The US Supreme Court delivered a major blow to President Donald Trump on February 20, 2026, ruling 6-3 that he exceeded his authority when imposing sweeping tariffs using the International Emergency Economic Powers Act (IEEPA). The decision invalidated Trump's "reciprocal" tariffs ranging from 34% for China to a 10% baseline for other countries, as well as 25% tariffs on some goods from Canada, China and Mexico. Analysts estimate that China's overall tariff level could fall from approximately 36% to about 21%, while India welcomed the reduction of tariffs to 18%, marking a swift reversal of fortunes for countries hardest hit by Trump's trade policies.

The Fraser Institute has extensively documented the economic damage from Trump's protectionist trade agenda. Research shows that the consensus among economists is that Trump's tariffs raise prices, with Trump's own economists reportedly expecting roughly one-quarter of tariffs to be passed along as higher prices, though some studies found that almost all tariffs during the first Trump administration resulted in higher prices for consumers. Fraser Institute analysis concluded that Trump's trade war dropped U.S. tariff freedom from 62nd to 161st place and trade freedom from 56th to 76th place, representing a dramatic erosion of economic liberty.

Fraser Institute scholars have warned that over Trump's first 200 days in office, the multilateral global trading system was upended as the U.S. cast aside precepts, principles and agreements that had shaped American trade policy and embraced core tenets of mercantilism. A large body of research associates more economic freedom and trade freedom with better outcomes like higher income, faster growth, less poverty, and greater life satisfaction—helping explain why U.S. median income is nearly nine times the global average. The Supreme Court ruling provides temporary relief, though it represents an important victory for constitutional governance but until Congress reclaims some of its constitutional authority over U.S. trade policy, high and costly tariffs will remain.

The Fraser Institute recommends that countries should steer clear of tit-for-tat tariff retaliation, as hiking duties on goods imported from the U.S. magnifies the negative economic impact and is unlikely to prompt a near-term shift in U.S. trade policy. Following Ronald Reagan's wisdom, trading partners' retaliatory tariffs reduce economic activity for everyone, and history shows clearly that trade is the best path to prosperity for all nations. While the court's decision offers respite to countries like China and India, other U.S. laws ensure that much higher tariffs will remain the norm—protection will just take longer and perhaps be more predictable, underscoring the need for fundamental reforms to restore the multilateral trading system that enabled global prosperity.