By Ryan Boyle

This year’s twisting and turning tariff journey hit a roadblock when the U.S. Court of International Trade (USCIT) struck down reciprocal tariffs.  The court deemed that President Trump had exceeded his authority when he used the International Economic Emergency Powers Act to impose the levies.  The decision will be appealed to higher courts, but several legal experts have opined that the USCIT decision is likely to be upheld.

This is by no means the end of the trade war.  Declaring an emergency was expeditious, but there are several other paths the president can use to impose tariffs under existing laws.

Section 301 of the Trade Act of 1974 allows tariffs in response to unfair trade practices.  This was the basis for Trump’s first-term strikes against China, which remain in force; it could be used against other nations that maintain high barriers to trade.  However, these actions require time-consuming investigations and a public comment period.

Section 232 of the Trade Expansion Act of 1962 allows tariffs to protect specific sectors in the interest of national security.  This was used to place taxes on imports of steel, aluminum and autos, and could be used this year for pharmaceuticals and semiconductors.  Like Section 301, this will require an investigation for each sector in need of protection.

If tariffs are struck down, the Trump administration could partially restore them quickly through Section 122 of the 1974 Act, which allows tariffs of up to 15% for 150 days to address balance-of-payments deficits.  This approach would buy time to complete 232 and 301 investigations.

We may also see an invocation of Section 338 of the Tariff Act of 1930, which allows the president to impose duties on countries that discriminate specifically against the U.S. in trade.  The new tariffs would require a 30-day warning period and are limited to a rate of 50%.  Like Section 122, this aspect of the code has not been used before, but does seem aligned with the administration’s intent.

Every long journey will encounter some unexpected delays.  We do not expect that this is the end of the road for tariff escalation.