Trump's team plots plan B for imposing tariffs

Mint

4 days ago

President Trump's trade team is readying its plan B.
The administration's tariff strategy was undermined when a court this week found it was illegal for Trump to impose sweeping duties by using emergency economic powers. A federal appeals court on Thursday allowed his duties to stay in effect while the administration's appeal moves forward, but U.S. officials are weighing their options should they need to find a new legal authority to impose the president's steep tariffs, which he argues will help rebalance trade in America's favor.
The potential pivot reflects the challenges to Trump's aggressive trade policy, which relied on a novel interpretation of trade law. Typically, tariffs are imposed using targeted authority delegated to the president by Congress, but Trump's team relied on little-used emergency powers to impose the bulk of his wide-ranging second-term tariffs quickly.
With that strategy under threat, the president's team is weighing a twofold response, according to people familiar with the matter.
First, the administration is considering a stopgap effort to impose tariffs on swaths of the global economy under a never-before-used provision of the Trade Act of 1974, which includes language allowing for tariffs of up to 15% for 150 days to address trade imbalances with other countries, the people said. That would then buy time for Trump to devise individualized tariffs for each major trading partner under a different provision of the same law, used to counter unfair foreign trade practices.
That second step requires a lengthy notification and comment process, but is seen by administration officials as more legally defensible than the tariff policy that was found to be illegal this week. The alternative provision has been used many times in the past, including for Trump's first-term tariffs on China.
Peter Navarro, senior counselor for trade and manufacturing, is floating alternative strategies.
The conversations remained fluid, and the administration hadn't made a final decision, the people added. The administration could wait to implement any alternative plans after the federal appeals court allowed Trump's emergency tariffs to stay in place during the appeals process.
The White House and the Office of the U.S. Trade Representative didn't respond to requests for comment. Karoline Leavitt, the White House press secretary, said Thursday that the administration is weighing other options to impose tariffs as it appeals the court rulings, but she didn't give specifics.
Peter Navarro, senior counselor for trade and manufacturing, appeared to confirm that the administration is considering a twofold alternative tariff plan, which would first use Section 122 of the 1974 trade law, and then Section 301.
'Those are the kinds of thoughts" the economic team is considering, he said when asked about those provisions on Bloomberg TV. Navarro also suggested that the administration could use the Smoot-Hawley Tariff Act of 1930, which has a provision that allows for tariffs on nations that discriminate against America. The U.S. could also expand the use of tariffs imposed citing national-security concerns.
All of the options under consideration now were discussed in the early weeks of the administration, but officials opted to instead impose tariffs under the International Emergency Economic Powers Act, also known as IEEPA. The law had never been used before to impose tariffs but allowed the administration to move quickly to impose levies on virtually every global trading partner.
In its decision Wednesday, the U.S. Court of International Trade struck down Trump's use of IEEPA to address trade deficits. In doing so, the court pointed to Section 122, the measure Trump's team is now weighing as a stopgap policy, saying part of federal law already grants explicit authority to address 'large and serious balance-of-payments deficits."
Pivoting to a different tariff authority could pose risks. If the administration moves to use a different law, that could be seen by courts as admitting defeat in ongoing appeals in the IEEPA case.
'The administration could quickly turn to other tariff authorities, but doing so while the ruling is under judicial review could be seen as a lack of confidence in the final decision," said Everett Eissenstat, who served as deputy director of the National Economic Council in Trump's first term.
Trump's alternative plan would likely still face legal challenges, said Peter Harrell, who served as senior director for international economics on the Biden administration's National Security Council. But both elements are on firmer legal ground than the IEEPA tariffs, he said.
The Court of International Trade 'seemed to indicate that Section 122 is how you'd address a trade deficit," Harrell said. Section 301, he added, has a long case law history, and action under that provision would likely be upheld as long as the Trump administration can point to unfair trade practices from each targeted nation. In all, the plan is 'certainly more defensible than the IEEPA tariffs," he said.
Trump's potential alternative tariff plan has an advantage: Using another law to reimpose the tariffs could smooth over any interruptions in tariffs because of the court's ruling, preserving Trump's leverage in ongoing trade talks. In a filing asking for an emergency stay on the Court of International Trade's decision, the administration said the ruling 'jeopardizes ongoing negotiations with dozens of countries by severely constraining the President's leverage and undermining the premise of ongoing negotiations."
That appeared to contradict National Economic Council Director Kevin Hassett, who insisted Thursday that trade negotiations will continue unabated and that three deals are close to being completed. Navarro similarly said that 'nothing has really changed."
The ruling on Wednesday came days after the president threatened to impose 50% tariffs on the European Union and then quickly pulled back to allow for negotiations until July 9—a deadline now thrown into question.
A rise in global stocks supports the EU's argument that tariffs aren't good for anyone, Spanish Minister of Economy Carlos Cuerpo said Thursday. He said the bloc is taking 'a constructive approach to reaching an agreement and, if possible, even reducing barriers" below pretariff dispute levels.
Some analysts said the ruling could ease the path for a trade deal between the U.S. and EU by removing, if the decision survives Trump's appeal, a key sticking point from the negotiations.
Ignacio García Bercero, a former EU trade official, said that removing the U.S.'s 10% tariff on European imports and the threat of further across-the-board tariffs would allow trade negotiators to focus instead on the U.S.'s sectoral tariffs on such industries as steel and automobiles. Those were implemented on national-security grounds, not using the economic-powers law, and will be unaffected by the continuing court battle.
'If there's a more pragmatic attitude from the United States and also, of course, from the European Union, one would have the opportunity to try to use this to find a more balanced type of agreement that is in the interest of both sides," he said.
Write to Gavin Bade at [e-mail] and Kim Mackrael at [e-mail]