After the US Supreme Court ruled against his emergency tariffs, President Donald Trump has vowed to rebuild the tariff wall by other means. However, his tariff weapon, blunted by the ruling, would never be the same again.
Mint looks at the options Trump now has.
How has the Trump administration reacted to the Supreme Court order?
President Trump termed the Supreme Court ruling, which struck down the imposition of tariffs using the International Emergency Economic Powers Act, as ‘deeply disappointing’ and lashed out at the justices for not having the courage to do what is right for the country.
He said he will not back down on tariffs, which had become central to foreign and economic policies in his second term. Soon afterwards, US Treasury Secretary Scott Besant clarified that the administration would get back to the same level of tariffs for various countries by using other means that are less direct and more convoluted.
What options does the administration have?
There are a few laws that the administration can use to reimpose the tariffs. Section 122 of the Trade Act of 1974 permits the US President to impose tariffs up to 15% on a country to address a serious balance of payment deficit.
Section 301 of the same law allows for tariffs once the US Trade Representative finds that a country has engaged in an unfair trade practice.
Section 201 and Section 338 permit tariffs to protect US industries from increased imports. Finally, Section 232 of the US Trade Expansion Act allows for sector specific tariffs on national security grounds.
What has the US administration done so far?
As an immediate measure, he has imposed a 15% tariff using Section 122 of the trade act. Tariffs under this law can be levied for only up to 150 days and need congressional approval to be extended. For now, Trump has bought time as his administration looks for other avenues to rebuild the tariff wall. It is not yet clear how he will go about it.
Why is the SC order a big blow for Trump?
The ruling, while reaffirming Congress’ primacy over levying tariffs, is the first judicial pushback against executive excesses in Trump’s second term. Also, the reason the Trump administration used an obscure International Emergency Economic Powers Act (IEEPA) to levy the tariffs in the first place was because the law offered a carte blanche (complete freedom to act as one wishes) with no real restrictions.
Alternate options come with some form of restrictions. Section 122 tariffs that Trump has levied now can be applied for only 150 days and need Congress’ approval beyond that. Other laws cannot be applied universally and require formal investigations.
What does this mean for global trade and India?
Trump can no longer use tariffs as an indiscriminate weapon like he penalized India for buying Russian oil or the fentanyl tariffs imposed on Canada, China and Mexico. Any executive excess in interpreting laws for tariff application will be thwarted by the Courts.
So, sweeping tariffs are unlikely, as it will be difficult to replicate the breadth and intensity of IEEPA tariffs. The administration will, however, find ways to keep some tariffs going. Trade deals in the pipeline, including that of India, will remain on hold for want of clarity, while those inked could be reopened for renegotiation.