Trump administration scrambles to pick up the pieces of broken tariffs

By Ana Swanson

WASHINGTON — The Trump administration has begun using a patchwork of trade laws to re-create the sweeping tariffs that the Supreme Court struck down as illegal last week.

But the approach will require a more cumbersome set of tariffs, ones that President Donald Trump will not be able to issue quickly or on a whim. The tariffs may be levied by country, trade issue or product and will probably take months to go into effect. The question now is how closely the old structure will be reproduced — or whether the new tariffs could end up creating an entirely different set of winners and losers.

The process is already creating friction inside the administration as officials try to satisfy Trump’s desire for swift and punishing tariffs. Officials at the Office of the United States Trade Representative and the Commerce Department are vying for which agency should be in the lead, people familiar with the matter said.

At the trade representative’s office, employees have begun working on new investigations that will cover most major trading partners and could result in tariffs grouped by country or trade issue. In an interview on ABC’s ‘This Week’ on Sunday (22), Jamieson Greer, the trade representative, said he would be initiating investigations related to issues like excess industrial capacity, which would cover a lot of countries in Asia that “make more than they can consume.”

“We had to look at backup plans, and we found ways to really reconstruct what we’re doing,” he said. “Now it doesn’t have the same flexibility that the president had under the previous authority that he was using, but it gives us very durable tools.”

Greer added that the president had been campaigning on tariffs and intended to deliver on his promises. “The legal tool to implement it, that might change, but the policy hasn’t changed.”

Greer had said in a statement on Friday (20) that his staff would begin investigating a variety of trade issues, including excess capacity, forced labour, pharmaceutical pricing, discrimination against US tech companies, ocean pollution and unfair trading practices for seafood and rice. Those investigations would be carried out on an accelerated timeline under Section 301 of the Trade Act of 1974, which allows the administration to impose potentially crippling tariffs if it finds evidence of unfair trade behaviour.

The office would also continue prior Section 301 investigations involving countries like China and Brazil.

At the Department of Commerce, employees are looking into new trade investigations on industries including batteries, chemicals, plastics and equipment for telecommunications and the electrical grid, people familiar with the matter said. Those investigations are being run under Section 232 of the Trade Expansion Act of 1962, which allows for tariffs to be imposed on national security grounds.

Trump has already imposed tariffs on a raft of products using Section 232, including steel, pharmaceuticals, furniture and other goods, which could be expanded to cover related goods. The department could also move quickly to issue new tariffs using investigations underway into sectors like minerals, semiconductors, robotics and medical equipment.

Neither the US trade representative nor the Commerce Department provided a comment. In a social media post on Monday, Trump said he had plenty of other options to impose taxes on imports.

“The court has also approved all other Tariffs, of which there are many, and they can all be used in a much more powerful and obnoxious way, with legal certainty, than the Tariffs as initially used,” he said.

As the complex effort to rebuild the tariffs unfolds, it is likely to inject even more uncertainty into the economy. Companies have spent the past year trying to navigate Trump’s unpredictable trade policies.

“We are in a spot of more uncertainty than we were last week as to what tariffs will look like in a month or two months or six months down the road,” said Greta Peisch, a partner at the law firm Wiley Rein who was a trade official in the Biden administration. “It does increase the complexity. There are more moving parts to this.”

The old system of tariffs that Trump announced last year was already vastly complicated, involving double-digit tariffs that varied for different trading partners based on trade flows, trade practices, negotiations with the United States and, seemingly, the president’s whims.

The new system may be even more byzantine, though much of it still needs to be determined. For now, Trump has used a legal authority known as Section 122 of the 1974 Trade Act to replace the tariffs the Supreme Court has struck down.

Section 122 allows the administration to impose up to a 15% tariff for 150 days. After that, the tariffs would need approval by Congress, which trade experts say is unlikely given that tariffs are unpopular with many voters.

