The messy trade landscape just got messier
Add Axios as your preferred source to
see more of our stories on Google.
Illustration: Maura Losch/Axios
The Trump 2.0 trade war has created two distinct economic risks: One from the cost of tariffs for businesses and consumers, the other from the pall of uncertainty hanging over companies that rely on imports.
The big picture: The first of those has been diminished and the latter worsened, after the Court of International Trade's ruling late Wednesday that Trump overstepped his emergency authority with a sweeping new tariff regime.
- It means tariff relief in the near term, but a more complex outlook for policy in the medium term, as the ruling makes its way through appeals and/or the Trump administration seeks alternate legal approaches to accomplish its goals.
- There's a reason the S&P 500 is up only 1% in pre-market trading, despite a seemingly big win for business interests. This could get messy, and nobody knows quite where it will lead.
Catch up quick: The ruling from a three-judge panel found that the International Emergency Economic Powers Act of 1977, which Trump invoked to levy tariffs on nearly every good from every country, does not "confer such unbounded authority."
Yes, but: The president has several other tools of unilateral power over tariffs and trade that he could invoke, even if appeals courts uphold the trade ruling.
- They require more detailed legal process, however — a comment period, a process for importers seeking exemptions, and so on — that are less conducive to the across-the-board tariff-setting that Trump favors.
State of play: That toolkit includes some trade law callbacks from Trump's previous term, and potentially a new one, each known by the section of trade statutes from which the authorities derive.
- Section 301 authority allows the president to enact tariffs in retaliation for unfair trade practices in an industry by other countries, but only after a process of study and appeals. It has been used on many Chinese imports by both the first Trump and Biden administrations.
- Section 232 allows tariffs on goods found to have national security implications. Trump used it on steel and aluminum imports, including from allies.
- Section 122 of the Trade Act of 1974 allows something closer to Trump's all-tariffs-on-everybody strategy — but not indefinitely. It allows up to 15% tariffs without a formal review process, but only for 150 days.
Between the lines: That all tilts the balance toward tariffs on goods where there is a clear national security nexus, or justifiable claims of unfair practices — and away from consumer goods like coffee, bananas, or t-shirts.
- It sets up a scenario where many items could still end up facing quite high tariffs, but only for strategic goods and only after more protracted procedures are followed.
- It implies less inflationary impact on the day-to-day commodity goods Americans buy directly — and more of the burden falling on importers of industrial inputs, where the national security or unfair practices cases are stronger.
- Businesses get time to adjust — a double-edged sword, because it also means a longer period of uncertainty about what the endgame looks like.
The bottom line: "In macro terms, the trade shock may be less severe, but trade uncertainty may be prolonged in particular in strategic sectors, with some risk Trump lashes out to restore leverage," writes Evercore ISI's Krishna Guha in a note.
