Following the US Supreme Court ruling last Friday (20 February), where six of the nine judges ruled that the International Emergency Economic Powers Act (IEEPA) does not authorise the US President to impose tariffs, US Trade Representative (USTR) Jamieson Greer made it clear this was only one of the tools the administration was using to pursue its trade agenda. In a statement, he outlined the imposition of new global tariffs and the continuation and expansion of trade investigations.
US President Donald Trump has justified a variety of tariffs under IEEPA, such as the 10% global baseline announced last April; the ‘reciprocal’ tariffs the administration says it determined based on each country’s trade balance with the US; tariffs levied against China and Mexico for their alleged failure to curb drug flows and migration; tariffs imposed on Brazil over tech regulation; and those imposed on Russia, Cuba and Iran over threats to the US. These are no longer in effect.
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Some of the tariffs imposed over the past year were pursued under different laws, meaning they are still in effect and have not been affected by the Supreme Court’s decision. Sectoral levies on steel, aluminium, lumber and automotives, for example, were imposed under section 232, which permits the President to impose levies on a product over national security concerns.
The administration will now try to recreate the tariff landscape it had established through IEEPA with trade statutes such as section 122 (which has never been used before), section 301 and section 232. Former chief of staff at the Office of the USTR and senior director at FTI Consulting, Payne Griffin notes that this expansion of trade investigations means the tariff landscape is about to get “a lot more complicated”, as different investigations target individual products.
However, businesses have more experience with some of these other statutes. Section 232 tariffs, for example, were used on steel and aluminium during Trump’s first term.
Ed Brzytwa, vice-president of international trade at the Consumer Technology Association, notes that section 301 “has a lot more processes and guardrails around it, there is more transparency built into the statute, and there are opportunities for stakeholders to comment, to give testimony at public hearings”.
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By GlobalDataGriffin echoes this view, noting that these investigations present an opportunity for companies to voice the infrastructural challenges they have faced over the past year due to tariff policy being in constant flux.
There is also the question of refunds, which the Supreme Court did not address directly, leaving lower courts to figure out the logistics. It was recently estimated that the US has collected $130bn in tariff revenue. Administration officials, including Trump, have warned that the refund process could get stuck in litigation for years.
Brzytwa notes that, in the past, the administration has offered opportunities for refunds as trade deals and tariffs have shifted. Therefore, the current reluctance may have more to do with retaining revenue.
“It is not a question of whether they can or cannot do it. It is a question of their will to do it,” Brzytwa says.
Overturning of IEEPA leaves uneven trade deal landscape
Following the Supreme Court’s decision, Trump announced a new global 10% tariff rate (there is currently some confusion about whether this will be raised to 15%, as the President had announced over the weekend). The new rate is being imposed under section 122, which allows the President to impose duties for up to 150 days to address significant balance-of-payments deficits and “fundamental international payments problems.”
This has created an awkward global landscape, with some of the countries most criticised by the Trump administration for trade surpluses having the most to gain from the ruling.
“Initial winners include Brazil, China, India and most ASEAN [Association of Southeast Asian Nations] countries,” Grace Fan, managing director of global policy and disruptive themes research at TSLombard, writes in a note. According to Global Trade Alert, Brazil will see the largest average tariff rate drop of 13.6 percentage points, with China seeing a 7.1 percentage point reduction. Manufacturing countries in Asia such as Vietnam and Thailand will also benefit from the new rate.
Some allies, which had secured tariff reductions and concessions through painstakingly negotiated trade deals, complained over the weekend and on Monday (23 February), as for some, a 15% global rate would have meant they would be paying higher tariffs than what had been agreed. The European Parliament, for one, froze the ratification of the EU’s trade deal with the US.
Many of these deals came with significant investment pledges to the US. At the time of the announcements, observers were quick to point out the unrealistic nature of the huge sums. As part of the EU-US deal announced in July, for example, the bloc said European companies would invest €600bn ($706.1bn) in the US. At the time, Davide Oneglio, director of European and global macroeconomics at TSLombard, said to this publication that the figure was “meaningless” because the EU cannot direct private sector investment in that way.
However, negotiations with other partners like South Korea, for example, have stalled over disputes regarding investment commitments. As part of the trade deal with the US, Korea committed to investing $350bn (Won504.89tn) in strategic US industries, but this has stalled as legislators in South Korea have noted the effects an outflow of that size could have on the country’s currency.
In contrast, Japan, which committed to investing $550bn (Y85.82tn) in the US, has moved much faster. On 18 February, the two countries unveiled $36bn of oil, gas and critical minerals projects.
Similar to the EU, India has delayed upcoming trade talks with the US, where a recent agreement was meant to be finalised, in the face of the overturning of the IEEPA tariffs.
Aside from the huge financial costs of the tariffs, one of the biggest problems they have created is a pervading sense of uncertainty. The Supreme Court decision takes only one part of this uncertainty away: Trump’s ability to impose tariffs via IEEPA. So, while it answers one question, it seems to have left many more in its wake.
