The high court struck down President Trump’s sweeping global tariffs, ruling that they violated his authority by using the International Emergency Economic Powers Act (IEEPA); As a result, the administration has turned to a more sustainable legal strategy.
The government will now have to return $166 billion to importers. To prevent revenue loss, the administration used Section 122 of the Trade Act to impose a temporary 10% tariff on imports.
However, these expire on July 24, and are unlikely to be extended by Congress due to the upcoming midterm elections. The administration is now investigating rapidly under Section 301.
Unlike IEEPA, Section 301 tariffs are legally stronger because they are tied to specific investigations of unfair trade practices and have survived court challenges in the past.
“For too long, American workers and firms have been forced to compete against foreign producers who may gain artificial cost advantages from the scourge of forced labor,” U.S. Trade Representative Jameson Greer said in March.
In this regard, the Office of the US Trade Representative (USTR) is launching two investigations this week to justify a new round of permanent taxes.
The first is an investigation of 60 economies representing 99% of US imports regarding their efforts to ban products made with forced labor. Subsequently, 16 major trading partners, including China, the European Union and Japan, were accused of overproducing goods to depress global prices and harm American manufacturers.
According to critics, the investigation is a mere formality. Treasury Secretary Scott Besant has already publicly stated that the original tariff revenues will be replaced by these new taxes even before the investigation concludes.
The administration is moving at twice the normal pace; While the previous Section 301 investigation took a year, this one is being expedited to ensure the new tariffs are ready by the July 24 deadline. Meanwhile, the resulting tariffs would be paid by U.S. importers and possibly passed on to consumers.
It comes at a sensitive time, as voters are already frustrated by the high cost of living ahead of November.
Despite the Supreme Court’s effort to limit the president’s trade powers, the administration is using “procedural shields” to rebuild its protectionist wall. Although legal challenges are inevitable, the Administration believes the formal investigation process provides sufficient legal cover to maintain these tariffs.
“One of the reasons Trump used IEEPA is that it was a completely blank slate” — or appeared to be — before the Supreme Court decision, Cato’s Lincicome said, describing it as “a little tariff switch in the Oval Office that Trump could turn on and off at any time; He wakes up in the morning and doesn’t like a Canadian television commercial, he flips a switch… you can’t really do that with the 301.”
