Supreme Court strikes down Trump’s massive tariffs and eases trade tensions with Brazil

The tariff dispute that took place in 2025 continues to affect trade relations between Brazil and the United States and creates uncertainty for Brazilian exporters. On July 30, 2025, President Donald John Trump invoked the IEEPA (International Emergency Economic Powers Act) and issued Executive Order 14323, titled “Addressing Threats to the Territory of the United States by the Government of Brazil,” which imposed exorbitant additional tariffs of 40% on Brazilian products—with minimal exceptions for certain raw materials—under the pretext that Brazil’s actions and policies constituted an “unusual and extraordinary threat to the national security, foreign policy, and economy of the United States,” thereby elevating Brazil to the status of a national threat to the United States of America.

It is important to bear in mind that 40% tariffs are considered prohibitive, meaning that domestic products cannot compete in the U.S. market, as the final price becomes unviable for consumers, who will prefer other goods. Numerous Brazilian products, especially manufactured goods, saw their final prices increase by around 50%. The objective of prohibitive tariffs is to suffocate trade between nations and to forcibly and unilaterally disrupt Brazil’s export relationships. It is therefore understood that this action was not based solely on economic reasoning, but also reflected a political intention by the president, who began using economic instruments as political tools that directly affect the sovereignty of countries.

The imposition of a 40% ad valorem tariff by the U.S. government was not merely an economic action aimed at preserving the country’s domestic economy and “national security,” as claimed by President Donald Trump, but rather a punitive measure intended to pressure the Brazilian state into adopting actions that would benefit the United States. In a portion of his statement, Trump asserted that his decision to declare a national emergency was also based on what he described as reprehensible actions against freedom of speech and the persecution of former president Jair Bolsonaro through unjustified legal accusations. He also claimed that the 2026 elections would be compromised due to the alleged inability of Brazilian judicial institutions to conduct them in a fair and democratic manner.

It is worth noting that the executive order exempted certain products from the new additional 40% tariff. Annex I—listing raw materials such as fertilizers and minerals, on which the U.S. depends intrinsically for its economic development—thus protected U.S. interests by allowing continued extraction of what it needed from Brazil without enabling Brazil to profit from products not directly aligned with U.S. government interests. In the long term, this could lead to forced deindustrialization in the Brazilian economy, as the national focus would shift toward meeting new demands for primary goods.

The punitive nature of the measure becomes evident when comparing Brazil with the rest of the American continent. According to Mercopress—an independent news agency focused on political and economic analysis of Latin America—Brazil was the country most affected by Trump’s actions, which sought to isolate the Brazilian economy from its Latin American neighbors.

However, the legal fragility of these executive orders did not withstand scrutiny by the United States Supreme Court on February 20, 2026. By majority vote, the judiciary ruled that the IEEPA does not grant the president the authority to impose tariffs. According to Chief Justice John Roberts, the term “regulate” in the law does not encompass the creation of customs duties. Thus, in the absence of explicit legislative delegation for taxation, the Court determined that the executive orders lacked legal foundation, overturning the barriers imposed against Brazil and other trade partners.

The Supreme Court’s decision was also based on the Major Questions Doctrine, according to which Congress must expressly authorize policies with significant economic and political impact, especially when core legislative powers—such as taxation and tariff policy—are at stake. For the majority, it would be unacceptable for Congress to have delegated to the president the power to impose unlimited tariffs of any value for an indefinite period, based solely on the declaration of a national emergency—whose definition, according to the Court, is controlled by the Executive itself.

It is important to note that, prior to the current administration of Donald Trump, no president had used the IEEPA to impose tariffs.

Just hours after the decision, with the tariffs overturned, President Trump announced at a press conference at the White House that he would rely on an alternative legal basis to maintain pressure on imports. On the same day, the White House issued a proclamation imposing a global surcharge of 10% under Section 122 of the Trade Act of 1974—a provision that allows the president to adopt temporary tariffs of up to 15% on imports when the United States faces serious balance-of-payments deficits.

The following day, in a post on his social network Truth Social, Trump announced an increase to the legal maximum of 15%. The new surcharge came into effect on February 24, 2026, and is strictly temporary, expiring on July 24, 2026, unless extended by Congress.

The new regime differs from the previous one in that, while the IEEPA tariffs were country-specific—and Brazil, as noted, bore a punitive 40% surcharge—the Section 122 measure imposes a uniform rate on all trade partners, regardless of origin, thereby legally undermining the targeted tariff punishment against Brazil.

Following the Supreme Court’s decision, Bloomberg analysts described Brazil and President Lula as “perhaps the biggest winners in the world.” Brazil’s strategy of neither retaliating nor yielding to pressure from Washington throughout 2025 ultimately proved successful. While countries that negotiated bilateral agreements under the IEEPA framework found themselves dealing with the legal consequences of those arrangements’ invalidity, Brazil entered the new phase of negotiations without having made concessions and with a lower final tariff than that applied to many traditional U.S. allies.

From an economic perspective, the reduction of the tariff from 40% to 15% provided immediate relief for high value-added sectors of Brazilian industry, such as automotive and machinery and equipment, whose exports had been virtually halted. It is estimated that maintaining the punitive surcharge would have cost Brazil billions of dollars in foreign exchange in just the first half of 2026. Following the court decision, shipments to the Port of Houston and other U.S. terminals gradually resumed, although exporters continue to operate with reduced margins due to the temporary nature of the new rate and the backlog of inventories accumulated during the period of heightened tariff aggression.

Even so, the new 15% surcharge, although universal, still represents a significant burden for Brazilian exporters. Moreover, the U.S. government had already initiated, in July 2025, a formal investigation into Brazilian digital trade practices under Section 301 of the Trade Act of 1974—an investigation that remains active and could, in the future, justify new specific and long-lasting tariffs. Unlike Section 122, measures under Section 301 are not subject to a time limit or fixed percentage cap. Uncertainty therefore remains, along with the challenge of building stable trade relations between Brazil and the United States in an environment of increasing political instrumentalization of U.S. tariff policy.

Anna Wiendl and Evelin Mwanyika