On 20 February, the United States Supreme Court struck down, by a clear majority of six to three, the entire tariff architecture introduced by President Trump during the early phase of his second term. It was a system on which the president had built much of his foreign policy. Attention now turns to how Trump will respond to the Court’s ruling. He could rely on a different statutory basis to reinstate tariffs, or part of them. In that case, he would have five possible routes, all of which are more limited than the mechanism deemed unlawful by the justices.
The first option lies in Section 232 of the Trade Expansion Act of 1962, which allows the president to restrict imports on national security grounds, with no limits on the level or duration of the measures. However, this can only be done following an investigation by the Department of Commerce. In addition, the tariffs must apply to entire sectors rather than to whole countries. Trump used this instrument during his first term to impose tariffs on steel and aluminium, which are the only duties upheld under the current Supreme Court ruling. Other tariffs introduced in his second term under this provision include those on motor vehicles and their components, as well as on products derived from copper.
The second legislative tool that allows the president to bypass Congress is Section 201 of the Trade Act of 1974. This authorises the president to impose tariffs if an increase in imports threatens, or causes, serious injury to US producers. Here too, the outcome of an investigation by the US International Trade Commission is required, and the measures must target a specific sector rather than all imports from one or more countries. There is also a cap of 50 per cent on the additional duty compared with an existing tariff, and a maximum duration of eight years. Trump relied on Section 201 to introduce tariffs on washing machines and solar panels.
Section 301 of the same Trade Act of 1974 allows the Office of the United States Trade Representative, under the president’s direction, to impose tariffs in response to foreign trade measures deemed discriminatory against American companies or in breach of US rights under international trade agreements. In this case, there is no limit on the tariff rate that may be introduced. However, the measure still requires a prior investigation, and such tariffs expire after four years, with the possibility of extension. Section 301 permits duties to be imposed on individual or multiple countries. Trump used it in his first administration to levy tariffs on Chinese imports, as did President Biden.
The Trade Act of 1974 also offers a fourth route through Section 122. Under this provision, the president may impose tariffs to address serious balance of payments problems. No investigation is required, but the application must correspond to significant balance of payments deficits and is limited in scope, both in value, capped at 15 per cent, and in time, for a maximum of 150 days. Only Congress may authorise an extension. No president has ever used this provision.
Finally, Trump could revive a near-century-old statute: the Smoot-Hawley Act of 1930, enacted during the Great Depression. Section 338 authorises the president to introduce tariffs on imports from countries that impose tariffs or restrictions deemed unreasonable, or that otherwise discriminate against US trade. The only limit in this case is the rate, which must not exceed 50 per cent. In practice, this provision has never been applied, and experts believe that its use by the president could trigger substantial legal challenges.
