Key Takeaways
- President Trump used his 2026 State of the Union address to declare a new "golden age" for the U.S. economy, despite a major Supreme Court ruling that struck down his primary tariff mechanism as unconstitutional.
- The administration has pivoted to "Plan B" tariffs, invoking Section 122 of the Trade Act of 1974 to impose a 10% to 15% global baseline tariff for a temporary 150-day period following the court's rejection of IEEPA-based duties.
- Chinese President Xi Jinping and German Chancellor Friedrich Merz met in Beijing to elevate bilateral ties to "new levels," focusing on stabilizing China-EU relations amid global trade volatility.
- Strategic cooperation was pledged in high-tech and industrial sectors, specifically targeting Artificial Intelligence (AI), pharmaceuticals, automotive, and chemical industries.
- The U.S. Supreme Court's 6-3 decision in Learning Resources Inc. v. Trump has forced a shift in trade policy, returning significant revenue-raising authority to Congress and creating a $175 billion question regarding potential tariff refunds.
U.S. President Donald Trump delivered a defiant State of the Union address on Tuesday, asserting that the American economy is "back, bigger, better, and stronger than ever before." Trump brushed aside recent legal setbacks, claiming his trade policies have sparked a manufacturing renaissance and that the nation has "seen nothing yet" in terms of growth. He noted that core inflation has hit its lowest level in over five years, though critics pointed out that the current 2.4% rate remains a focal point of public anxiety.
The speech came just days after the U.S. Supreme Court issued a landmark 6-3 ruling striking down the "Liberation Day" tariffs. The court concluded that the International Emergency Economic Powers Act (IEEPA) does not grant the president the authority to impose revenue-raising taxes, a power reserved for Congress. Trump castigated the justices during his address, calling the decision "unfortunate" and an "embarrassment," while immediately announcing a pivot to Section 122 of the Trade Act of 1974 to maintain a 10% global tariff (with intentions to hike it to 15%).
While Washington grapples with domestic legal battles, German Chancellor Friedrich Merz arrived in Beijing for a high-stakes summit with President Xi Jinping and Premier Li Qiang. Xi urged both nations to advance their comprehensive strategic partnership to "new levels," emphasizing that Germany remains China's most vital trading partner in Europe. Merz, leading a delegation of 30 senior executives, is seeking to balance "the right amount of cooperation" with the reality of increasing competition from Chinese firms.
Premier Li Qiang specifically called for deepened cooperation in "traditional" sectors like the automotive and chemical industries, while pushing for joint research and development in AI and biopharmaceuticals. Li expressed hope that Germany would serve as a "stabilizing anchor" for China-EU relations, which have been strained by recent export curbs and trade disputes. During his visit, Merz is scheduled to tour a facility for Mercedes-Benz Group AG (MBG) and meet with tech leaders in Hangzhou, the headquarters of Alibaba (BABA).
The geopolitical shift comes as German manufacturers face mounting pressure from both U.S. protectionism and Chinese domestic competition. Merz’s visit—the first by a foreign leader since the Chinese New Year—highlights Berlin's pragmatic approach to maintaining market access in Asia. Despite the "competition" theme of the trip, the two sides emphasized the need for "predictable relations" and "mutual respect" to ensure global economic stability.
In the U.S., the financial implications of the Supreme Court ruling remain a primary concern for the private sector. The Penn-Wharton Budget Model estimates that the federal government could owe importers more than $175 billion in refunds if the previous tariffs are fully invalidated by lower courts. While Trump’s new Section 122 tariffs provide a temporary 150-day window of executive control, the administration will eventually require Congressional approval to extend these measures, setting the stage for a major legislative battle over the future of U.S. trade policy.
Ed Liston is a senior contributing editor at TheStockMarketWatch.com. An active market watcher and investor, Ed guides an independent team of experienced analysts and writes for multiple stock trader publications.