Goldman Says Trump Can Offset Tariff Ruling With Other Tools
(Bloomberg) -- A court ruling that seeks to block President Donald Trump's 'Liberation Day' tariffs represents only a temporary setback to his trade agenda and can be offset by other taxes, according to analysts at Goldman Sachs Group Inc.
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The judgment by the US Court of International Trade halts 6.7 percentage points of levies announced this year and the White House could use other tariff tools to make up for that, the bank's economists said in a note to clients Thursday.
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'This ruling represents a setback for the administration's tariff plans and increases uncertainty but might not change the final outcome for most major US trading partners,' chief US political economist Alec Phillips wrote. 'For now, we expect the Trump administration will find other ways to impose tariffs.'
The alternatives include the use of Section 232 levies, referring to the charges on steel, aluminum and auto imports on national security grounds. If all the pending investigations result in 25% tariffs and are added to current levies under the section, that would add 7.6 percentage points alone, they said.
The trade court in Manhattan, siding with a group of small businesses and Democratic-led states, ruled on Wednesday that Trump wrongfully used an emergency law to impose tariffs on global trading partners. A panel of three judges gave Trump's team 10 days to halt tariff collection in a decision that the White House has already appealed.
Trump has other options at his disposal to impose levies. He could apply Section 122 tariffs of up to 15% for 150 days or initiate investigations under Section 301, though those would take longer to implement.
Goldman's Phillips said he doesn't expect the court's decision to have a major impact on the fiscal package in Congress, 'as tariff revenue was never counted toward offsetting the cost of the package, and most lawmakers never made a clear link between the two issues.'
However, he said the tariffs the court struck down were likely to raise almost $200 billion on an annual basis, approximately the amount the fiscal package would increase the deficit next year and more than the impact in following years. 'For now, we expect the Trump administration will find other ways to impose tariffs, so we still expect most of this revenue to materialize.'
US 30-year yields maintained their spread over swap counterparts — a gauge of sensitivity to fiscal risks — hovering around -89 basis points.
--With assistance from James Hirai.
(Updates with Goldman Sachs' view on the potential fiscal impact in the final paragraphs)
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