Tariff pain to stay despite court ruling

The US Supreme Court's Feb 20 ruling striking down President Donald Trump's use of emergency powers to impose sweeping tariffs has restricted one avenue for broad duties, yet experts say the administration's switch to other legal tools means high tariffs and their economic costs are likely to continue.

"The Supreme Court's decision... invalidating the Trump administration's use of the International Emergency Economic Powers Act, or IEEPA, as the legal basis for broad tariffs applied to the imports from dozens of countries... has reconfigured the statutory authorities for presidential tariff powers," said Patrick T. Childress, a partner at Holland & Knight and former official with the Office of the United States Trade Representative.

Childress described the ruling as a "setback" for rapid, large-scale tariff imposition but noted the White House responded within hours. It shifted to Section 122 of the 1974 Trade Act, imposing temporary tariffs of 10 percent to 15 percent across the board for up to 150 days, while launching multiple Section 301 investigations to establish longer-term, country-specific measures without rate caps or time limits.

"This was a ruling that was celebrated by those who opposed the president's trade policy agenda,"Childress said. "That excitement lasted for only a few hours, however, because ... the president held a news conference where the message was very clear ... that tariffs were not going anywhere.

"These reduced rates that we're seeing under Section 122 currently, (are) most pronounced for countries like Brazil, which saw its rates drop from 50 percent to 15 percent overnight," Childress said. "These can potentially represent real savings for importers, but this window is not going to last long." He warned that the lower rates are temporary and likely to rise again after Section 301 investigations conclude.

Elena Patel, codirector of the Urban-Brookings Tax Policy Center, termed the IEEPA tariffs a massive, disguised tax increase. "What the Supreme Court did here is see through the IEEPA tariffs for what they were, which was, as estimated by the Congressional Budget Office, a $3 trillion tax increase," she said.

Patel said that more than $130 billion in duties had already been collected, creating uncertainty over refunds. She said the Supreme Court ruling reaffirmed Congress' constitutional authority over taxation, even as delegated powers under Sections 301 and 232 remain available. "The power to raise taxes has always been with Congress. It remains there," she said.

Earlier, Douglas Irwin, a professor of economics at Dartmouth College, welcomed the court's decision as a check on executive overreach. He called it "good news" because it prevents the president from using emergency declarations to bypass Congress on tariffs and warned that ignoring constitutional limits on taxation could lead to "catastrophic results".

'Unpredictable partner'

Mira Rapp-Hooper, visiting fellow at the Center for Asia Policy Studies of the Brookings Institution, said trading partners have long viewed US trade policy as unpredictable. Many Asian economies have advanced regional agreements, such as the Comprehensive and Progressive Agreement for Trans-Pacific Partnership, or CPTPP, following the US withdrawal from the TPP in 2017. Many partners now focus on preserving existing arrangements or delaying new deals to seek better terms under the new tariff authorities.

"Most of our partners are still free-trading nations that are looking at new trading agreements with one another ... in a world in which the United States is less unpredictable," Rapp-Hooper said.

Emily J. Blanchard, associate professor at Dartmouth's Tuck School of Business, emphasized the ruling "materially matters" by shifting business expectations. Firms may adjust sourcing away from higher-tariff countries and rethink long-term investments, while tariffs mechanically raise living costs, act as a drag on economic activity and complicate the administration's reshoring goals, she said.

In the State of the Union address on Tuesday, Trump reaffirmed tariffs as essential for revitalizing US manufacturing and cutting trade deficits, without directly addressing the Supreme Court decision.

Childress predicted limited renegotiation by partners because "the underlying threat of higher duties persists". Rapp-Hooper suggested accumulated leverage from high tariffs "could be redirected toward more constructive international cooperation", and Blanchard advocated shifting "from distortionary tariffs to transparent, targeted industrial policies that better support domestic goals without imposing broad costs on consumers and global supply chains".

"Persistent high tariffs, even under revised legal grounds, risk prolonged uncertainty for businesses and trading partners alike," Irwin said, adding that such policies "make US manufacturing less competitive by raising input costs".

yifanxu@chinadailyusa.com