Supreme Court tariff ruling boosts China’s leverage before Trump-Xi summit

The U.S. Supreme Court’s decision to strike down President Donald Trump’s sweeping tariffs has strengthened China’s hand ahead of a summit with his counterpart Xi Jinping, where Beijing is expected to push for reduced U.S. support for Taiwan, analysts said.

In a ruling Friday, the court said Trump wrongfully invoked the International Emergency Economic Powers Act (IEEPA) to implement broad tariffs.

That decision has weakened Trump’s negotiating leverage as he prepared for a trip to Beijing in April, said Wendy Cutler, senior vice president at the Asia Society Policy Institute.

“He has effectively had his wings clipped on his signature economic policy,” said Cutler, who was also a former U.S. trade representative.

Trump will visit China from March 31 to April 2, the first trip by an American president since his last visit in 2017. Xi is also expected to make a state visit to Washington later this year.

Analysts said the ruling could change the dynamics around efforts to extend a trade truce negotiated last year and complicate Trump’s push for Beijing to buy large quantities of U.S. soybeans, Boeing aircraft and energy exports.

“It limits Trump’s ability to deploy tariffs at will, reduces pressure on Beijing to expand soybean purchases or ease rare earth access, and gives China leverage to push for the removal of the remaining 10% tariffs linked to fentanyl,” said Dan Wang, China director of Eurasia Group.

For Beijing’s part, it could use the opportunity to press Washington to ease technology export controls, remove certain Chinese entities from U.S. sanctions lists, and cut back arms sales to Taiwan, said Xinbo Wu, director at Fudan University’s Center for American Studies.

“[The ruling] certainly helps strengthen China’s position in its negotiation with the U.S,” Wu said.

In a statement Monday, China’s commerce ministry said it is currently assessing the impacts from the implementation of the ruling, while urging the U.S. to remove all unilateral tariffs against its trading partners.

“China and the U.S. both stand to gain from cooperation and lose from confrontation,” according to the ministry’s statement translated by CNBC.

Following the Supreme Court’s ruling, Trump responded with a 10% global tariff under Section 122 of the Trade Act of 1974 — before raising it further to 15%, which the president said would be “effective immediately.”

In a Truth Social post on Saturday, Trump dangled a warning that more tariffs would follow: “During the next short number of months, the Trump Administration will determine and issue the new and legally permissible Tariffs.”

It remains unclear if any official documents have been signed detailing the timing. A White House fact sheet issued Friday said the original 10% tariffs would go into effect on Tuesday, Feb. 24, at 12:01 a.m. ET.

Before the ruling, Washington had imposed an additional 20% tariff on Chinese exports last year —including a 10% reciprocal tariff and a 10% fentanyl-related tariff — citing IEEPA authority. The Supreme Court’s ruling implies a net reduction of around 5% in U.S. tariffs on China, according to Goldman Sachs.

“Overall, this development suggests upside risk to our positive outlook on Chinese exports this year,” Goldman said.

A study by the trade monitoring body Global Trade Alert also named China among the top winners under the revised Section 122 tariff regime, with a 7.1 percentage point reduction in tariff rates.

John Gong, a former consultant to China’s commerce ministry, said that Beijing is not “betting their strategy on the dispute between the executive and judicial branches of the [U.S.] government, although a lower tariff rate ‘is something nice to have.'”

The Office of the U.S. Trade Representative said in October last year that China appeared not to have met its commitments to expand market access, lower non-tariff barriers, and ramp up purchases of U.S. goods and services, despite repeated U.S. engagement to address implementation concerns.

“Once the U.S. has decided that a country is an ‘unfair’ trade partner, Section 301 comes with substantial flexibilities to use tariffs or other measures,” said Deborah Elms, head of trade policy at the Hinrich Foundation.

China said Monday that it is “watching closely” the U.S. move in using trade investigations to maintain higher tariffs, vowing to “firmly safeguard” Chinese interests.

The ruling may have a limited impact on broader U.S.-China relations, said Scott Kennedy from the Center for Strategic and International Studies, who noted that tensions extend beyond tariffs.

“The [Supreme Court] ruling doesn’t upend U.S.-China relations the way it might to U.S. ties with its allies and others, because China had already gained the upper hand,” he said.

Kennedy expects the April summit to yield limited results, such as an extension of the ceasefire and sales of U.S. products, but progress is unlikely on thornier issues such as clear guidelines for export controls or rebalancing China’s economy.

During a phone call earlier this month, Xi asserted to Trump that Taiwan is the “most important issue” in U.S.-China relations — overshadowing the commercial deals Trump touted at the time, including Chinese purchases of American energy and agricultural products.

Upcoming talks between the two leaders may prove more political than economic, said Minxin Pei, a professor of political science at Claremont McKenna College.

Xi might be “open to giving Trump a better commercial deal” in exchange for a statement on Taiwan that Beijing could claim as a victory, Pei said.

— CNBC’s Elaine Yu contributed to this story.