The Trump administration just took a huge loss. A key piece of its economic policy has been dealt a major blow by a new legal ruling. A Manhattan-based federal court has now issued a permanent injunction on most of those tariffs imposed by President Donald Trump. This includes a 10% baseline tariff on all imports and extra tariffs aimed specifically at China, Canada, and Mexico. This ruling is a major blow to Trump’s economic agenda, which largely rested on the tariffs used to shield American industries.
The court’s ruling not only stops the current tariffs, but makes any future changes to them impossible. The panel of three judges granted the White House a 10-day window to complete the formal process of halting the tariffs. Despite this loss, pundits warn that Trump will soon look for other ways to circumvent his inability to impose tariffs to protect American companies and industries.
One possible response is to begin Section 301 investigations against U.S. trading partners of greatest concern. Today’s investigations lead to the imposition of steep tariffs. In short, they can create the bureaucratic skeleton needed for new or expanded levies. As soon as the regulation is provided to the public, analysts are expecting the process to take at least a few weeks.
Goldman Sachs recently outlined the key legal paths open to the Trump administration to impose tariffs even after the court ruling. These include:
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Section 122 of the Trade Act of 1974: This section does not require a formal investigation and could provide a speedy workaround for the administration, potentially replacing the current 10% tariff with a similar levy of up to 15%.
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Section 301 of the Trade Act: This allows the president to investigate unfair trade practices by foreign countries.
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Section 338 of the Trade Act of 1930: This lesser-known section permits the president to impose levies of up to 50% on imports from nations that discriminate against U.S. goods. However, it has never been used before.
In many ways, the ruling serves to highlight this precarious balance between unfettered executive power and much-needed judicial oversight. James Ransdell, a specialist in trade law, laid out what the court’s decision could mean.
“This king-like executive order was always going to, at some point, run into the courts … The difference between being a monarchy and being a constitutional democracy is the legal system.” – James Ransdell
Ransdell acknowledged there is not much precedent for the statute at play in this ruling. That unprecedented nature creates questions about if, and when, the Supreme Court could ultimately hear the case.
So for the time being, Goldman Sachs is counting on the Trump administration to find ways to impose tariffs without an explicit tariff. They stated:
“For now, we expect the Trump administration will find other ways to impose tariffs.” – Goldman Sachs
The administration may consider broadening existing Section 232 tariffs, which currently apply to steel, aluminum, and auto imports, to encompass other sectors.
Even with these promising strategies, uncertainty surrounds the future of U.S. trade policy. Goldman Sachs noted that this ruling is a blow to the administration’s trade war plans. It will probably do little to change the results for the top ten closest US trading partners.
As pressure increases, analysts on all sides are now expecting Trump to move quickly to test the waters and call the court’s decision into question. Economic analyst Steven Blitz noted that an emergency appeal to the Supreme Court would likely be in the works.
“The first thing he will probably do is an emergency appeal to the Supreme Court … wanting to get a ruling from them that basically says you can keep these tariffs in place while the appeals process runs through.” – Steven Blitz