In a year marked by diplomatic brinkmanship and economic uncertainty, the relationship between the United States and China has entered a new, unpredictable phase. The Supreme Court is now poised to decide whether the president can wield the International Emergency Economic Powers Act (IEEPA) as a tool to impose tariffs on imports from dozens of countries—a move that could reshape not only U.S. trade policy but also the global order itself. According to GIS Reports, President Donald Trump, now in his second term, is surrounded by advisers known as "China hawks," all intent on outcompeting Beijing across military, technological, and economic fronts. Yet, despite the tough rhetoric and aggressive executive orders, the administration’s actual strategy remains shrouded in ambiguity, leaving allies, adversaries, and markets alike guessing about America’s next move.
The roots of the current legal drama go back to 1977, when Congress passed the IEEPA. The law was intended to let presidents freeze assets or restrict transactions in genuine emergencies—not to serve as a standing authority for tariffs that sidestep legislative oversight. As The Washington Post notes, the Trump administration’s lawyers now claim that without IEEPA tariffs, the nation would be “defenseless,” as if the entire U.S. economy hinged on the president’s unilateral power to raise import taxes. But critics argue this is a dangerous overreach, warning of a looming trade cold war where tariffs, export bans, and shifting rules splinter global supply chains and erode trust among even America’s closest allies.
Recent months have only heightened these tensions. From May through September 2025, when both so-called "trafficking" and "reciprocal" tariffs were in full force, customs duties made up about 6 percent of federal receipts and less than 5 percent of federal outlays. But, as GIS Reports points out, the IEEPA tariffs themselves accounted for only a fraction of that total. If the Supreme Court were to strike them down, the resulting loss would amount to just a few tenths of a percent of federal revenue—hardly the fiscal cliff some have predicted.
Meanwhile, the economic pain has been real, particularly for small businesses and farmers. Every credible study of the 2018–2019 tariffs found that the costs landed squarely on U.S. consumers and producers, not foreign exporters. The 2025 emergency tariffs have only magnified these harms, hitting a wider swath of trade. According to a brief filed by 43 economists and three Cato Institute scholars, small firms faced the steepest hikes, farmers lost access to overseas markets, and many companies delayed investments amid constant uncertainty about what products or countries might be targeted next. "Tariffs imposed under IEEPA are not saving the nation. They tax it twice, once at the border and again through higher prices, slow growth, and diminished trust in US law," the economists wrote.
Markets, too, have responded in telling ways. Treasury yields barely budged on tariff announcements, signaling that investors saw them as little more than background noise. But when the Court of International Trade blocked many of the tariffs in May, U.S. stocks jumped more than 1 percent the very next day—hardly a vote of confidence in the administration’s approach. Research cited by The Washington Post shows that exporters trading with partners bound by credible agreements fared far better during the global financial crisis than those exposed to unpredictable policy shifts. Such agreements, the study found, act as a kind of insurance, stabilizing expectations and investment. When governments replace rules with discretion, they weaken growth and recovery.
Yet, the uncertainty in U.S. trade policy is only one piece of a much larger puzzle. As GIS Reports details, the Trump administration’s China policy has been anything but straightforward. In November 2025, Presidents Trump and Xi Jinping met face-to-face on the sidelines of the Asia-Pacific Economic Cooperation summit in Gyeongju, South Korea—their first in-person encounter of Trump’s second term. The summit yielded a flurry of deals: the U.S. agreed to pause some tariffs on China for another year, halt plans for a 100 percent tariff on Chinese exports, and reduce a fentanyl-related tariff. China, for its part, lifted restrictions on rare earth exports and pledged to renew soybean purchases from American farmers.
But beneath these headline-grabbing agreements lies a deeper ambiguity. The administration has avoided a hard decoupling from China, instead increasing trade pressures on traditional allies and partners—sometimes straining relationships that are vital for countering Beijing’s influence. Tensions with India, for example, have escalated over trade disputes and punitive tariffs linked to India’s purchase of Russian oil, raising concerns that New Delhi might drift closer to China and Russia. Yet, a new U.S. ambassador has been warmly received in India, and both countries have signed a 10-year defense cooperation agreement, signaling a desire to restore ties.
On other fronts, the administration’s signals are equally mixed. President Trump extended the deadline for banning TikTok in the U.S., even as a sale of TikTok’s American operations to a group led by Larry Ellison and Oracle awaits Chinese approval. The White House has also expressed a willingness to allow 600,000 Chinese students into U.S. universities, a move that seems at odds with the concerns of his conservative base about Chinese influence. And while the U.S. has reaffirmed that its commitments to Taiwan are up for negotiation with Beijing, Trump pointedly did not discuss Taiwan during his meeting with Xi—a move interpreted by some as a sign that Washington is not prepared to alter the status quo, despite Beijing’s calls for unification.
At the same time, the administration has taken steps to strengthen America’s military and technological edge. The U.S. has ramped up its nuclear arsenal, developed a national air and missile defense system dubbed the "Golden Dome," and invested heavily in cyber defenses. Meanwhile, Beijing has responded with its own show of force, imposing restrictions on exports of rare earths and other critical materials in a bid to counter U.S. sanctions on advanced chips and manufacturing tools.
The administration’s approach has left many allies uncertain about the future. Several key Indo-Pacific diplomatic posts remain unfilled, and the U.S. National Security Council staff plays a limited role in policy-making, according to GIS Reports. This has led to concerns that Asian allies are being sidelined, even as the president signs major defense and trade deals with Australia, South Korea, and Japan. In Europe and the Middle East, the U.S. has been more visibly engaged, facilitating a ceasefire between Israel and Hamas and negotiating a peace deal in the South Caucasus.
Looking ahead, most analysts expect President Trump to continue his improvisational, risk-informed strategy—emphasizing military buildup, economic resilience, and efforts to limit China’s ability to carve out hard spheres of influence. Both Washington and Beijing seem to view recent accommodations as temporary, with neither side expecting agreements to endure. As GIS Reports puts it, "The rivalry between the U.S. and China will resemble a horse race that is still in progress." Allies and partners, for their part, may find it difficult to chart their own course amid the uncertainty, but as long as American power appears to be rising relative to China’s, they are likely to stick with Washington.
For now, the fate of the IEEPA tariffs—and the broader question of how America wields its economic and strategic power—rests with the Supreme Court. Whatever the outcome, one thing is clear: the world’s largest economy is at a crossroads, where the rule of law, global trust, and the future of U.S.-China relations hang in the balance.