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Indian Express
2 days ago
- Business
- Indian Express
Uncertainty around US tariffs will not be over after August 1, even with signed trade deals
The US tariff saga has gone through many twists and turns. And many more are likely left. The ratcheting up of tariffs last month is broader and higher than expected. In late May, the view was that while the extant US average tariff rate was around 13-14 per cent, it was headed towards 18-20 per cent. Much of the increase was expected to be focused on ASEAN, where the tariff rate would be raised to that of China's to eliminate transshipment of Chinese exports to the US via the region. While those on Vietnam and Indonesia were in line with expectations, the additional tariffs on Brazil, Canada, and Mexico were not. Nor was the higher 50 per cent rate on copper. However, negotiations are ongoing, including with India, the EU, and Korea. If this week's Japan deal is any guide, tariffs on these economies will likely be half of the threatened levels. But, even at the reduced rate, if these, along with those on EU and the likely extensions of global sectoral tariffs to semiconductors and pharmaceuticals, are realised, then the effective tariff rate could well exceed 20 per cent. All eyes are therefore on August 1, which is the new deadline set by the administration for countries to finalise trade deals. But there is an upcoming and surprisingly overlooked event that could easily make these trade deals moot and plunge the tariff discussions into more uncertainty. On May 28, the US Court of International Trade (USCIT) ruled that tariffs imposed using the provisions under the International Emergency Economic Powers Act (IEEPA) overstepped the authority granted by the Act. The ruling did not consider the current conditions in the US to be a 'state of emergency,' which is needed to invoke IEEPA, to be convincing nor the use of tariffs to address it. Tariffs could be imposed, if the government so desired, but via the other options at its disposal. Not IEEPA. A federal appeals court granted the government a stay on the order and is slated to begin hearing arguments on the appeal on July 31. All the universal, reciprocal, and fentanyl-related tariffs are based on IEEPA. The tariffs unaffected are the Section 301 tariffs on China imposed under Trump 1.0 and extended by the Biden administration, and the global sectoral tariffs on aluminum, autos and auto parts, copper, and steel that were imposed under Section 232. It is unclear how the appeals court will rule. But regardless of the decision, either party is likely to move the case to the Supreme Court. If the tariffs under IEEPA are eventually disallowed by the US Supreme Court, the government will shift to other options. Tariffs are central to this administration's economic agenda and will thus be pursued. Unlike those under IEEPA, the tariffs under the other options are more cumbersome, limited in scope, and significantly more resource intensive. But they can be implemented in a compressed time frame if the administration so desires. A potential sequence of such actions could be the following. Use Section 122 to impose tariffs of 15 per cent for 150 days on all countries (justified to address balance of payments needs or to prevent a significant depreciation of the dollar). At the same time, ratchet up the tariffs on China that were imposed under Section 301 in Trade War 1.0 by both the Trump and Biden administrations. Keep tariffs on steel and aluminum at 50 per cent (as on copper) and raise that on autos from 25 per cent to 50 per cent. Hasten the ongoing Section 232 (sector specific on grounds on national economic security) investigations into semiconductors, pharmaceuticals, and lumber to bring these under the tariff net of 25 per cent – 50 per cent. Use Section 338 to impose tariffs on countries that are deemed to discriminate specifically against US commercial interests (such as digital services taxes by Australia, the EU, Canada, India, and others, although the taxes are imposed on other countries too). Complete Section 301 investigations on large trading partners (some are ongoing, for example, on the EU and Brazil). These investigations are resource intensive as they need to first identify the specific policy of a trading partner that is the basis of 'unfair competition 'and then quantify the 'harm' that such policies impose on US consumers for each product and for each country. The tariff rate needs to be commensurate with the harm caused and, thus, differ, from product to product for each country. Finally, roll all tariffs under Sections 301 and 232. As one can imagine, this is an arduous and uncertain process. However, the direction of travel is more certain — the average effective tariff rate is likely to settle close to 20 per cent. Needless to say, the country- and product-specific impact