Following the Supreme Court ' s ruling in February this year that Trump cannot continue to invoke the wide-ranging imposition of customs duties under the International Emergency Economic Powers Act, the White House is moving towards new legal instruments to continue its trade policy. The latest move was to impose a 25 per cent tariff on a wide range of Brazilian imports, and the measures will come into effect later this month.
Change to a 301 investigation to promote tax increases
The new tariff round is based on section 301 of the Trade Act 1974. The United States Trade Representative ' s Office, after a one-year investigation, concluded that there were unfair trade practices in Brazil, thus providing a legal basis for tax increases.
This also means that the Trump Government is moving from its earlier approach of being faster but more vulnerable to judicial challenges to a more slow process and possibly longer-term path. Trump has also used this tool many times during his first term, including a 25 per cent tariff on Chinese imports of about $250 billion. The measures were challenged but not overturned by the courts.
Find an alternative path after the Supreme Court ruling.
In February this year, the United States Supreme Court ruled that Trump could not impose the relevant tariffs under the International Emergency Economic Powers Act. The monthly statement of the United States Department of the Treasury shows that importers have received approximately $71 billion in refunds, which are expected to total $16.6 billion in size.
At the same time, manufacturing performance in the United States is weak. As of June, manufacturing had increased only 1.1 per cent over the same period. This has not resulted in significant fiscal revenues from tariffs, as expected, nor has it boosted manufacturing.
Following that ruling, Trump temporarily imposed a 10 per cent global import surcharge under section 122 of the Trade Act 1974, but this measure lasted only 150 days and will expire later this month. In contrast, the Article 301 survey took longer, but once the survey had been completed, the subsequent adjustment of the tax rate did not have to restart the entire process.
Impact or expansion to more trading partners
The report mentions that Brazil may be only the beginning. The Trump Government has introduced tariff programmes for dozens of trading partners, including the European Union, which partially focused on the implementation of the ban on forced labour products in these economies.
However, new tariffs do not mean that they will no longer be subject to litigation. In the view of business and industry organizations, future disputes may focus on two issues: whether the Government has sufficiently demonstrated that the foreign practices in question are damaging to the United States economy; and whether tariff escalation really solves these problems.
For enterprises, the more immediate impact remains uncertainty. Prior to the rapid landing of tariffs, importers had been forced to adjust their compliance and procurement arrangements on short notice. If a new round of tariffs were to be rejected again in the future by the courts, enterprises might also have to go through a process of “first-in-first-in-first-in-first-out, back-out” payments.
In addition, additional tariffs may push up import costs, increase price pressures and reduce the Federal Reserve ' s interest rate space. Trade policy could also become one of the more frequent administrative tools used by Trump if the Republican party loses some of its parliamentary control after the mid-term elections.