Four tools at the Trump administration’s disposal after a U.S. court blocks tariffs

A U.S. Court of International Trade ruling blocked President Trump's ability to impose tariffs under the International Emergency Economic Powers Act, halting existing tariffs and barring future modifications; the administration is appealing the decision, and Goldman Sachs analysts suggest the White House has alternative legal avenues, including Section 122 of the Trade Act of 1974, Section 301, and Section 338 of the Trade Act of 1930, to reimpose tariffs, though some options may be temporary or require Congressional action. Legal experts suggest the Supreme Court may ultimately decide the case, given the lack of precedent and the potential impact on executive power.

Analysis

The U.S. Court of International Trade's ruling against President Trump's use of the International Emergency Economic Powers Act (IEEPA) to impose broad tariffs marks a significant, albeit potentially temporary, disruption to U.S. trade policy. The court ordered a halt to most of these tariffs, including the 10% baseline tariff on most imports and additional tariffs on China, Canada, and Mexico, and barred future modifications, giving the White House a 10-day window to comply; however, an appeal has been swiftly filed. Goldman Sachs analysts suggest this ruling, while a setback that increases uncertainty, may not alter the final outcome for most major U.S. trading partners, as the administration possesses alternative legal avenues. These alternatives include Section 122 of the Trade Act of 1974, which could quickly replace the halted tariffs with a similar levy of up to 15% for a maximum of 150 days without a formal investigation, and Section 301 of the Trade Act of 1930, which allows for investigations leading to tariffs, albeit over a longer timeframe of several weeks at minimum. Sectoral tariffs, such as those on steel, aluminum, and autos under Section 232, remain unaffected and could potentially be broadened, while Section 338 of the Trade Act of 1930 offers another, though historically unused, mechanism for imposing levies up to 50%. Legal experts note the unusual speed of the appeal and suggest the Supreme Court may ultimately adjudicate, given the limited precedent on presidential powers in this domain, introducing prolonged uncertainty regarding the tariff landscape.

Key Decisions for Investors

• Investors should closely monitor the administration's appeal of the court ruling and any potential Supreme Court review, as these outcomes will be critical determinants of future U.S. tariff policy and associated market stability.
• Re-evaluate exposure to companies and sectors most affected by the now-halted IEEPA tariffs, while remaining cognizant that the administration may utilize alternative legal authorities, such as Section 122 or Section 301, to reimpose similar trade restrictions, potentially with little warning.
• Given the heightened policy uncertainty and potential for swift changes in trade policy, investors should factor this into risk management, potentially favoring assets with lower direct exposure to U.S. trade disputes or considering strategies to hedge against renewed tariff impositions.