of Sections 301 and 232 tariffs could be vastly different than under IEEPA. Markets so far have largely shrugged off the announced new tariffs. This is understandable given the quick deescalation after the strong market and corporate reaction to the Liberation Day tariffs; the possibility that the August 1 deadline is postponed; and the eventual negotiated tariff rates could be different from those announced. However, a court ruling on IEEPA could well turn both the August 1 deadline and the trade deals moot, including potentially that with India. If the basis of these deals, that is, IEEPA, is no longer admissible, then we are headed for renegotiations with tariffs under sections 301 and 232. These could be starkly different than those that are being negotiated now. The uncertainty around US tariffs will not be over after August 1, even with signed trade deals. US courts might well upset the best laid plans of mice and men. Continued uncertainty is the only certainty. The writer is Chief Emerging Markets Economist, J P Morgan. Views are personal
Yahoo
29-05-2025
- Business
- Yahoo
What to Know After Trade Court Rules Against Trump's Tariffs
The U.S. Court of International Trade building in New York on April 24, 2025. Credit - Yuki Iwamura—Bloomberg/Getty Images Donald Trump's sweeping and volatile tariffs have left businesses in uncertainty, roiled global markets, upended U.S. relations with trading partners, and pushed up the prices of consumer goods. But on Wednesday, a federal court ruled that Trump didn't have the authority to impose them in the first place. A three-judge panel at the U.S. Court of International Trade (USCIT) in New York ruled that Trump overstepped his authority by implementing a tariff regime on dozens of countries in a bid to enliven domestic manufacturing and to slash budget deficits by generating revenue from import levies. The Administration has also used the tariffs as bargaining chips for trade deals more favorable to the U.S.—as well as in geopolitical negotiations. The Wednesday court ruling may provide temporary relief for affected consumers and businesses—halting a 30% tariff on China, 25% tariff on certain goods from Mexico and Canada, and 10% universal tariffs on most of the rest of the world—and it throws a wrench in the centerpiece of Trump's agenda, though the Trump Administration swiftly filed an appeal. Here's what to know about the ruling. The USCIT has jurisdiction over civil cases arising from U.S. customs and international trade laws. Its website states that 'the court may grant any relief appropriate to the particular case before it, including, but not limited to, money judgments, writs of mandamus, and preliminary or permanent injunctions.' The panel of judges that ruled on Trump's tariffs were all appointed by different Presidents: Judge Jane Restani was appointed by Ronald Reagan; Judge Gary Katzmann was appointed by Barack Obama, and Timothy Reif was appointed by Trump during his first term. The USCIT issued its opinion on two consolidated cases concerning Trump's tariffs. The first was filed by New York-based wine importer V.O.S. Selections along with four other small businesses, and the second was filed by 12 different states. In imposing tariffs, which Congress has the constitutional power to approve, Trump invoked his authority under the International Emergency Economic Powers Act of 1977 (IEEPA), which grants the President authority to regulate commerce in light of threats that can constitute a national emergency. It was the first time a President invoked the IEEPA in a tariff situation. These include the tariffs Trump imposed earlier this year on Canada, China, and Mexico, which were aimed at curbing the entry of fentanyl into the country, as well as his April 2 'Liberation Day' so-called 'reciprocal' tariffs, which were aimed at taxing dozens of nations due to their trade surpluses with the U.S. The plaintiffs argued that Trump did not have authority under IEEPA to impose such widespread tariffs. The court said that it 'does not read IEEPA to confer such unbounded authority and sets aside the challenged tariffs imposed thereunder.' The court said that the worldwide retaliatory duties 'exceed any authority granted to the President by IEEPA to regulate importation,' while the drug trafficking-related levies 'fail because they do not deal with the threats set forth in those orders.' 