The US Supreme Court will hear arguments today from plaintiffs against President Donald Trump’s “Liberation Day” tariffs, which upended the global trade order last April. The administration is confident that the tariffs will be upheld. However, officials have repeatedly said that if they are struck down, they will pursue tariffs using alternative tools such as section 232 and 301 investigations.
“What [the administration] suggested, particularly more recently, is ending up in the same practical place, where you have this global tariff regime using a combination of section 232, which is a Commerce Department statute, and then section 301, which is USTR [US Trade Representative],” says Payne Griffin, senior director at FTI Consulting and a former Republican congressional staffer who worked on the trade agenda during Trump’s first administration.
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The hearing only concerns the tariffs imposed through the International Emergency Economic Powers Act of 1977 (IEEPA), which gives the president executive powers to “deal with any unusual and extraordinary threat […] if the president declares a national emergency with respect to such a threat”. The ‘reciprocal’ tariffs were imposed through this measure, which gave countries different rates depending on their trade balance with the US. Ever since then, leaders have been scrambling to secure trade deals (although experts have pointed out these are better characterised as skeletal frameworks) to bring high rates down.
The hearing does not concern sectoral tariffs, which are also major concerns for domestic and international players. In the EU, for example, the sectoral tariffs that were imposed through section 232 investigations on pharma, vehicles and steel worry the bloc more than the IEEPA regime – particularly as the bloc negotiated a 10% reduction in the IEEPA tariffs applied to them, from 25% to 15%, earlier this year.
Business frustration and alternative trade tools
The administration’s goal of reshoring manufacturing is complicated by the same tariffs being used to incentivise this investment. On one hand, foreign companies and countries are being told that investment in the US is the price for market access. On the other hand, companies face bigger manufacturing costs in the US, driven by factors such as tariffs on raw inputs and higher labour costs. The chaotic way in which tariff policies have developed, leading to phrases like TACO trade (Trump Always Chickens Out), has also made it harder for businesses to plan both short-term and long-term costs.
“I think there is a major impact on capital expenditures, and from the conversations we have with our members, a lot of people are just in wait-and-see mode still. They are not in a position to hire. They are withholding new investments, essentially to save money for tariff payments,” Ed Brzytwa, vice-president of international trade at the Consumer Technology Association, tells Investment Monitor.
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By GlobalDataPayne highlights that, while there has been speculation regarding which tools the administration will turn to if the Supreme Court shoots down the tariffs, the administration has only explicitly mentioned sections 232 and 301. The former allows the president to impose tariffs on imports deemed a threat to national security, while the latter grants this same power based on whether foreign countries are engaging in unfair trade practices towards the US.
“I think they feel fairly confident that they can construct a regime that looks broadly similar to the IEEPA regime, even though they feel fairly confident that they are going to win in court,” Payne says.
National security
The argument underlying the use of IEEPA, along with section 232 and section 301 tariffs, is that unfair trade practices towards the US have created an economic emergency, and therefore are a matter of national security. While the rapid and convoluted way in which the tariff regime has been rolled out has been highly disruptive, the logic behind it reflects a wider trend that is not unique to the US.
In an opinion piece for this publication, Economic Security Forum CEO Mikael Wiggel argued that efficiency is no longer the guiding principle for investment.
“Across advanced economies, governments no longer view efficiency as the ultimate virtue but as one variable among others; balanced against security, resilience and strategic advantage,” he explained. “A new paradigm is emerging: strategic capitalism, a system in which states actively steer investment to strengthen national security, technological capacity and geopolitical leverage.”
While the administration has said that it acknowledges the economic pain that tariffs can cause businesses in the short term, officials say they are focused on long-term goals such as increasing manufacturing employment in the US and raising the median household income. Tariffs, plus deregulation and low taxes, are their blueprint.
It will be a long time before the long-term outcomes of the tariff regime become clear. In the meantime, no matter the verdict of the Supreme Court, the administration is set to continue using all the tools at its disposal to pursue its case.
In the meantime, the businesses that sit in the crosshairs of these trade disputes continue to make tough decisions amid a policy landscape that shows no signs of stabilising.
“You get to a point where it becomes too expensive, and there is just no market for the product, and so that is the concern for the small businesses – like, can they actually even be competitive?” Brzytwa says.
