Import Tariffs in the USA: What Next?

The Supreme Court ruled that not all tariffs were illegal, and Trump could introduce others, but he can no longer arbitrarily manage tariffs and use them as a leverage tool.

The first thing Trump did after learning about the Supreme Court’s decision and insulting the judges was to announce the introduction of a universal flat import tariff of 10% on all goods imported from the US. A day later, he raised the tariff rate to 15%.

The Supreme Court found those tariffs (most of which were part of Trump’s toolkit) introduced by Trump with reference to the 1977 Act on Emergency Foreign Policy and Foreign Trade Presidential Powers to be illegal.

All sorts of tariff increases for specific countries to arbitrary levels (up to 146% for China at one point), followed by reductions and “deals” — all of this no longer works. Existing trade agreements involving US import duties are also now in question, including those with the EU, China, and India.

What can Trump do now? He can use the Trade Expansion Act of 1962 and the Trade Act of 1974. Section 232 of the 1962 Act allows the president to impose tariffs on certain categories of imported goods to “combat imports that threaten national security”. This section was already used by Trump to impose universal tariffs on imported steel and aluminum. And these tariffs seem to remain in effect.

From Friday, Trump began using Section 122 of the 1974 Act, which allows the president to impose tariffs to protect the domestic market. These tariffs must be universal (i.e., applied to all trading partners) and cannot exceed 15%. Moreover, the tariffs imposed by the president are valid for 150 days and are automatically canceled unless extended by Congress. Lawmakers can also cancel the tariffs earlier, but then the presidential veto comes into play.

At the same time, on Friday, Trump announced that all existing trade deals should continue to be in effect. But this is a cry in the wilderness, because these agreements were not ratified by Congress, and the tariffs operating in accordance with these agreements were introduced under the 1977 Act, which the Supreme Court has deemed illegal.

Trump also has another lever — Section 301 of the 1974 Act, which allows the president to use import tariffs against countries with which trade is deemed “unequal and unfair”, i.e., to counter certain trade practices. However, such a conclusion can only be made after special investigations. Trump has already announced that his trade representative’s office (currently held by Jayson Grier) will begin such investigations. However, this is not an easy path: the report must be published and sufficiently substantiated. And actions in accordance with such a report can be challenged by Congress or in court.

Other options for the president include using Section 201 of the 1974 Trade Act and Section 338 of the 1930 Tariff Act. Here, it will be necessary to prove intentional discrimination against the US and its producers and other commercial structures. The maximum potential tariff on these grounds is 50%.

IN SUMMARY. Trump still has some moves and even tariffs at his disposal. But, firstly, it will no longer be possible for Trump to negotiate with other countries “from a position of tariff strength”. And secondly, Congress has smelled blood and will almost certainly try to take away the president’s foreign trade powers. Especially since elections are coming up, and economic problems can be blamed on “ill-considered tariffs”, against which lawmakers are “resolutely fighting”.