'A tax deals with a budget deficit by raising revenue. A dam deals with flooding by holding back a river. But there is no such association between the act of imposing a tariff and the 'unusual and extraordinary threat[s]' that the Trafficking Orders purport to combat,' the court wrote. In its conclusion, the court ruled in favor of a permanent injunction on the tariff orders nationwide. Trump has 10 days to put the injunction into effect, per the order accompanying the ruling. The court ordered that four of Trump's executive orders are invalid and must be repealed. Trump's 25% steel, aluminum, and auto tariffs, however, were left in place, pending a Commerce Department investigation. The ruling noted that the President has the power to impose certain tariffs when the Secretary of Commerce 'finds that an 'article is being imported into the United States in such quantities or under such circumstances as to threaten to impair the national security'' under Section 232 of the Trade Expansion Act of 1962. The ruling threatens to upend ongoing trade-deal negotiations, though Trump could still impose new 'restricted' tariffs, the ruling noted, so long as they are 'in response to 'fundamental international payment problems'' which include substantial trade deficits under Section 122 of the Trade Act of 1974. This authorizes the President to impose tariffs of as much as 15% for up to 150 days. There's also the chance that the Administration may simply ignore the ruling. A provision in the thousand-plus-page 'One Big Beautiful Bill,' which passed in the House last week and is now before the Senate, would effectively restrict judges' power to hold a litigant in contempt for defying court orders or injunctions. If the megabill becomes law, with the provision intact, critics say it could limit federal courts' ability to restrain some of Trump's moves. Analysts warn that Trump will likely take other avenues to impose tariffs. 'This ruling represents a setback for the administration's tariff plans and increases uncertainty but might not change the final outcome for most major U.S. trading partners,' chief U.S. political economist at Goldman Sachs Alec Phillips told Bloomberg. 'For now, we expect the Trump administration will find other ways to impose tariffs.' Timothy Moe, chief Asia Pacific equity strategist at Goldman Sachs, told Bloomberg TV, 'This might be considered a body blow, but it's not the final rendering.' Minutes after the ruling, the Trump Administration filed a notice of appeal to the U.S. Court of Appeals for the Federal Circuit in Washington, D.C. The case may also later be appealed to the Supreme Court. 'The judicial coup is out of control,' White House deputy chief of staff for policy and homeland security adviser Stephen Miller posted on X. 'It is not for unelected judges to decide how to properly address a national emergency,' said White House deputy press secretary Kush Desai in a statement. Desai said that trade deficits have led to a national emergency that has 'decimated American communities, left our workers behind, and weakened our defense industrial base—facts that the court did not dispute.' He added: 'President Trump pledged to put America First, and the Administration is committed to using every lever of executive power to address this crisis and restore American greatness.' 'This administration was already a joke in so many ways,' posted George Conway, attorney and a founder of the anti-Trump political action committee The Lincoln Project, on X. 'But the USCIT's decision striking down Trump's tariffs could not make him look more hapless.' The Independent Institute, a nonpartisan think tank that has previously criticized Trump's tariffs, posted a blog with the headline: 'Happy Liberation from Trump's Tariffs Day.' Gregory Meeks, the ranking Democrat on the House Foreign Affairs Committee who co-led an amicus brief in support of the 12 plaintiff states in the case, said in a statement: 'I'm encouraged by the court's decision today to block President Trump's so-called 'liberation day' tariffs, confirming what we've long known: these tariffs are an illegal abuse of executive power. Trump's declaration of a bogus national emergency to justify his global trade war was an absurd and unlawful use of IEEPA.' 'The law is clear: no president has the power to single-handedly raise taxes whenever they like,' New York Attorney General Letitia James, one of the attorneys general who filed the lawsuit, said in a statement. 'These tariffs are a massive tax hike on working families and American businesses that would have led to more inflation, economic damage to businesses of all sizes, and job losses across the country if allowed to continue. This decision is a major victory for our efforts to uphold the law and protect New Yorkers from illegal policies that threaten American jobs and economy.' Around the world, economists and leaders—and by early indications, markets—have also embraced the ruling. Hong Kong Financial Secretary Paul Chan told reporters the ruling would 'at least bring President Trump to reason.' 'For economies that have more diversified export baskets, this is a reprieve,' Nick Marro, principal economist for Asia at the Economist Intelligence Unit, told the BBC, noting that Asian economies will largely embrace the ruling. 'But that's not everyone,' he added, pointing to economies like South Korea and Taiwan that could still be 'held hostage' to U.S. tariffs on auto and metals exports. Others reacted more cautiously. Australian Trade Minister Don Farrell told the Guardian that Australia will 'continue to engage and strongly advocate for the removal of tariffs.' He noted that there may be 'further legal processes through the courts,' adding that the Australian government 'has been consistent in the view that these tariffs on Australian imports into the U.S. are unjustified.' Contact us at letters@
