Tariff Trauma & Insight

Feb 23
3 min read

A short recap:

-On Friday, the U.S. Supreme Court ruled that last year’s Trump tariffs (taxes) levied under the International Emergency Economic Powers Act (IEEPA) were unlawful. These tariffs (taxes) are the cornerstone of Trump’s economic policies.

-The tariffs (taxes) in question are the Reciprocal Tariffs (taxes), levied on a myriad of countries at rates seemingly arbitrarily set, and the Fentanyl Tariffs (taxes), a 10% rate levied against Canada, Mexico, and China.

-This theoretically means that the tariffs (taxes) that were collected from U.S. importers are due to be reimbursed to said importers. I think this officially puts to bed the notion that “other countries” will pay the tariffs (taxes). I stressed the word "theoretically" above as it would appear that the Trump Administration has not stated that they would issue any refunds, there is nothing in place to actually issue these refunds, and the Supreme Court did not rule on this issue, instead remanding it to the U.S. Court of International Trade to address it. Treasury Secretary Scott Bessent said on Friday that “...additional litigation involving the refund process could take weeks, months or more — if ever — for the refunds to flow.”

-Upset, Trump then said that he would be applying a 10% global tariff (tax) on all imports, effectively immediately. This tariff (tax) is being levied under the Trade Act of 1974.

-Less than 24 hours later, he then increased that global tariff (tax) to 15%. At this time, we don’t know what that means for shipments that are currently on the water.

A little deeper dive:

-IEEPA: enacted in 1977, the International Emergency Economic Powers Act “…authorizes the President to regulate or block international commercial and financial transactions after declaring a national emergency in response to an unusual and extraordinary foreign threat. It is a primary tool for imposing economic sanctions, freezing assets, and controlling imports.” Nowhere in this act is the word “tariff” included.

-Friday’s Supreme Court ruling: Conservative Chief Justice John Roberts (did I mention conservative?) wrote in his ruling that “The President asserts the extraordinary power to unilaterally impose tariffs of unlimited amount, duration, and scope. In light of the breadth, history, and constitutional context of that asserted authority, he must identify clear congressional authorization to exercise it,” Roberts wrote, declaring that the 1977 law Trump cited to justify the import duties “falls short” of the Congressional approval that would be needed.” So it’s Congress that would need to authorize the application of tariffs (taxes) in this instance. Thanks, John.

-The current 15% global tariff (tax): Implemented under Section 122 of the Trade Act of 1974. You may have read about the Section 301 tariffs (taxes) that were put in place during Trump’s first term and remain in place to this day. Section 301 falls under the Trade Act of 1974 as well.

-The Trade Act of 1974 “permits the president to impose temporary import surcharges of up to 15% for up to 150 days to address "large and serious" balance-of-payments deficits or currency depreciation”. Here’s a fun fact: because the power to levy tariffs (taxes) under this act is temporary for 150 days, Congress must vote to extend the tariff for an additional 150 days. So, on approximately July 20th, just over 90 days before the midterm elections, Trump is forcing the Republican controlled House to vote on extending this tariff (tax) that up to 64% of Americans oppose. I have to wonder how many Republicans will be voting in favor of the economic policy that is directly attributable to higher consumer costs, slowing economic growth, and increasing inflation.

So, what can we glean from all this? For one thing, the Supreme Court’s ruling on Friday was a major blow to Trump’s primary economic and foreign trade policy. Some have speculated that the court has seemingly had enough of Trump’s authoritarian control over the levers of government. Also, Trump is doubling and tripling down on ramming his tariff policy through one way or another. And by using the authority of the Section 122 tariff (tax), which by law is a temporary cudgel, he is forcing Republicans in Congress to vote for or against it right before the November midterms. Grab some popcorn folks, you aren’t going to want to miss this…

Written by: Michael Fisher of GPI - Custom Manufacturing, Sourcing, Safety Testing, Freight Forwarding

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