The US Supreme Court buries the extreme tariff scenario on China

The 20 February 2026 ruling, handed down by a 6-3 majority, constitutes the most consequential geopolitical development since the first Huawei sanctions in 2018. The United States Supreme Court ruled that IEEPA does not authorise the president to impose tariffs unilaterally. The scenario of duties exceeding 60% on Chinese goods is legally dead 1.

The economic impact is immediate. Goldman Sachs estimates a net reduction of approximately 5 percentage points in effective duties on Chinese imports. The administration responded with Section 122, which authorises temporary 10% duties for 150 days — a limited tool that does not replace IEEPA's firepower. Section 301 duties remain in force at approximately 30%, but the upward trajectory is broken 12.

Beijing enters the April Trump-Xi summit with a strengthened bargaining position. China is the primary trading partner of approximately 65% of the world's countries. Renminbi invoicing now represents 35% of Chinese foreign trade, up from 5% in 2015. Exports to the United States fell 20%, but the total trade surplus reached a record USD 1.2 trillion in 2025, compensated by Europe and ASEAN 13.

Some analysts downplay the ruling's significance. They point out that the administration retains other levers — entity lists, export controls, Section 301. This is correct. But the tail risk — that of an uncontrolled tariff war triggered by presidential decree — has disappeared. And it is precisely this tail risk that maintained a discount on Chinese assets since 2018 2.

The bottom line. The legal constraint imposed by the Supreme Court durably alters the risk-return calculation for Chinese investments. The maximum tariff wall now has a legal ceiling. The market has not yet fully priced in this reality.