The Supreme Court’s recent decision to invalidate tariffs imposed under the International Emergency Economic Powers Act (IEEPA) marks a seismic shift in the landscape of international trade and insurance risk. Simon Glairy, a distinguished expert in risk management and the intersection of global trade law and insurance markets, joins us to unpack the ramifications of this ruling. With his deep background in navigating the complexities of cross-border exposure, Glairy provides a vital perspective on how the reassertion of Congressional authority will stabilize global supply chains and reshape the way insurers price political and trade-related risks.
The Supreme Court recently clarified that tariff-setting power belongs primarily to Congress rather than the Executive branch under the International Emergency Economic Powers Act. How will this rebalancing of power change federal trade negotiations, and what specific procedural hurdles will the administration now face when trying to implement new duties?
The rebalancing of power effectively strips the White House of its “fast-track” ability to impose unilateral, open-ended duties under the guise of national emergencies. Historically, the executive branch could act with lightning speed, but this ruling reaffirms that the core power to tax Americans remains firmly within the halls of Congress. Moving forward, the administration will face the grueling procedural hurdle of legislative debate, requiring them to build consensus among lawmakers rather than issuing executive orders. This shift means that trade negotiations will likely become more transparent and deliberate, as the administration can no longer use the 1977 statute as a catch-all weapon to bypass the constitutional role of the legislative branch.
With broad duties on imports from Canada, China, and Mexico being invalidated, many businesses are seeing a sudden shift in their cost structures. Which industries stand to benefit most from this stabilization, and how should they adjust their procurement strategies to capitalize on this reduced regulatory uncertainty?
Import-dependent sectors, such as manufacturing and retail, are the primary beneficiaries of this stabilization, as they were the hardest hit by sudden, hard-to-price tariff shocks that squeezed their profit margins. Companies in these industries can now breathe a sigh of relief as the immediate threat of sweeping “reciprocal” tariffs on our largest trading partners—Canada, China, and Mexico—has been lifted. To capitalize on this, procurement officers should shift away from defensive, short-term sourcing and look toward long-term contracts that were previously too risky to sign. By leveraging this reduced regulatory uncertainty, businesses can stabilize their supply chains and potentially see a decrease in the cost of trade credit and surety bonds, which had risen sharply due to the volatility of the past year.
Insurers have long struggled with hard-to-price shocks from unilateral emergency tariffs. How will this ruling specifically affect the underwriting of trade credit and business interruption policies, and what metrics should risk managers now use to evaluate the likelihood of legislative trade disruptions versus executive actions?
For underwriters, this ruling is a massive step toward predictability, as it narrows one of the most unpredictable channels for sudden economic shocks that previously plagued trade credit and business interruption policies. Underwriters can now move away from pricing for “black swan” executive actions and instead focus on the more visible, slower-moving machinery of Congressional legislation. Risk managers should recalibrate their metrics to monitor legislative calendars, committee hearings, and bipartisan trade coalitions rather than trying to decipher the intent behind executive emergency declarations. This change allows for a more actuarially sound approach to assessing risk, as the formal, legislated process gives insurers and their clients significantly more time to adjust their coverage and premiums before a policy change takes effect.
Trade policy has recently been used as a tool to influence geopolitical goals, such as pressuring foreign governments over territorial interests or drug flows. Without the catch-all weapon of emergency economic powers, what alternative economic levers remain available, and how might these shifts impact global market volatility?
While the IEEPA has been blunted as a tariff tool, the administration still possesses other levers, such as targeted sanctions or duties imposed under different statutory authorities that were not struck down by this ruling. However, the inability to use broad tariffs as a cudgel to influence geopolitical goals—like the recent attempts to pressure European governments over territorial interests in Greenland—means the administration must find more nuanced diplomatic or economic paths. This shift could actually decrease global market volatility in the long run because it prevents the sudden, unilateral “shocks” that often send markets into a tailspin. We are likely to see a return to more traditional economic statecraft, which, while slower, provides a more stable environment for international commerce and marine cargo operations.
Since the 1977 International Emergency Economic Powers Act does not explicitly mention tariffs, the court has narrowed the definition of “regulating” imports. What are the long-term legal implications for other executive emergency powers, and how can businesses better prepare for a shift toward more formal, legislated trade processes?
The long-term legal implications are profound, as the court has signaled a strict textualist interpretation that prevents the executive branch from “stretching” nearly 50-year-old statutes to cover modern economic maneuvers. By narrowing the definition of “regulating” to exclude the imposition of taxes or duties, the court has set a precedent that could limit executive reach in other areas of economic policy where the word “regulate” is used loosely. Businesses must prepare for this shift by strengthening their government affairs divisions and participating more actively in the legislative process, as trade policy will now be won or lost in Congressional committees. Investing in sophisticated supply-chain monitoring and political risk insurance remains essential, but the focus must shift from reacting to midnight tweets to engaging with the deliberate, documented work of lawmakers.
What is your forecast for global trade stability in the wake of this ruling?
I forecast a period of “cautious stabilization” where the era of sudden, unilateral tariff spikes is replaced by a more predictable, though still tense, trade environment. While the ruling does not erase the underlying geopolitical frictions with China or Mexico, it eliminates the most volatile mechanism for trade disruption, which will likely lead to a cooling of the extreme price fluctuations we’ve seen in the trade credit market. We will see a renewed focus on multilateral agreements and formal legislative debates, which, despite being slower, offer the structural integrity that global markets and insurers crave. Ultimately, the return of trade authority to Congress provides a much-needed buffer for the global economy, allowing businesses to plan for years rather than just weeks or months.
