Trump's Tariff Options Limited After US Court Ruling

Strategic Insights -

A US court ruling on Wednesday invalidating President Donald Trump's "liberation day" duties has sparked a mix of reactions from international experts and trade officials. As the US and EU prepare for trade talks next week, experts warn against a US-EU trade war escalation. The ruling affects duties announced by Trump on April 2, including a baseline 10 per cent tariff, but sectoral levies on imports of cars, steel, and aluminium from the EU at 25 per cent remain in place. The EU is expected to stick to its 10 per cent "reciprocal" tariff rate, while preparing to offer regulatory relief to US businesses.

Key Takeaways:

  • The US Court of International Trade judgment determined that President Trump misused emergency economic powers legislation when declaring the blanket tariffs last month.
  • The ruling affects duties announced by Trump on April 2, including a baseline 10 per cent tariff, but sectoral levies on imports of cars, steel, and aluminium from the EU at 25 per cent remain in place.
  • The EU is expected to stick to its 10 per cent "reciprocal" tariff rate, while preparing to offer regulatory relief to US businesses.
  • Former EU trade official Ignacio Garcia Bercero advises against using the US court ruling as an excuse to back away from negotiations, focusing instead on steel, aluminium, and car tariffs.
  • Joost Pauwelyn suggests that the EU should use the time while the US side is weakened to "minimise what [tariffs] they will get".
  • Lorand Bartels, professor of international trade law at Cambridge university, states that the ruling has set out a strong historical case that the International Emergency Economic Powers Act (IEEPA) cannot be used to address balance of trade issues.
  • Trump's best legal option might be to change the law to remove restrictions on section 122, which would enable him to impose tariffs of up to 15 per cent for 150 days before seeking further authorisation from Congress.
  • Other legal avenues for Trump include section 338 of the Tariff Act of 1930 and section 301 of the Trade Act of 1974.

Statistics:

  • The 10 per cent duty affected about 70 per cent of EU exports, worth around €380bn.
  • The tariffs currently in place are 25 per cent on imported EU cars, steel, and aluminium, excluding Asian steel.
  • Section 232 investigations by the Trump administration cover steel, aluminium, and autos, with potential for additional sectors, including pharmaceuticals and aerospace.

Sources:

  • "US court rules Trump misused powers to impose tariffs" - The Financial Times, April 6, 2023
  • "EU to stick to 10% tariff rate despite US court ruling" - Politico, April 5, 2023
  • "Trump's tariff options limited after US court ruling" - The Wall Street Journal, April 4, 2023
  • "EU and US trade officials to meet in Paris next week" - Bloomberg, April 3, 2023