Days that dazed the tariff Don

For a President who wants to ‘Make America Great Again,’ on a path he architects, paves, and constructs, the past week or 10 days were something like a series of nightmares. Perhaps the most disappointing moment for Donald Trump was the Supreme Court ruling that his “reciprocal tariffs” were illegal. The phrase, after all, is among his favourite words in the dictionary, which he has reiterated several times. To rub salt to the legal wounds, the Court is full of pro-Republican judges, many appointed by Trump. In the past, it repeatedly ruled in his favour in a series of emergency rulings on immigration, removal of the bosses of independent agencies, and wider cuts to spending.

On the day of the ruling, the US Department of Commerce released GDP data, and noted that it “increased at an annual rate of 1.4 per cent in the fourth quarter of 2025 (October-December). Hence, quarterly growth slowed sharply, with the rate well below the 2.5 per cent predicted by the economists. For the full year (2025), the GDP grew by 2.2 per cent, down from 2.8 per cent in 2024. Trump justified it. A long shutdown of the federal government due to the fractures within the legislature was a major drag, and shaved at least one percentage point. Trump stated that the loss to the GDP was a higher two per cent.

“The contributors to the increase in real GDP in the fourth quarter were increases in consumer spending and investment. These movements were partly offset by decreases in government spending and exports. Imports, which are a subtraction in the calculation of GDP, decreased,” stated an official note. Compared to the third quarter of 2025, the deceleration in the fourth quarter, the note added, was partly offset by an acceleration in investment, and the decrease in imports was “smaller than in the prior quarter.” The sum of consumer spending, and gross private fixed investment increased 2.4 per cent in the fourth quarter, compared with an increase of 2.9 per cent in the third quarter.

Inflation was on the rise, which diluted the president’s attempts to safeguard the interests of the American consumers. The price index for gross domestic purchases increased by 3.7 per cent, higher than 3.4 per cent in the third quarter. The personal consumption expenditures price index rose by 2.9 per cent, compared with the previous quarter’s hike of 2.8 per cent. Excluding food and energy prices, this index increased 2.7 per cent compared with an increase of 2.9 per cent. A weaker GDP increases the pressures on the policymakers to lower interest rates, which runs counter to caution due to persistent core inflation.

If this was not enough, the US recorded a large trade deficit in 2025, with December’s monthly shortfall hitting $70.3 billion, and full-year one reaching $901.5 billion, or one of the largest annual gaps since 1960. The widening reflected a combination of stronger imports and weaker exports, while the tariffs were aimed to curtail imports, and a series of bilateral trade pacts hoped to boost exports. Imports rose 3.6 per cent in December 2025, led by consumer and business purchases such as computer accessories and motor vehicles. Firms accelerated buying early in the year to avoid anticipated tariff increases.

Volatile categories, including gold and medicines, swung sharply as companies adjusted inventories around the policy changes. Worse, exports fell by 1.7 per cent, with declines in several categories that reduced foreign sales, and contributed directly to the larger gap. Trade patterns changed markedly in 2025. Merchandise deficit with China narrowed to $202 billion, its lowest level in more than two decades. But the shift coincided with rising deficits with other supplier nations such as Mexico and Vietnam, which reached record highs. America’s trade deficit with the European Union was the highest at $218.8 billion, the figure ($146.8 billion) was substantial with Taiwan.

Heavy investments in artificial intelligence (AI), and related hardware boosted imports, as American firms imported $145 billion more in computers and accessories as they expanded AI capacity. In 2025, total exports were $3.43 trillion against imports of $4.33 trillion, which show the scale of the trade imbalance. Economists warn that while a part of the import growth reflects healthy investments (notably in AI), persistent deficits can weigh on manufacturing, employment in trade-exposed sectors, and the current-account position. Policymakers face a tradeoff. Measures to curb imports can disrupt supply chains, and raise costs, even as efforts to boost exports require sustained market access, global demand, and competitive positioning.

Of course, the Supreme Court ruling on tariffs will add further diplomatic and geopolitical twists. The various bilateral deals that American has signed in the recent past are poised delicately, even though they may not have been automatically voided. However, the bargaining powers, and negotiating context may change. Trade partners may pause to seek legal guarantees to renegotiate tariff commitments, or to demand clearer, statutory authority. This has begun to happen in the cases of the EU, the UK, and others. Reports indicate that New Delhi rescheduled the trip of a trade delegation to Washington over the sanctity and clarity related to the trade deals.

However, Trump’s cryptic “Nothing changes” comment, when he was questioned on the Indian deal, implied that the bilateral deal will remain as it stands despite the Court ruling triggered wild speculations. “They will be paying tariffs, and we will not be paying tariffs,” he said. In effect, while India will pay 18 per cent, most of the US’ goods will enjoy zero per cent. There is talk about the US president’s upcoming Beijing visit, beginning March 31, where China President Xi Jinping may sit at the negotiating table with a stronger leverage.

Whatever spin different sides may give, and whatever outward contempt Trump shows after the Supreme Court order, the bilateral trade dynamics has shifted. Even allies will feel a bit more powerful, and feel that they can renegotiate a few clauses, if not now, later. China will claim that it has won the global trade wars, even if it needs to ride on the shoulders of an order of the American court. It may not allow Trump to push Xi for larger purchases of American soybeans, Boeing aircraft, and energy. China may go slow on opening the supply valve for a steady flow of rare earth minerals, a crucial component of the American hi-tech and AI-based manufacturing.