On February 20, the Supreme Court handed the Trump administration a stinging rebuke. In a 6-3 decision, the justices ruled that the International Emergency Economic Powers Act (IEEPA) “contains no reference to tariffs or duties,” pouring cold water on Trump’s claim that the IEEPA grants him unilateral authority to impose sweeping taxes on all goods entering or leaving the United States.
But where one road closes, Trump’s tariff regime finds alternate routes. Within hours, Trump signed a new proclamation slapping a 10 percent global tariff under Section 122 of the Trade Act of 1974, with promises to ratchet it to 15 percent. While this new round of tariffs will require a higher legal bar to implement, the administration is falling in lockstep with those across the political aisle who are rejecting free trade. Once viewed as the cornerstone of the global trading system, the US is turning its back on the market forces that ushered in Pax Americana — an era defined by rising living standards and unprecedented economic growth.
That chapter has ended.
Let’s be clear about the true costs of tariffs. Rather than being used as revenue generators or geopolitical bargaining chips, as Trump likes to tout, they are heavy taxes imposed on Americans. By 2026, the cumulative effect of Trump’s trade measures amounted to the largest tax increase as a share of GDP since the early 1990s. The average household faced roughly $1,300 more per year in costs. Broader estimates suggest price levels jumped more than two percent in the short run — translating to thousands of dollars in lost purchasing power for a typical family.
American manufacturers, the biggest supposed beneficiaries of America’s protectionist walls, are not exactly celebrating either. These measures cannot revive declining industries from which workers and capital have already moved to more productive sectors. A tax on consumers simply can’t reverse long-run economic forces that have made some industries obsolete. It simply transfers wealth from households to narrow interest groups, while leaving factory floors empty and workers worse off. According to researchers at the Federal Reserve, Trump’s Section 232 tariffs on steel and aluminum resulted in 75,000 manufacturing jobs lost downstream — in auto plants, construction firms, and appliance makers that depend on affordable inputs like steel — while adding only 1,000 jobs in steel production itself.
And of course, the working-class Americans whom Trump purports to champion are absorbing the biggest economic blows. Tariffs have fallen hardest on low- and middle-income households that spend the greatest share of income on goods like furniture, clothing, and food. Steel and lumber tariffs drive up housing prices. Higher input prices drive down real wages. And deficit spending further erodes purchasing power through inflation, which has only worsened lately thanks to a misguided belief that tariff revenue will offset America’s spending spree.
While Americans suffer from self-inflicted wounds at home, the world moves on.
Across Asia, China’s meteoric rise as an economic alternative to the US could serve as the deathblow to Pax Americana. One survey found 56.4 percent of regional respondents identify China as the dominant economic force — a figure that has only grown as America retreats from the global stage. Nations across the region are deepening ties with Japan, the EU, India, and Australia, rather than gambling on Washington’s trade whims.
In Europe, the picture is even more stark. The EU’s trade commissioner flew to Washington 10 times in four months in 2025, seeking relief from US tariffs. Each time, he returned empty-handed. European capitals are quickly realizing that once-leader of Pax Americana is an unreliable partner, driven by self-defeating populist impulses that will make America and the world a lot poorer.
Accelerated by Trump’s tariffs, the EU has signed or updated trade deals with Mercosur, Indonesia, India, and Mexico. Other countries across the Anglosphere like Canada and New Zealand are inking new free trade agreements in an effort to diversify beyond the U.S. In other words, as America raises its trade barriers, the rest of the world is lowering theirs, further undermining its standing as the global economic powerhouse.
Meanwhile, the US dollar — America’s enduring monetary advantage — is losing its luster as the world’s reserve currency. Research from Stanford’s Graduate School of Business finds that after Trump’s “Liberation Day” tariffs took effect, foreign investors sold US debt and dollar-denominated assets en masse, a sharp break from historical norms, when the dollar typically strengthened during global stress. The dollar’s share of central bank reserves has slid to a two-decade low, with foreign nations flocking to gold and other less risky assets.
What does this all mean?
As Johan Norberg lays out in his book, Peak Human, golden eras — from Ancient Rome to the Abbasid Caliphate to Song China — flourished when they embraced the free flow of ideas and people. Today’s post-Pax Americana moment is no exception. We’re not immune to the fate of past golden ages, and the surge of fear-driven economic nationalism will only speed the pace of our decline.
While Pax Americana fades in the rearview mirror, that doesn’t mean the US can’t find its way back to the top of the world’s rules-based economic system. But it will require more than a Supreme Court ruling. It will require Congress to reclaim its constitutional authority over trade policy — and an administration that understands that global free trade is the best recipe for making the country great again.
The Court may have struck down the IEEPA tariffs. But unless the US reverses its protectionist course, the costs will compound. Starting at home.Other nations are not waiting for America to find its footing. They are building the trading order for this century — and they are building it without us.
