set of tariffs on China, Canada, and Mexico. These tariffs have been a significant part of Trump's trade strategy, aiming to prioritize domestic manufacturing and national security. However, the high court's decision does not impact other tariffs issued under different legal authority.

The administration's tariffs have reshaped global commerce, introducing a new era of tariff-driven uncertainty. The average applied tariff rate has reached 19.5%, the highest since 1941, with sector-specific levies as high as 125% on Chinese goods. Retaliatory tariffs from key partners like China, Canada, and the EU have added $330 billion in export costs and contributed to a 1.1% contraction in U.S. GDP [4].

Trump's comments suggest that the trade deals reached with major trading partners were framework agreements subject to change, not fully fledged trade agreements. Legal and trade experts note that the Supreme Court's majority of Republican-appointed justices may slightly improve Trump's odds of keeping at least some of the tariffs in place. However, the exact outcome remains uncertain.

Senator Ron Wyden, the top Democrat on the Senate Finance Committee, expressed concern about the confusion caused by Trump's comments. He stated that the administration's story about whether its trade deals will hold any water if the tariffs are struck down is unclear.

Investors and financial professionals should closely monitor the Supreme Court's decision, as it could have significant implications for global trade and the U.S. economy. The potential unwinding of trade deals could lead to further economic disruption, forcing businesses to reassess their supply chains and investment strategies.

References:
[1] https://news.bloomberglaw.com/international-trade/carney-sees-progress-in-call-with-trump-sends-officials-to-dc
[2] https://www.reuters.com/world/asia-pacific/trump-says-us-might-have-unwind-trade-deals-with-eu-others-if-it-loses-tariff-2025-09-03/
[3] https://www.reuters.com/world/asia-pacific/trump-says-us-may-have-unwind-trade-deals-will-suffer-greatly-if-it-loses-tariff-2025-09-03/
[4] https://www.ainvest.com/news/impact-trump-tariff-uncertainty-global-trade-investment-strategy-2509/