Time Magazine
29-05-2025
- Business
- Time Magazine
What to Know About the USCIT's Tariff Ruling—and How Trump and the World Are Reacting
Donald Trump's sweeping and volatile tariffs have left businesses in uncertainty, roiled global markets, upended U.S. relations with trading partners, and pushed up the prices of consumer goods. But on Wednesday, a federal court ruled that Trump didn't have the authority to impose them in the first place. A three-judge panel at the U.S. Court of International Trade (USCIT) in New York ruled that Trump overstepped his authority by implementing a tariff regime on dozens of countries in a bid to enliven domestic manufacturing and to slash budget deficits by generating revenue from import levies. The Administration has also used the tariffs as bargaining chips for trade deals more favorable to the U.S.—as well as in geopolitical negotiations. The Wednesday court ruling may provide temporary relief for affected consumers and businesses—halting a 30% tariff on China, 25% tariff on certain goods from Mexico and Canada, and 10% universal tariffs on most of the rest of the world—and it throws a wrench in the centerpiece of Trump's agenda, though the Trump Administration swiftly filed an appeal. Here's what to know about the ruling. What is the U.S. Court of International Trade? The USCIT has jurisdiction over civil cases arising from U.S. customs and international trade laws. Its website states that 'the court may grant any relief appropriate to the particular case before it, including, but not limited to, money judgments, writs of mandamus, and preliminary or permanent injunctions.' The panel of judges that ruled on Trump's tariffs were all appointed by different Presidents: Judge Jane Restani was appointed by Ronald Reagan; Judge Gary Katzmann was appointed by Barack Obama, and Timothy Reif was appointed by Trump during his first term. What did the ruling say? The USCIT issued its opinion on two consolidated cases concerning Trump's tariffs. The first was filed by New York-based wine importer V.O.S. Selections along with four other small businesses, and the second was filed by 12 different states. In imposing tariffs, which Congress has the constitutional power to approve, Trump invoked his authority under the International Emergency Economic Powers Act of 1977 (IEEPA), which grants the President authority to regulate commerce in light of threats that can constitute a national emergency. It was the first time a President invoked the IEEPA in a tariff situation. These include the tariffs Trump imposed earlier this year on Canada, China, and Mexico, which were aimed at curbing the entry of fentanyl into the country, as well as his April 2 'Liberation Day' so-called 'reciprocal' tariffs, which were aimed at taxing dozens of nations due to their trade surpluses with the U.S. The plaintiffs argued that Trump did not have authority under IEEPA to impose such widespread tariffs. The court said that it 'does not read IEEPA to confer such unbounded authority and sets aside the challenged tariffs imposed thereunder.' The court said that the worldwide retaliatory duties 'exceed any authority granted to the President by IEEPA to regulate importation,' while the drug trafficking-related levies 'fail because they do not deal with the threats set forth in those orders.' 'A tax deals with a budget deficit by raising revenue. A dam deals with flooding by holding back a river. But there is no such association between the act of imposing a tariff and the 'unusual and extraordinary threat[s]' that the Trafficking Orders purport to combat,' the court wrote. In its conclusion, the court ruled in favor of a permanent injunction on the tariff orders nationwide. How might this impact Trump's tariffs? Trump has 10 days to put the injunction into effect, per the order accompanying the ruling. The court ordered that four of Trump's executive orders are invalid and must be repealed. Trump's 25% steel, aluminum, and auto tariffs, however, were left in place, pending a Commerce Department investigation. The ruling noted that the President has the power to impose certain tariffs when the Secretary of Commerce 'finds that an 'article is being imported into the United States in such quantities or under such circumstances as to threaten to impair the national security'' under Section 232 of the Trade Expansion Act of 1962. The ruling threatens to upend ongoing