Tariffs: Does Trump need a backup plan amid legal pushback?

Yahoo

a day ago

President Trump is claiming that China has "totally violated" its trade agreement, in a post on Truth Social after US Treasury Secretary Scott Bessent commented that negotiations with Chinese trade officials have become "stalled." This all comes after Thursday's legal whiplash, where a US appeals court temporarily reinstated several of the administration's sweeping tariff policies after a US trade court ruled them to be illegal.
Strategas Securities managing director of policy research Jeannette Lowe joins the Morning Brief team to share her perspective on the latest US-China tariff drama and what Trump's next step in his tariff strategy could look like.
To watch more expert insights and analysis on the latest market action, check out more Morning Brief here.
President Trump taking to truth social this morning claiming China violated its trade agreement with the US. It comes a day after Treasury Secretary Scott Beson says the stalled trade talks could warrant a call between President Trump and President Xi. Despite the 90-day pause on reciprocal tariffs that went into effect May 14th, tensions remain high. Here with more on the ongoing negotiations. We've got Jeannette Lo who is the strategist securities managing director of policy research here. I just want to get your reaction to the latest via social media this morning from Trump and and what that could entail kind of going into the weekend.
Well, thank you for having me. I think one of the things that's interesting is that, you know, we had a court decision on Wednesday night overturning the authority for the president to impose tariffs using national emergencies. Then you did actually get to stay yesterday, and now here you have Trump pressuring China over its deal that they reached to lower tariffs from the really high rates of 125% down to 10% or 30% depending on which, uh, you know, terrace you're calculating at the time. But I think the point is is that Trump is also trying to pressure trade partners to show that he is still going to pursue this trade agenda of his even if there is some uncertainty that has been caused by the court decision earlier this week. And we've always been of the view that trade decisions are going to be a little bit different with China than the rest of the world. We think Trump is going to be much more hawkish with regard to China than he is with other countries, and this kind of plays into that where he is really trying to pressure China and show a little bit more stringency with them with regards to the tariffs and talking about the fact that they are not moving well in a particular direction to get a deal. But that was not necessarily a surprise. I think if we had seen a message like that coming from another country like Europe, which we saw last Friday, that would have been probably a different story.
Yeah, I think that's a really great overview, and it's something that is interesting given the fact that we did have this appeal coming in overnight here. I I'm just curious, Jeanette, can you kind of lay the groundwork for where you see these tariffs heading at the current moment? Like did this ruling actually put any sort of bounds on the president's tariff policy in your view that are going to stay in place long term?
Right. I think the main point is that it put, uh, it put a barrier on the president's ability to do it in an unbounded manner. That was kind of the word that was using used by the the Court of International Trade when they made their decision. So I think what's important here is that it makes it more difficult for Trump to impose more tariffs, but it doesn't take away his ability to do so. So the administration has a backup plan. Obviously, if the tariffs had to be removed immediately and the stay had not been granted, that would have caused a lot more disruption to the markets, put tariffs on, take them off, then they're probably going to go back on again. But I think what's important is we showed that we still have section 232, which is the way that the Trump administration is imposing tariffs on goods like steel, aluminum, autos, auto parts, potentially pharmaceuticals and semiconductors in the future. And then there's also these other, um, authorities. So we had section 301 that was used to impose tariffs on China in Trump's first term. That is still a tool that can be used to even increase tariffs on China quite quickly. Um, but then the Trump administration has other tools. There's a talk about whether or not he could put some tariffs in place at 15% for 150 days while they do investigations on a country by country basis to then impose other tariffs. That's kind of a clunky way to do this, but at the same time there's another method as well. There's section 338, which means that they could put tariffs in place. They only have to wait 30 days. They don't have to do an investigation, but they could impose tariffs up to 50%. So I think the larger message is that the tariffs are not necessarily going away. There's just probably even more uncertainty now about what comes next and when and when will this play out through the legal system, and do we keep the current tariffs in place or does the administration need to go to a backup plan?