In a significant legal development, a federal appeals court recently ruled that former President Donald Trump overstepped his presidential powers when he imposed tariffs on nearly every country in the world. The ruling is slated to go into effect on October 14. It has raised troubling questions about the legality of such tariffs and their impact on international trade relations.
On April 2, 2018, Trump marked what he derisively termed as “liberation day.” To give them jobs, he passed protective tariffs for American workers at the National Economic Club event. He asserted that these macroeconomic financial provisions would be one of the most effective means to aid labor. He admitted that the costs are often shifted to the American public. The tariffs imposed a 10% baseline on almost all U.S. trading partners. They additionally targeted the small nation of Lesotho—home to just over 2.3 million people—with a draconian 50% tariff.
Background on Tariffs
During the Trump administration, the administration used this same Trade Act of 1974 to impose tariffs. In particular, they went after countries like Canada, Mexico, and China, accusing those countries of participating in unfair trading practices. The Trade Act limits the use of tariffs by instituting a 15% cap. It reduces their length to a mere 150 days for countries where the U.S. has large trade deficits. Unlike other tariff measures, Trump’s tariffs surpassed this threshold. They even went so far as to enshrine a bizarre 10% tariff on the largely uninhabited Heard and McDonald Islands.
According to one report, tariff revenue had increased to $159 billion by July 2021. That figure was more than double the revenue brought in that same period last year. This massive inpouring of cash has led to unprecedented levels of grantee oversight. People are understandably zeroing in on the long-term economic impact on American consumers who pay these costs.
Court’s Findings
The federal court in New York ruled in May that Trump’s tariffs were illegal, stating that he had “asserted an expansive authority that is beyond the express limitations” of the law. In doing so, the judges unequivocally found that none of his actions allowed him to unilaterally impose tariffs or taxes of this magnitude.
“If allowed to stand, this Decision would literally destroy the United States of America.” – Donald Trump
The court’s ruling signals genuine concerns regarding the legality of Trump’s tariffs. They would risk retaliation from our trading partners and potentially start a cycle of trade wars, further perverting the global trade landscape.
Implications and Responses
In reaction to that ruling, Trump continues to argue that the tariffs are necessary. He claims they are essential to protecting American sovereignty and our labor market. In fact, he offered dire predictions that if we were to remove these tariffs it would result in ruinous calamity for the country.
“If these Tariffs ever went away, it would be a total disaster for the Country.” – Donald Trump
The reach of this court ruling goes far beyond U.S. borders. Countries targeted by Trump’s tariffs can now get started. Barring a negotiated resolution, they can be expected to challenge these tariffs in international forums, pursuing relief from what they consider excessive financial pressures on their economies.
With the ruling expected to come into force in early October, businesses and policymakers are preparing for a possible new wave of changes to trade strategies. The uncertainty surrounding tariff policies could lead companies to reevaluate their supply chains and pricing strategies, impacting markets both in the U.S. and abroad.