(Image source from: Moneycontrol.com)
In a significant blow to US President Donald Trump, the Supreme Court made a decision on Friday to overturn large tariffs that his government had placed, stating that the president went beyond his powers by using emergency measures intended for national emergencies. The court explained that Trump used a law meant for such situations to support wide-ranging trade tariffs, which the judges found to be outside the president's authority. However, this ruling might not mean the end of Trump’s plan for tariffs. After the ruling, Trump stated, "I will sign an order today to put a 10% tariff globally in place under Section 122, in addition to the regular tariffs we are already charging, and we will also begin several Section 301 and other investigations to safeguard our nation from unfair trading practices by other countries and companies. "
Section 122 of the Trade Act of 1974 offers Trump the fastest temporary option. It permits tariffs of up to 15% to deal with a significant and serious balance-of-payments problem. Nevertheless, this authority is only valid for 150 days unless Congress agrees to extend it. This could serve as a temporary fix until Trump’s administration finds a more lasting solution. Another law Trump can utilize is Section 232 of the Trade Expansion Act of 1962. This section allows for tariffs if imports are considered a threat to national security. Trump previously applied this law to enforce tariffs on steel and aluminum during his first term in office. Unlike the tariffs that the court rejected, trade duties under Section 232 remain legally valid. To implement these duties, a Commerce Department investigation is needed, which can take up to 270 days but provides a stronger legal basis.
Another option available to Trump is Section 301 of the Trade Act of 1974, which permits the United States to target nations accused of unfair trading practices. This law has frequently been used against China and allows for tariffs that can stay in effect indefinitely after an investigation by the US Trade Representative. A new option that has not been used before, Section 338 of the Tariff Act of 1930, permits tariffs of up to 50% against countries considered to be discriminating against American products. This doesn't require an investigation, and there is no limit on how long the tariffs can remain in effect. In the past, Trump’s officials have indicated their intention to use this option if faced with a setback at the US Supreme Court. Additionally, officials have spoken about an alternative involving import licenses. This would require importers to obtain licenses with fees to bring products into the United States. This possibility was also brought up during discussions regarding the Trump tariff case. However, it was suggested that if these licensing fees function similarly to taxes, they could be declared unconstitutional since the power to tax lies with Congress.
The government had put fees on imports using the International Emergency Economic Powers Act, which is a law meant for serious national crises. The Supreme Court decided that applying this law to set broad trade tariffs was too much power for the executive branch. Even with this ruling, the White House was prepared for the decision. US Trade Representative Jamieson Greer mentioned to The New York Times last month that the team was ready to respond quickly if the court's decision was unfavorable. We will "begin the next day" to set up tariffs "to address the issues the president has pointed out," Greer explained. He continued that advisers had already found several legal ways to help achieve Trump's trade objectives. "The fact is, the president will include tariffs in his trade strategy moving forward," Greer stated.
However, it is still uncertain how quickly new tariffs might be put in place.
