nmoyPhoto/ShutterstockThe decision by the US Supreme Court to rule most of Donald Trump’s “liberation day” tariffs illegal will have far-ranging consequences for the president’s economic agenda. Although the administration will find other ways to increase tariffs, their usefulness as a weapon of economic warfare will be diminished. And the issue – among the most unpopular of the president’s economic policies – will cause him serious political damage.Trump’s first move following the ruling has been to impose a 15% tariff on all imports. Imposed under a little-used law, the tariff rate is fixed and time-limited to 150 days before needing congressional approval. It would take only a few Republicans to block its extension. And the midterm elections are looming. Using a flat-rate tariff means that some countries that settled earlier and got a better deal – including the UK – are now worse off, while others that had a higher tariff rate imposed on them have, at least for now, benefited. It also could mean that those that pledged to invest hundreds of billions in the US economy – including Japan and the EU – may now question whether their commitment still stands.Trump’s ability to threaten instant retaliation to any country that crosses him will also be constrained by the other two legal routes he can use to raise tariffs. Both provisions would require time-consuming, detailed investigations into specific industries or countries, and rates once fixed cannot as easily be changed.The domestic political fallout from the Supreme Court decision is also substantial. Two thirds of the US public disapprove of Trump’s tariff policy, with large sections believing that his tariffs are inflationary. Democrats are already calling for the money raised to be returned to consumers. And businesses, including small firms hit hard by the tariffs, are suing the government. If the US government can no longer rely on the income from tariffs – which rocketed to US$287 billion (£211 billion) this year – it would put further pressure on the fast-growing federal budget deficit. This is already US$2 trillion and projected to rise to US$3 trillion by the 2030s, as a result of Trump’s large tax cuts.Nor have Trump’s tariffs achieved their objectives. The trade deficit was slightly larger in 2025 than the year before, with US$1 trillion more goods being imported than exported. Tariffs have not boosted jobs: manufacturing employment fell by 80,000 and unemployment is up to 4.3% compared to 4% in January 2025.The bigger problem for the president is the overall performance of the economy. The Republicans have only a narrow majority in the House of Representatives, and most observers are predicting that the Democrats will gain control in November. Trump’s ratings on his performance on the economy have been slipping, with 55% now disapproving. And 65% disapprove of his handling of inflation. He now faces an uphill struggle in the State of the Union address to convince the public that the economy is back on track under his leadership.Weak growth and high inflationThere is still debate over how much the tariffs have contributed to inflation, but the US economy is only growing at 2.2% a year, its slowest rate since 2020. Inflation is the main concern of US voters, with figures putting the rate at 2.9% – well above the Federal Reserve target of 2%. Estimates by economists suggest that companies are increasingly passing on the cost of tariffs to consumers, which may well be driving inflation. Recent job figures may have provided some more positive news, but voter worries about high prices may be hard to shift. Inflation is the number one issue worrying US voters. WKanadpon/Shutterstock Trump’s next battle is for control of the US Federal Reserve. This independent agency sets short-term interest rates and manages the US currency – Trump wants it to sharply cut interest rates to boost the economy. But Fed chair Jerome Powell is reluctant to cut rates too quickly when inflation is not yet contained. Powell’s term is due to end in May, and the president has nominated a new chair, Kevin Walsh, who backs his policy of more interest rate cuts. But he will need to convince a majority of the other 11 members of the Fed’s Open Market Committee to go along with these. Trump, as well as being openly critical of Powell, also fired (in an unprecedented act) Fed governor Lisa Cook, a supporter of Powell who was appointed by President Joe Biden. This decision is being challenged in the Supreme Court, and in a preliminary hearing several judges appeared to be sceptical of its legality – including Brett Kavanaugh, a conservative who voted in favour of Trump in the tariff case.Financial markets could wobble if Trump succeeds in taking political control of the Fed. Its independence is seen as vital for ensuring non-partisan and credible management of interest rates and inflation. But if Trump does force the Fed to cut rates further, this could add to the inflationary pressures and damage the Republicans’ path to retaining power in the midterms.After one year back in power, Trump’s failure to deliver his promised transformation of the US economy (and especially to tackle inflation) is having serious political consequences that could damage his freedom of action. The Supreme Court’s ruling has thrown US tariff policy into turmoil and weakened the president’s ability to dictate to other countries on both economic and political issues.If the Supreme Court also backs the independence of the Federal Reserve, Trump’s bid for complete control of US economic policy will face another major setback. But the most important limit on the president’s powers would be a defeat for the Republicans in the midterm congressional elections in the House of Representatives, leading to a divided Congress that will no longer rubber-stamp Trump’s policies.Steve Schifferes does not work for, consult, own shares in or receive funding from any company or organisation that would benefit from this article, and has disclosed no relevant affiliations beyond their academic appointment.