Tariff ruling is a setback for Trump but doesn't end trade war

Mint

29-05-2025

SINGAPORE
:
Shortly after the news broke that a U.S. court invalidated almost all of President Trump's tariffs, one Vietnam-based furniture exporter responded with an astonished text: 'WHAT???"
Wednesday's shock decision by a hitherto little-known U.S. federal court sows fresh uncertainty over the U.S. assault on global trade, the latest in a series of escalations and reversals over trade policy that have whipsawed financial markets and scrambled corporate decision-making.
The bottom line, say trade experts, is that the global trade war is far from over. While a setback for the Trump administration, the ruling is unlikely to deter the president from seeking to rewrite the rules of global commerce in America's favor or lead him to abandon tariffs as the principal tool to do so.
The administration has already said it will appeal the ruling, and trade experts and lawyers say it has a variety of other legal avenues to prosecute the trade war that are unaffected by Wednesday's decision.
'This is just one more bump in the tariff road that we are going to be on for as long as Trump remains in office," said Deborah Elms, head of trade policy at the Singapore-based Hinrich Foundation, which advocates for free and open trade. 'He loves tariffs and he loves the idea of being able to impose them at will, and I don't think he's going to give that up easily."
The New York-based Court of International Trade's ruled that the president overstepped his authority in invoking powers granted to the executive in an economic emergency to impose sweeping tariffs on all U.S. trade partners April 2.
The judgment undermines the legal basis for those 'reciprocal" tariffs—which the administration paused for 90 days to allow time for negotiations—that are the centerpiece of Trump's effort to rein in the U.S.'s yawning trade deficit. The court also shot down special levies of 20% imposed on Canada, Mexico and China for their alleged role in the U.S. fentanyl crisis.
The administration's plan to appeal could ultimately land the case in the Supreme Court. It is unclear if the tariffs affected by the judgment will remain in place while appeals are heard.
Stocks in Asia rose Thursday following the ruling, with investors warming to the prospect of faster economic growth as trade tensions ease. Hong Kong's Hang Seng Index closed up 1.35%, while Tokyo's Nikkei benchmark was up 1.88%.
For now, business executives say they're unsure how to respond, given the legal fog.
Jeffy Ma, a hat manufacturer in Guangzhou, China, said the ruling was good news, but he hadn't yet heard from his U.S. customers.
'After all, tariffs haven't been completely canceled," he said.
New cars sit near the Port of Long Beach in California, where new tariffs have constricted the flow of imports.
'Some large retailers are asking us to see if we can ship more now," said William Su, who splits his time between Taiwan and New York as chief executive officer of Teamson, which sells China-made products, such as toys, through U.S. retailers. But he said muddiness about the future of tariffs on China could deter retailers from approving new production.
Some executives expressed caution over the decision, saying that Trump will likely search for other ways to reimpose steep tariffs on China and potentially other Asian economies that run large and persistent trade surpluses with the U.S., including Vietnam, South Korea and Japan.
'I don't think it will change much as U.S. customers will keep on moving products out of China as the focus of Trump is clearly China. Just adding to more instability with everyone wondering what Trump's next step will be," said Michel Bertsch, who runs a furniture-manufacturing company in Vietnam that exports to the U.S.
Trump's trade broadside and his frequent reversals have sent manufacturers, retailers and shippers around the world racing to respond, upending longstanding supply chains in Asia, Europe and Latin America.
Importers from China canceled billions of dollars' worth of orders after Trump slapped 145% tariffs on the country earlier this year, only to rush to revive some of them when Washington and Beijing later reached a truce to lower duties. Companies have put investment on hold amid the uncertainty over U.S. trade policy.
The court's decision doesn't affect a host of other tariffs imposed on U.S. imports, including 25% levies placed on steel, aluminum and cars. Those levies were imposed using alternative legal avenues to that questioned by the New York court.
Those more conventional avenues, known as Section 232 and Section 301, still give the president substantial authority to impose new tariffs, though they tend to be used to target imports in specific sectors and don't confer the broad power to tariff all goods in the way the president had sought.
The Trump administration says sweeping tariffs are necessary to counter what it says are unfair practices of U.S. trading partners that have contributed to the U.S.'s large and persistent deficit in trade in goods.
The 90-day tariff pause announced not long after April 2 sparked a stampede by countries eager to strike trade agreements with Trump to avoid the new tariffs. The U.S. reached agreement with the U.K. over tariff reductions and a framework for further talks, and agreed with Beijing a marked de-escalation in a bilateral trade fight that saw Washington and Beijing push tariffs on each others' products above 100%. The truce brought new tariffs on most Chinese goods down to around 30%, though some products face additional levies.
But progress with other trading partners including the European Union, South Korea and Japan has been slow. Trade experts say the court ruling complicates those negotiations, since it means countries might be less willing to make concessions on trade if the courts ultimately decide the basis for Trump's move was faulty.
'Do you still negotiate knowing the whole thing might get settled with the bang of a gavel?" said Paul Nadeau, an associate professor in international affairs at Temple University's Japan campus.
Write to Jason Douglas at [e-mail], Jon Emont at [e-mail] and Hannah Miao at [e-mail]