trade-deal negotiations, though Trump could still impose new 'restricted' tariffs, the ruling noted, so long as they are 'in response to 'fundamental international payment problems'' which include substantial trade deficits under Section 122 of the Trade Act of 1974. This authorizes the President to impose tariffs of as much as 15% for up to 150 days. There's also the chance that the Administration may simply ignore the ruling. A provision in the thousand-plus-page 'One Big Beautiful Bill,' which passed in the House last week and is now before the Senate, would effectively restrict judges' power to hold a litigant in contempt for defying court orders or injunctions. If the megabill becomes law, with the provision intact, critics say it could limit federal courts' ability to restrain some of Trump's moves. Analysts warn that Trump will likely take other avenues to impose tariffs. 'This ruling represents a setback for the administration's tariff plans and increases uncertainty but might not change the final outcome for most major U.S. trading partners,' chief U.S. political economist at Goldman Sachs Alec Phillips told Bloomberg. 'For now, we expect the Trump administration will find other ways to impose tariffs.' Timothy Moe, chief Asia Pacific equity strategist at Goldman Sachs, told Bloomberg TV, 'This might be considered a body blow, but it's not the final rendering.' How has the Trump Administration reacted? Minutes after the ruling, the Trump Administration filed a notice of appeal to the U.S. Court of Appeals for the Federal Circuit in Washington, D.C. The case may also later be appealed to the Supreme Court. 'The judicial coup is out of control,' White House deputy chief of staff for policy and homeland security adviser Stephen Miller posted on X. 'It is not for unelected judges to decide how to properly address a national emergency,' said White House deputy press secretary Kush Desai in a statement. Desai said that trade deficits have led to a national emergency that has 'decimated American communities, left our workers behind, and weakened our defense industrial base—facts that the court did not dispute.' He added: 'President Trump pledged to put America First, and the Administration is committed to using every lever of executive power to address this crisis and restore American greatness.' How have supporters of the ruling reacted? 'This administration was already a joke in so many ways,' posted George Conway, attorney and a founder of the anti-Trump political action committee The Lincoln Project, on X. 'But the USCIT's decision striking down Trump's tariffs could not make him look more hapless.' The Independent Institute, a nonpartisan think tank that has previously criticized Trump's tariffs, posted a blog with the headline: 'Happy Liberation from Trump's Tariffs Day.' Gregory Meeks, the ranking Democrat on the House Foreign Affairs Committee who co-led an amicus brief in support of the 12 plaintiff states in the case, said in a statement: 'I'm encouraged by the court's decision today to block President Trump's so-called 'liberation day' tariffs, confirming what we've long known: these tariffs are an illegal abuse of executive power. Trump's declaration of a bogus national emergency to justify his global trade war was an absurd and unlawful use of IEEPA.' 'The law is clear: no president has the power to single-handedly raise taxes whenever they like,' New York Attorney General Letitia James, one of the attorneys general who filed the lawsuit, said in a statement. 'These tariffs are a massive tax hike on working families and American businesses that would have led to more inflation, economic damage to businesses of all sizes, and job losses across the country if allowed to continue. This decision is a major victory for our efforts to uphold the law and protect New Yorkers from illegal policies that threaten American jobs and economy.' Around the world, economists and leaders—and by early indications, markets —have also embraced the ruling. Hong Kong Financial Secretary Paul Chan told reporters the ruling would 'at least bring President Trump to reason.' 'For economies that have more diversified export baskets, this is a reprieve,' Nick Marro, principal economist for Asia at the Economist Intelligence Unit, told the BBC, noting that Asian economies will largely embrace the ruling. 'But that's not everyone,' he added, pointing to economies like South Korea and Taiwan that could still be 'held hostage' to U.S. tariffs on auto and metals exports. Others reacted more cautiously. Australian Trade Minister Don Farrell told the Guardian that Australia will 'continue to engage and strongly advocate for the removal of tariffs.' He noted that there may be 'further legal processes through the courts,' adding that the Australian government 'has been consistent in the view that these tariffs on Australian imports into the U.S. are unjustified.'
