Today, the U.S. Court of International Trade ruled in our favor. It closes the loophole of the high reciprocal tariffs that President Donald Trump slapped on hundreds of countries last April. This decision not only vacates the tariffs but almost entirely strips Trump of his negotiating leverage in current and upcoming trade negotiations. The court’s order, which deemed the tariffs unconstitutional, may have far-reaching repercussions on Trump’s economic strategy.
In April, President Trump signed huge tariffs on several countries into place, stating that they were needed to fix long-standing trade deficits. The White House has a lot of flexibility to authorize tariffs of up to 15% under Section 122 of the Act. These tariffs are allowed to last for a maximum of 150 days on countries with “significant and deteriorating trade surpluses.” The recent tariff ruling from the U.S. Court of International Trade does, at least for now, put a stop to these punitive tariff actions.
In their latest investors’ note, Goldman Sachs analysts estimate that this ruling imposes a “hard stop” for the Trump administration’s tariff plans. This has led to increased uncertainty across the trading ecosystem. Although U.S. stock futures remained positive following the court’s decision, the economic implications of this ruling cast a shadow over Trump’s trade agenda.
“This ruling represents a setback for the administration’s tariff plans and increases uncertainty but might not change the final outcome for most major US trading partners,” – Jan Hatzius
The court’s ruling is a serious setback to Trump’s intent to craft one-sided trade agreements with other countries. Member countries in negotiations can’t commit to making big concessions when the future of these harmful tariffs is unclear. Consequently, Trump’s bargaining power in negotiations is severely reduced.
Andrew Thurston, a trade analyst, commented on the broader implications of the ruling:
“Not only will tariffs at U.S. customs be halted for the foreseeable, but will businesses that have already paid ‘illegal’ tariffs on U.S. imports be reimbursed? If so, this would be a sizeable task for the U.S. customs authorities and businesses may be left in the dark for a long period of time.”
Though the ruling does provide some clarity, legal analysts still expect that the Trump administration will try to find other ways to go after tariffs. According to Goldman Sachs, the White House could be rolling out several new Section 301 investigations in the next few weeks. These investigations may focus on other trading partners in the months ahead. These investigations would be the mechanism through which country-specific tariffs and rates higher than 10% could be imposed in specific cases.
“As it seems unlikely that the administration could win an appeal in the 10 days it has under the CIT order to remove the tariffs, we would expect the White House to announce a similar across-the-board tariff using Sec. 122,” – Jan Hatzius
The speculation points to the Trump administration’s continued desire to find novel ways to levy tariffs. This may now be possible even after the recent court ruling. As analysts ourselves, we would urge caution in believing that it’s possible to conclude investigations on every major trading partner within such a short time period.
Lizzy Galbraith, a legal expert with the Institute for Policy Integrity, said the administration will almost certainly appeal the ruling. She stated:
“The administration will almost certainly appeal the ruling and seek to lift the block on IEPPA tariffs while the case is ongoing. The case will first go to the US Court of Appeals for the Federal Circuit but is likely to end up in the Supreme Court.”
Trade experts are hearing that countries currently engaged in ongoing trade negotiations with the U.S. are keeping a close eye. Still, there is cause for an appeal. Galbraith emphasized that many nations may delay making significant concessions until there is clarity regarding the status of the tariffs.