The Trump administration may replace struck-down tariffs with a 10 percent levy affecting Sri Lanka and other countries. Analysts say this follows a Supreme Court ruling limiting presidential authority under the IEEPA and opens new investigations under the Trade Act of 1974.
US considers new 10% tariff after Supreme Court blocks previous ad hoc measures
The United States may impose a 10 percent tariff on imports from Sri Lanka following the Supreme Court’s decision to strike down earlier ad hoc “reciprocal” tariffs. The court ruled 6-3 that President Donald Trump did not have the authority to impose tariffs under the International Emergency Economic Powers Act (IEEPA), citing a national emergency.
In response, the Trump administration has indicated that a temporary 10 percent surcharge could be applied under Section 122 of the Trade Act of 1974. Additionally, investigations under Section 301 of the same act are planned to assess “unjustifiable, unreasonable, discriminatory, and burdensome” trade practices by foreign partners, according to US Trade Representative Jamiesen Greer.
“These investigations will likely cover major trading partners and focus on issues such as industrial excess capacity, forced labor, pharmaceutical pricing, discrimination against US technology companies, digital services taxes, ocean pollution, and trade practices related to seafood, rice, and other products,” Greer said in a statement.
Sri Lanka may also face pressure to implement or adjust digital service taxes under the International Monetary Fund’s guidance. The country’s long-standing price controls in the pharmaceutical sector, initiated about a decade ago, have restricted the sale of higher-quality drugs, pushing patients toward generics without clinical trials. Despite these controls, drug prices have risen amid broader inflationary pressures and a central bank operating framework that has struggled to stabilize prices. Critics have linked this environment to an increase in deaths associated with substandard or untested medications.
Trump criticized the Supreme Court justices for being “unpatriotic,” but the justices emphasized that the previous tariffs would have represented an unprecedented expansion of presidential authority without Congressional approval. Other sudden taxes imposed in Sri Lanka, including mid-night gazette taxes on basic foods, have similarly drawn criticism for potentially harming vulnerable populations.
While the Supreme Court ruling struck down the so-called “reciprocal” tariffs on countries like Canada and measures targeting specific products such as fentanyl, tariffs on steel imposed under a separate law remain unaffected. President Trump has reaffirmed his intention to implement a 10 percent levy under different legal provisions.
The Trade Act of 1974, enacted following the collapse of the Bretton Woods system and the Smithsonian Agreement, allows the US to impose tariffs following investigations confirming that foreign trade practices harm domestic businesses. Analysts note that while some sectors, such as steel, continue to favor protectionist measures, many US companies now rely on global supply chains and benefit from free trade, which could limit support for broad new tariffs.
For Sri Lanka, potential tariffs could impact exports and create uncertainty for businesses engaged in US trade. Policymakers and industry groups are closely monitoring developments, as any new levy may require detailed investigations and procedural compliance by US trade authorities before implementation.
The 10 percent tariff proposal underscores ongoing tensions in international trade policy and highlights the complex interaction between presidential authority, judicial oversight, and Congressional powers in shaping US import measures. Countries like Sri Lanka may face renewed scrutiny as Washington seeks to address perceived trade imbalances and protect domestic industries while navigating global supply chain dependencies.