Will Trump’s New Tariffs Be Struck Down Too? & Trump Admin Probes Trade Partners’ Practices

Immediately after the Supreme Court struck down President Trump’s tariffs based on the International Emergency Economic Powers Act (IEEPA), the president shifted to Section 122 of the Trade Act of 1974 to impose a broad 10% tariff on imports.

Now those tariffs are under litigation. Could they end up struck down with shippers due even more tariff refunds?

Almost half of the country’s states together brought a lawsuit against the Section 122 tariffs.

Noi Mahoney reported in a FreightWaves article:

A coalition of 24 U.S. states has filed a lawsuit against the Trump administration seeking refunds of tariffs they argue were imposed unlawfully.

The lawsuit added to a growing wave of legal challenges from companies such as Nintendo and Costco, as well as importers affected by the duties.

…

The plaintiffs include Arizona, California, Colorado, Connecticut, Delaware, Illinois, Kentucky, Maine, Maryland, Massachusetts, Michigan, Minnesota, Nevada, New Jersey, New Mexico, New York, North Carolina, Pennsylvania, Oregon, Rhode Island, Vermont, Virginia, Washington and Wisconsin, according to court records.

The lawsuit names Trump, the U.S. Department of Homeland Security, U.S. Customs and Border Protection and several federal officials as defendants.

Arguments of the new lawsuit sound similar to ones in the lawsuit that eventually toppled the IEEPA tariffs. They argue the president exceeded his legal authority with the sweeping Section 122 tariffs. Further, they argue tariff power rests with Congress, not the president, and Trump violated the constitution with these tariffs, which lack congressional approval.

Does that mean the tariffs will be similarly knocked down? Not necessarily.

An argument made before the Supreme Court concerning IEEPA granting tariff powers to the president was that the language in IEEPA did not explicitly include the word “tariff.” I actually thought that argument was weak as IEEPA did include language granting the president power to regulate importation, and tariffs are one of, if not the, biggest and most common tools for regulating imports.

In the Supreme Court’s decision, it pointed out how IEEPA did not explicitly mention tariffs and wrote, “When Congress has delegated its tariff powers, it has done so in explicit terms and subject to strict limits.”

Section 122 does explicitly grant tariff power to the president. Interestingly, the justices who wrote the dissenting opinion from the court’s majority decision specifically brought up Section 122 of the Trade Act of 1974 (along with a couple other statutes) as reasons why the Supreme Court “decision might not substantially constrain a President’s ability to order tariffs going forward.”

That paragraph in the dissenting opinion ended by saying the court’s decision “concludes that the President checked the wrong statutory box by relying on IEEPA rather than another statute to impose these tariffs.”

In other words, Section 122 tariffs may hold up in court where tariffs justified by IEEPA were overturned.

However, we’ll once again have to see how the lawsuits play out in court.

Trump Admin Commencing Probes Necessary for Tariffs

Section 122 has a limited time scope of 150 days on tariffs the president imposes. It requires an act of Congress to extend them. It seems unlikely Congress would extend President Trump’s tariffs with the midterms approaching. Plus, I don’t think Trump wants to depend on Congress for his foreign trade policy anyway.

Other statutes that grant tariff policy to the president require the executive branch to conduct investigations. This is likely the reason President Trump previously relied on IEEPA for his tariff power. It has no investigative requirements.

Here’s a quick rundown of statutes that require investigations in order for the president to implement tariffs:

• Section 301 of the Trade Act of 1974 requires the office of the U.S. Trade Representative (USTR) to investigate foreign acts or policies that violate trade agreements or are unjustifiable or unreasonable.
• Section 232 of the Trade Expansion Act of 1962 requires the Department of Commerce (DOC) to investigate the effects of specific imports on national security.
• Section 201 of the Trade Act of 1974 requires the International Trade Commission (ITC) to investigation if increased imports are a substantial cause of serious injury to a domestic industry.

While it’s most likely, especially after comments made by high ranking administration members like Trade Secretary Scott Bessent, for Trump to use the above statutes to impose tariffs, there’s an older one that he could also turn to:

• Section 338 of the Tariff Act of 1930 authorizes the President to impose new or additional duties on products from countries that discriminate against U.S. commerce.

Section 338 does not appear to require a formal investigation for the president to implement tariffs. However, with the statute being nearly 100 years old and a bit vague in its language, it doesn’t seem as likely as the others to withstand legal challenges. President Trump doesn’t want a repeat of what happened with his IEEPA tariffs, so he’s turning to probes into other countries’ trade.

As was covered in Universal Cargo’s blog last week, the Trump Administration is focusing in on using Section 301 to reconstruct tariffs it previously imposed with IEEPA.

Emel Akan reported in an Epoch Times article about the Trump Administration announcing Section 301 probes into other countries’ trade practices:

The Trump administration announced on March 11 the launch of new trade investigations to address unfair trade practices as it seeks to replace reciprocal tariffs recently struck down by the Supreme Court.

There will be two separate investigations under Section 301 of the Trade Act of 1974, which may result in tariff increases on certain countries, U.S. Trade Representative Jamieson Greer said in a call with reporters.

The first investigation, initiated on March 11, will focus on addressing trade practices related to excess capacity and production in manufacturing sectors.

According to Greer, the trading partners subject to this investigation are China, the European Union, Singapore, Norway, Indonesia, Malaysia, Cambodia, Thailand, South Korea, Vietnam, Taiwan, Bangladesh, Mexico, Japan, and India.

The second investigation, set to launch on March 12, will focus on imports produced with forced labor and target roughly 60 countries, he said. The investigation could result in a ban on imports of such goods.

IEEPA failing to stand up to legal scrutiny doesn’t mean tariffs implemented via other statutes will share a similar fate. However, it likely emboldens people to challenge Trump’s continued usage of tariffs. There’ll be plenty more fighting to come over the topic. At Universal Cargo, we’ll be watching how it plays out for shippers.