In a 6-3 decision, the U.S. Supreme Court ruled that the Trump administration’s “Liberation Day” tariffs were unlawful. While the ruling removed the administration’s ability to deploy tariffs at will as a tool of economic or geopolitical leverage, it may complicate rather than clarify the economic relationship between the United States and key partners such as Japan, South Korea, and Taiwan as the Trump administration works to replace the “Liberation Day” tariffs with new ones.
In response to the Supreme Court’s decision, the Trump administration moved quickly to put in place new levies. In an initial step, it imposed a global 10 percent surcharge under Section 122 of the Trade Act of 1974. This provision allows the administration to implement a surcharge of up to 15 percent for 150 days to address an international payments crisis. The administration also announced that it would begin a series of expedited Section 301 investigations into unfair trading practices by U.S. trading partners. Each of these moves raises new questions about the timing and scope of new tariffs.
For Japan, South Korea, and Taiwan, the new global surcharge only slightly adjusts their current circumstances. Each negotiated new deals with the United States focused on investment to bring their “Liberation Day” tariffs down to 15 percent. Those deals also reduced some of the Section 232 national security tariffs each faced.
After announcing a 10 percent surcharge, Trump quickly said he was raising the surcharge to 15 percent, but only the 10 percent surcharge has been implemented to date. If the 15 percent surcharge becomes official, it will largely restore the tariff level that was in place for Japan, South Korea, and Taiwan before the Supreme Court decision.
The shift to a Section 122 surcharge, however, does create some differences. With the “Liberation Day” tariffs under the International Economic Emergency Powers Act (IEEPA) struck down by the court, exports to the United States not subject to Section 232 tariffs or other tariffs returned to their most favored nation (MFN) rate, or in the case of South Korea, their KORUS FTA rate. The new Section 122 surcharge exempts goods already subject to Section 232 tariffs and certain critical minerals, but unlike the IEEPA‑based tariffs, it is added on top of each country’s existing MFN rate rather than establishing a new uniform tariff. Under this structure, then, South Korean exports would face a slightly lower overall tariff burden than comparable goods from Japan or Taiwan.
Because the Section 122 tariffs can only be utilized for 150 days, unless reauthorized by Congress, they are only a temporary measure designed to maintain a tariff level in line with many of the Trump administration’s new deals. This will provide the administration time to conduct Section 301 investigations into unfair trade practices to create a more permanent replacement for the IEEPA tariffs.
The administration’s long‑term strategy will hinge on the Section 301 investigations it has already signaled. These cases are likely to draw heavily from the 2025 National Trade Estimate (NTE) report, which catalogued a wide range of tariff and non‑tariff barriers across key U.S. trading partners.
For Japan, the NTE highlighted tariffs on chemicals, seafood, and footwear, as well as non‑tariff barriers affecting U.S. wheat, pork, rice, and ethanol.
South Korea’s tariffs were largely eliminated under KORUS, but the report pointed to persistent non‑tariff barriers in agriculture, procurement, and digital services. This is where Seoul’s investigation into the data breach at Coupang could become an issue, although previously it was separate from the tariffs.
Similar to Japan, the United States has concern over tariff and non-tariff barriers with Taiwan. With regards to Taiwan, the NTE pointed to a list of concerns, including barriers affecting U.S. autos, agriculture, pharmaceuticals, medical devices, and services.
But Section 301 is a more constrained tool than the now-void IEEPA authority the administration previously relied on. It requires the United States to identify specific unfair trade practices, demonstrate harm to U.S. commerce, and negotiate with the partner country before imposing any retaliation. Any tariffs must also be proportional to the estimated burden on U.S. exporters. That makes retaliation for non‑tariff barriers – such as digital restrictions or data‑related investigations – far more difficult to quantify.
In South Korea’s case, for example, translating the impact of the Coupang investigation or longstanding limits on Google Maps into a tariff schedule would be challenging, and unlikely to produce large‑scale duties on its own. By contrast, barriers that restrict physical goods, such as Japan’s agricultural and industrial tariffs, are easier to measure.
Yet exposure to Section 301 investigations alone does not explain why Japan, South Korea, or Taiwan agreed to deals requiring them to invest hundreds of billions of dollars in the United States. Here there are two additional factors to consider – Section 232 tariffs and national security.
Automobiles were the top priority in Japan’s negotiations with the United States, and South Korea was in a similar position. Roughly 30 percent of all Japanese automotive exports are to the United States, while Hyundai Motor Group and GM Korea are even more dependent on automotive exports to the United States. Automobile tariffs are one of the Section 232 tariffs, which were not overturned by the Supreme Court. As Onodera Itsunori, the head of tax policy for the ruling Liberal Democratic Party in Japan, noted, the current situation is “a real mess,” but Japan can’t risk damaging its auto industry to renegotiate the deal as the Trump administration has more flexibility to raise tariffs under Section 232.
The Trump administration has not finalized its Section 232 investigation into semiconductors, which has implications for all three economies as well. Each also faces tariffs from other Section 232 investigations.
These agreements, however, shouldn’t be viewed solely through the context of economic benefits. Japan, South Korea, and Taiwan, similar to Europe, are dependent on the United States for security. Each negotiated with the United States in part to ensure that economic disputes did not damage security ties.
Because of these factors, Japan, South Korea, and Taiwan have each signaled that they will largely maintain the new trade deals they struck with the Trump administration. While the Supreme Court decision has not changed the end result for each, it has added a new degree of uncertainty to the economic relationship going forward as the Trump administration pursues Section 301 investigations.
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