WASHINGTON (AP) — The Supreme Court’s stunning rebuke of President Donald Trump’s most sweeping tariffs means he can’t conjure up new import taxes on a whim anymore.
But the justices’ ruling on Friday is nonetheless unlikely to ease the uncertainty over Trump’s trade policy that has paralyzed businesses over the past year. “It’s only gotten more complicated for everybody,’’ said trade lawyer Ryan Majerus, partner at King & Spalding and a former U.S.
trade official.
Vexing questions remain: How will the president use other laws to reconstruct the tariffs the Supreme Court knocked down, and will those attempts withstand legal challenges? What does the decision mean for the trade deals Trump strong-armed other countries into accepting, using his now-defunct tariffs as leverage? Can importers collect refunds for the tariffs they paid last year, and if so, how?
Then there’s Trump’s own unpredictability. Even though he had weeks to prepare for an unfavorable Supreme Court ruling, his response was still chaotic: On Friday, he said he’d use other legal authority to impose 10% levies on imports from other countries. Saturday, he ratcheted it up to 15%.
Normally, lower tariffs arising from the Supreme Court’s decision might be expected to give the economy a little lift. But “any benefit you would get from that is more than offset to a modest negative from the uncertainty front,” said Mike Skordeles, head of U.S. economics at Truist, a bank.
Gone for good are the sweeping tariffs Trump justified under the 1977 International Emergency Economic Powers Act (IEEPA), mainly to combat America’s persistent trade deficits. But that doesn't mean the president can't invoke other laws to rebuild much of his tariff wall around the U.S. economy.
“Tariff revenues will be unchanged this year and will be unchanged in the future,” Treasury Secretary Scott Bessent said in a Fox News interview Sunday.
Trump reached for a stop-gap option immediately after his defeat Friday at the Supreme Court: Section 122 of the Trade Act of 1974 allows the president to impose tariffs of up to 15% for up to 150 days. But any extension beyond 150 days must be approved by a Congress likely to balk at passing a tax increase as November’s midterm elections loom.
Section 122 has never been invoked before, and some critics say the president can’t use it as a stand-in for the IEEPA tariffs to combat the trade deficit.
Bryan Riley of National Taxpayers Union, for example, argues that Section 122 is meant to give the president a tool to fight what it calls “fundamental international payments problems,’’ not the trade deficit.
The provision arose from the financial crises that emerged in the 1960s and 1970s when the U.S. dollar was tied to gold. Other countries were dumping dollars in exchange for gold at a set rate, putting alarming downward pressure on the dollar. But the U.S. currency is no longer linked to gold, so Section 122 has been “effectively rendered obsolete,’’ Riley wrote in a commentary.
“Given the amount of money at issue for U.S. businesses, it is not hard to imagine a new wave of litigation attacking Section 122, and again seeking refunds of Section 122 duties collected,” said trade lawyer Dave Townsend, a partner at Dorsey & Whitney.
A sturdier alternative is Section 301 of the same 1974 trade act, which gives the United States a handy cudgel with which to smack countries it accuses of engaging in “unjustifiable,” “unreasonable” or “discriminatory” trade practices. In a statement Friday, in fact, U.S. Trade Representative Jamieson Greer said the administration was launching a series of 301 investigations after the loss at the Supreme Court.
Trump invoked Section 301 in his first term to impose sweeping tariffs on Chinese imports in a dispute over the sharp-elbowed tactics that Beijing was using to challenge America’s technological dominance. Those tariffs were upheld in court and kept by the Biden administration.
“We’re eight years in, and those China tariffs are still here,” King & Spalding’s Majerus said. “They’re sticky tariffs.’’
The Supreme Court’s decision also raises questions about the lopsided trade agreements Trump negotiated last year, using the threat of potentially unlimited IEEPA tariffs to squeeze concessions out of U.S. trading partners from the European Union to Japan.
Will countries try to back out of their commitments, now that the IEEPA tariff threat is gone?
The European Union’s trade deal with Trump is already on hold amid confusion following the Supreme Court’s ruling — and Trump’s decision to respond to it with the 15% Section 122 global tariff.
European lawmakers on Monday delayed a vote on ratifying the pact to seek clarification. They are worried that Trump’s new import tax will stack on top of the “most favored nation’’ tariffs the United States charges under pre-existing World Trade Organization rules — and lift U.S. tariffs on EU imports above the 15% the Europeans had agreed to last year.
“A deal is a deal,” said commission spokesman Olof Gill. “So now we are simply saying to the US, it is up to you to clearly show to us what path you are taking to honor the agreement.”
Then there’s the United Kingdom, which had reached a deal with Trump last year for 10% tariffs on its exports to the United States. Will they really go to 15%?
Still, trade analysts largely expect U.S. trade partners to stick by the deals they reached with Trump last year. For one thing, the United States could wallop them with hefty Section 301 tariffs, which are potentially unlimited, for violating trade agreements.
“They’re going to pretty leery of rocking the boat on their deals,” Majerus said. “Violations of trade agreements can be a basis for taking 301 action. So you could see Section 301 become an enforcement mechanism’’ for the United States.
“We are confident that all trade agreements negotiated by President Trump will remain in effect,’’ U.S. Trade Representative Greer said in his statement.
In its ruling, the Supreme Court didn’t bother to say what would happen to all the money collected from the IEEPA tariffs, $133 billion as of mid-December. It left the messy issue of refunds to importers — but likely not to consumers — to lower courts and the Customs and Border Protection agency, which collects import taxes. But they’re likely to be overwhelmed — hundreds of companies are already lined up to get their money back — and the refunds could take months or years to be paid.
“The whole thing’s going to be a mess,’’ Majerus said.
It’s possible that Congress will order Customs to take an “easy ‘one-click’ approach to refunds,’’ wrote strategists Thierry Wizman and Gareth Berry at the investment bank Macquarie. Otherwise, they warned, the Trump administration could “make the refund process as burdensome as possible, requiring every importer to file stacks of paperwork, if not file a lawsuit, to get its money back. That would be costly for businesses.’’
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AP Economics Writers Christopher Rugaber in Washington and David McHugh in Frankfurt, Germany, contributed to this report.