The administration has already created some notable exemptions for the new 15% global tariffs, some of which are more generous than before — for example, a new exemption for countries that were part of a Central American trade agreement signed in 2004.

But beyond those carve-outs, the Section 122 tariffs are set at a flat rate globally, at 15% for every country. That has been a major setback for some close allies and trading partners, like Britain, Singapore and Australia, which had previously faced lower tariff rates on their exports.

The change has been a boon for others, though, like China, India and Brazil, whose tariff rates were previously set significantly higher.

The flat 15% tariff is set to expire in late July. By that time, the administration has signalled that it will have other tariffs ready to go to replace it, using the Section 301 provision at the trade representative’s office and Section 232 tariffs at the Commerce Department.

Another option for the administration would be to look to Congress to pass a trade bill. Greer had been interested in the idea of legislation that would lock in tariffs and other terms of the trade agreements his office negotiated over the past year. But neither administration officials nor lawmakers seem to see that as a possibility in an election year.

“As President, I do not have to go back to Congress to get approval of Tariffs,” Trump wrote on social media Monday (23) morning. “It has already been gotten, in many forms, a long time ago!”

As future tariffs are determined, companies and America’s trading partners have a lot to lose or gain. As a result, the Trump administration is likely to face fierce lobbying from chief executives and foreign leaders. It will also have to contend with concerns about how voters view tariffs ahead of the midterm elections.

The Supreme Court’s ruling, that Trump exceeded his legal authority in imposing certain tariffs, centred on a powerful economic tool that the president used liberally over the past year. Trump wielded the 1977 emergency law, the International Emergency Economic Powers Act, or IEEPA, to punish and cajole trading partners over a range of issues, such as the trade deficit and the flow of fentanyl into the United States.

A New York Times analysis in November found that the president had used IEEPA to impose tariffs on an estimated 29% of all imports, affecting more than $300 billion in imported goods.

But there are questions about how much the Supreme Court ruling will really restrain the president, who continues to profess his devotion to tariffs. Trump has said in recent days that the Supreme Court decision affirmed his ability to use other tariff authorities, as well as more extensive trade measures like embargoes.

While the other tariff laws require reports and public hearings, some government employees say that some of these processes have recently become an exercise in box-checking. At the Commerce Department, for example, employees last year were inundated with requests to create complex reports under tight deadlines on the national security threat trade posed to critical industries such as minerals, semiconductors and copper.

Lori Wallach, the director of the Rethink Trade program at the American Economic Liberties Project, said the court’s decision was not likely to have much effect on the overall economics of tariffs. But it could change the “lightning-bolt” way Trump had chosen to impose them, she said, including against the European Union for regulating Big Tech companies or against Canada after it aired a television ad the president didn’t like.

“We’re not going to see a huge difference in tariff rates because they can use other authorities, but this could constrain Trump’s Zeus-like use of tariffs as punishment on non-trade matters,” Wallach said.

In his first term, Trump had relied on other legal authorities, including Section 232 and Section 301, to impose his tariffs. The decision was made at the urging of advisers like Robert Lighthizer, then the trade representative, who saw IEEPA as vulnerable to court challenges.

In the second term, Trump’s advisers, like Greer, also recognized the threat of a legal challenge. But Trump was emboldened on his trade agenda. He wanted maximum power to threaten other countries with tariffs and negotiate trade deals, and he chose to use IEEPA because of its flexibility, advisers said.

Trump drew on IEEPA to impose tariffs on Canada, Mexico and China in February and March for their roles in channelling fentanyl to the United States. He used it again in April as he announced a uniform 10% tariff on imports from nearly every country and significantly higher tariffs on several dozen, including some of the closest US allies, like the European Union and Japan.

The Supreme Court decision still leaves in place the tariffs Trump has issued using other trade laws, including Section 232 and Section 301. The president has used those laws to impose tariffs on steel, aluminium, furniture, copper, cars and other products, as well as the duties he issued in his first term on China and other trading partners.

-New York Times