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Following the Supreme Court’s decision to strike down President Donald Trump’s International Emergency Economic Powers Act of 1977 tariffs, Trump issued new 10% tariffs under the seldomly used Section 122. However, a panel of judges has now struck down these new tariffs. While Trump remains steadfast in his commitment to apply tariffs on goods coming into the U.S., there is uncertainty as to what these tariffs will look like moving forward. Despite the losses, Trump continues to be seeking out new ways to impose tariffs on goods entering the U.S.
Donald Trump And Tariffs
Early in his second term as President, Trump invoked the IEEPA to impose sweeping tariffs on Canada, Mexico, and China. A couple of months later, on “Liberation Day,” Trump followed the same law and imposed a 10% tariff on most goods imported globally, as well as tariffs on specific countries labeled as reciprocal tariffs.
However, one key issue with these tariffs kept surfacing – the U.S. Constitution does not allow the President to impose tariffs. Instead, this power resides with Congress. Approximately one year after these tariffs were imposed, a significant number of them were struck down, according to The New York Times. In particular, the tariffs specifically aimed at Canada, Mexico, and China, and the reciprocal global tariffs (both implemented under the IEEPA) were deemed illegal. The result is that the tariffs were immediately nullified, and those who paid them were entitled to refunds.
Not all tariffs were overturned. In fact, those invoked under Section 232 (aimed at applying a tariff on steel and aluminum products) and Section 301 (China tariffs) remain in effect. However, the vast majority of tariffs that Trump imposed were no longer in effect after the Supreme Court decision.
Trump did not concede and instead applied the laws under Section 122 to impose a new 10% global tariff. Section 122 provides the President with emergency powers to respond to a significant trade imbalance that puts the strength of the U.S. dollar at risk or leads to greater international instability. These tariffs are designed to be short-term, with a maximum number of days set at 150. They are also capped at a maximum rate of 15%, and they need to be designed to meet the specific deficits and pressures outlined in the law.
Despite these tariffs being imposed, a panel of Federal judges in the Court of International Trade ruled in a split decision that the tariffs imposed under Section 122 will not be permitted, according to the New York Times. Furthermore, any tariffs collected under this recent bout may be eligible for refund.
What Is The Future For Donald Trump And Tariffs In the U.S.?
The most recent decision marks a new era for Trump’s tariffs. Now facing a second straight Federal court defeat, there appears to be significant limits placed on the President’s ability to impose tariffs. Instead, the courts appear to have shifted this decision-making authority back to Congress.
This defeat appears to have upended his big picture plans of having a continuous tariff policy in place. In fact, the Section 122 tariffs were always temporary (maximum number of days set at 150), and the administration had already been working on more permanent tariffs under Section 301 to take effect once these temporary measures could no longer be implemented, according to the New York Times. However, with this defeat, goods will now come to the U.S. without a tariff being imposed.
Potentially more critical for this discontinuous tariff policy is the fact that those who paid the tariffs when imposed are likely to be entitled to refunds for what they paid. The refund process is already underway for the IEEPA tariffs, and now that these Section 122 tariffs have been struck down, precedent would suggest that those, too, can be refunded.
Despite some of the legal losses the Trump administration has faced over these tariffs, it appears to remain steadfast in having tariffs imposed on goods entering the U.S. The process for implementing the aforementioned Section 301 investigations is already underway and appears to be able to be implemented as early as July. Assuming that no snags are hit during this process, we can expect to see a wave of new types of tariffs being imposed. This resiliency, while costly, reflects the administration’s unwavering commitment to imposing tariffs on goods coming into the U.S.