At a critical stage of the Trump Administration’s aggressive global trade reset, a federal court has struck down a major statutory pylon of the White House trade strategy, potentially depriving President Trump of the most flexible weapon in his trade arsenal and scrambling the calculus for many of the pending negotiations with US trading partner.
Although the Trump Administration has signaled its determination to appeal the unanimous decision of the US Court of International Trade, the decision to set aside tariffs imposed under the International Emergency Economic Powers Act of 1977 (IEEPA) undercuts many of the punitive tariff threats driving US efforts to force sweeping changes in the global trading system.
The court decision challenges the ability of the president to use the IEEPA and its emergency economic powers to unilaterally apply massive tariffs to imports from specific countries without consulting US Congress. Under the Constitution, the Legislative Branch has the authority to levy tariffs and set trade policy, but Congress has generally delegated that responsibility to the Executive Branch with statutory authority that is limited in scope, timing, geography and circumstances. The practical consequence of the ruling is to block the April 2 “Liberation Day” tariff program imposed globally with specific conditions on Mexico, Canada, and China, while complicating potential reciprocal tariff increases on the European Union and other countries that are on deck for a July 9 announcement.
The court held that there was no “unlimited delegation of tariff authority” contained in the IEEPA, finding that the White House had overstepped its authority in employing a Carter-era law to posit an economic “emergency” based on trade deficits, and to apply tariffs remedies not specified in the statute. The court found for the plaintiffs on every point; a lopsided result that will push the Administration to offer refined justification and procedural clarity in future trade actions. The ruling is also unusual in that the Judiciary has historically deferred to the Executive Branch on trade policy.
The decision, if sustained, should be seen as strong assertion of the separation of powers and the Constitutional checks and balances of the American system. It will likely force the Trump Administration to restore the traditional consultation of Congress on trade policy, returning to procedural norms that even characterized the first Trump term.
There also will likely be some impetus to promote legislation that legitimizes Trump trade policies through the legislative process. This however will be an immensely challenging exercise. The diversity of domestic economic interests impacted by aggressive trade protection make it difficult for any tariff legislation to be navigated through Congress, even in a less narrowly polarized institution. In recent decades, even collaborative initiatives like Trade Promotion Authority and modest bilateral free trade agreements (FTAs) have faced headwinds: the existing United States-Mexico-Canada Agreement (USMCA) — now under fire — was only possible because of an unusual bipartisan entente. The conditions for new trade legislation are hard to see in the current Congress.
If courts block the use of the IEEPA for tariff purposes, the Trump Administration will retain other trade policy instruments to deploy, undoubtedly in unconventional ways. They will continue to have access to Section 232 of the Trade Expansion Act, Sections 122 and 301 of the Trade Act of 1974, and Section 338 of the Tariff Act of 1930 to levy tariffs, although with greater restrictions and limitations. Existing steel, aluminum, and automotive tariffs, among others (Section 232, 301), won’t be directly affected by the ruling, but there is likely to be enhanced scrutiny of the exercise of presidential authority that may even affect the lengthy process currently involved with trade initiatives for semiconductors and pharmaceutical products.
My own instinct is that on appeal (which will likely conclude in the US Supreme Court) deference will be made to Congress’s long neglected primacy in trade policy, if so (ironically) with the contribution of traditionalist jurists-many appointed by Republican Administrations. (The US Court of International Trade includes one Trump and one Reagan appointee, as well as an Obama appointee). Meanwhile the reciprocal trade policies of the White House are likely to advance with a shaky mandate into difficult, potentially protracted negotiations as Congress may be called upon to ratify trade agreements when they appear and consider trade law reforms. Local solons will be dragged even more deeply into controversial trade politics. The uncertainties of American trade policy will continue to multiply.
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