Two laws that Trump could use to re-impose his tariffs (and why he might do them both)

Despite a recent court ruling against President Trump's tariff authority under the International Emergency Economic Powers Act (IEEPA), the administration is expected to pursue alternative legal avenues to reimplement tariffs, potentially increasing uncertainty for trading partners. Immediate options include invoking the balance-of-payments authority under Section 122 of the Trade Act of 1974, allowing tariffs up to 15% for 150 days, or focusing on sector-specific duties under Section 301 or Section 232, though these require more time to implement. Goldman Sachs suggests a strategy of using the balance-of-payments authority as a short-term fix while pursuing investigations for more permanent sector-specific tariffs.

Analysis

A recent US Court of International Trade decision striking down President Trump's tariff authority under the International Emergency Economic Powers Act (IEEPA) represents a procedural setback rather than a definitive halt to the administration's tariff ambitions. The administration has signaled its intent to appeal and explore alternative legal avenues, as Congress has delegated significant tariff powers to the executive branch over decades. Key among these are Section 122 of the Trade Act of 1974, which permits swift implementation of tariffs up to 15% for a 150-day period under balance-of-payments justifications, and the more time-consuming but potentially permanent sectoral duties under Section 301 of the Trade Act of 1974 and Section 232 of the Trade Expansion Act of 1962, both of which require investigations but have been utilized previously for tariffs on goods like steel, aluminum, cars, and Chinese imports. President Trump has indicated a current focus on sector-specific tariffs, particularly for goods like military equipment and semiconductors, rather than broader consumer items. Goldman Sachs has noted that this legal maneuvering increases uncertainty for trade partners but may not ultimately alter the tariff landscape for most, suggesting a possible strategy where the administration uses the balance-of-payments authority for immediate effect while pursuing longer-term sectoral tariffs. The White House is actively challenging the court's order to halt tariff collection within 10 days, underscoring its commitment to maintaining tariff pressure.

Key Decisions for Investors

• Investors should anticipate continued trade policy uncertainty and the potential for reimplementation or new tariffs through alternative legal authorities, despite the recent court ruling.
• Monitor closely the administration's appeal process and its potential utilization of Section 122 for short-term tariffs (up to 15% for 150 days) or Sections 232 and 301 for more enduring, sector-specific measures, particularly targeting industries like semiconductors, military equipment, steel, aluminum, and potentially pharmaceuticals.
• Companies with significant exposure to international trade, especially in the aforementioned sectors, may face heightened volatility and should assess potential impacts from these evolving tariff strategies.