On Friday, February 20, the United States Supreme Court ruled that President Trump’s invocation of a law designed to address national emergencies, imposing comprehensive tariffs globally, violated federal law. President Trump expressed his disappointment in response to the ruling and pledged to replace the globally imposed tariffs deemed illegal with other tariff schemes.
This decision on Friday only pertained to the tariffs imposed by Trump under the International Emergency Economic Powers Act (IEEPA) aimed at addressing national emergencies. It is estimated that these tariffs have generated over $175 billion in tariff revenue for the United States to date.
The trade policy monitoring organization Global Trade Alert estimated that this decision alone would reduce the weighted average tariffs of the United States by nearly half, from 15.4% to 8.3%.
Following the Supreme Court ruling, many uncertainties still remain, including which new tariffs Trump will seek to impose, whether the funds from the canceled tariffs will need to be refunded, and whether regions that have reached agreements with the United States to mitigate tariff impacts will re-evaluate these agreements.
During a White House press conference, Trump was asked about trade agreements with foreign countries. He stated that many of these agreements would remain in effect, but “some agreements will become ineffective and will be replaced by other tariffs.”
He added, “Some agreements are effective, many agreements are effective, but some agreements are ineffective and will be replaced by other tariff measures.”
Trump further noted that all agreements were in effect, albeit with differences in the implementation process.
According to Reuters, economists from the Dutch financial group ING also share this view, stating, “The scaffolding has been removed, but the building is still under construction. Regardless of today’s ruling, tariffs will continue to exist.”
Even before the ruling, the Trump administration had signaled that it could re-impose tariffs using other legal means.
Below are different approaches the Trump administration could take to continue levying tariffs.
Section 301 of the Trade Act of 1974 has long been a powerful tool for the U.S. government to combat countries engaged in “unreasonable,” “unjust,” or “discriminatory” trade practices.
In his first term, Trump invoked Section 301 to impose broad tariffs on Chinese imports in response to the Chinese Communist Party’s challenges to America’s technological dominance. The United States also utilized Section 301 to address China’s unfair practices in the shipbuilding industry.
There is no limit to the scale of tariffs under Section 301. These tariffs are effective for four years but can be extended.
However, before imposing Section 301 tariffs, the U.S. Trade Representative must conduct an investigation and typically hold public hearings.
Section 122 of the Trade Act of 1974 allows the president to levy tariffs of up to 15% on trading partners in cases of trade imbalances, with a maximum duration of 150 days. The government does not need to conduct a prior investigation.
Paul Ashworth, Chief North American Economist at Capital Economics, wrote in a research report on Friday that the White House is likely to invoke Section 122 of the Trade Act of 1974. Ashworth pointed out that Section 122 stipulates a maximum tariff rate of 15%, lasting only 150 days, and can be implemented without congressional approval.
Following the Supreme Court’s decision on Friday, Trump announced a 10% tariff on global commodities, to be implemented three days later.
The president can invoke the power granted by Section 232 of the Trade Expansion Act of 1962 to impose tariffs on imported goods he deems a threat to national security.
In 2018, Trump imposed tariffs on foreign steel and aluminum products. Since returning to the White House in January of last year, Trump has expanded the scope of tariffs to include automobiles, automotive parts, copper, and lumber under Section 232.
Last September, the president imposed Section 232 tariffs on kitchen cabinets, bathroom vanities, and upholstered furniture.
Section 232 tariffs are not legally restricted but require an investigation by the U.S. Department of Commerce.
Nearly a century ago, amidst the brink of economic collapse for the U.S. and the world, Congress passed the Tariff Act of 1930, imposing high tariffs on imported goods. These tariffs were known as the “Smoot-Hawley tariffs,” named after the congressmen who proposed the bill.
Section 338 of that law authorized the president to impose tariffs of up to 50% on imported goods from countries discriminating against American businesses. No investigation is required, and there is no limit on the duration of the tariffs.
Ashworth also noted that Trump could invoke Section 338 of the 1930 Smoot-Hawley Tariff Act. However, he pointed out that this action could also lead to legal challenges.
These tariffs have never been actually implemented, as U.S. trade negotiators have historically preferred to use Section 301 sanctions. However, the U.S. has used Section 338 tariffs as a bargaining chip in trade negotiations in the 1930s.
Last September, Treasury Secretary Mnuchin told Reuters that if the Supreme Court ruled Trump’s use of emergency powers to impose tariffs ineffective, the government was considering Section 338 as an alternative.