- Markets briefly soared after a ruling from the New York-based Court of International Trade struck down many of the Trump administration’s tariffs. On Thursday, a court of appeals granted the administration an emergency stay, allowing tariffs to remain unchanged for now. Still, experts say in the long term Trump is likely to succeed in implementing tariffs in some way, whether it be by succeeding in court, pushing for a tariff bill in Congress, or adjusting tariffs in line with provisions of the Trade Act of 1974.
After a federal trade court invalidated many of the Trump administration’s tariffs, stocks soared. Yet despite the ruling, experts cautioned the president may have several options available to continue with his tariff plans.
In sum, a Wednesday ruling from the Court of International Trade sent stocks on a tear before a federal court of appeals dented the euphoria by granting the Trump administration an emergency stay. In its ruling, the court claimed the Trump administration did not have the power to implement broad tariffs, including a 10% baseline tariff on every nation as well as tariffs on China and Mexico based on authority from the International Emergency Economic Powers Act, or IEEPA. The ruling does not affect Trump’s tariffs on steel and aluminum, and the stay allows Trump’s team to continue with his tariff policies for now.
Still, trade experts and analysts warned that Trump’s tariff plans and the ongoing negotiations with major trading partners may continue as before, despite the roadblock.
“This ruling represents a setback for the administration’s tariff plans and increases uncertainty but might not change the final outcome for most major US trading partners,” Goldman Sachs analysts wrote in a Wednesday note.
Far from changing direction, lawyers for the Trump administration have already appealed the ruling. Businesses and countries negotiating with the U.S. should not take this recent development as a signal that trade policy will change, said international trade law expert and University of Kansas law school professor Raj Bhala.
“This is nothing more than a suspension, a hiatus, a delay in what we know are dogged second Trump administration tariff plans—dogged plans to address the trade imbalances and what it regards as unfair trade practices by other countries,” Bhala told Fortune.
If the administration wants to pivot its approach, it also has three options, Bhala said. The first is to appeal, which is already in motion. The administration has solid grounds to appeal because the court may defer to the president on issues of national security, he said. If it loses on appeal, the administration has said it will elevate the case to the Supreme Court.
Otherwise, President Trump can also ask Congress to pass a bill giving him authority on some tariff and trade matters. This move would need to be limited in scope, possibly by sector, and would likely require specifics on the duration of tariffs, or a periodic congressional review, but Bhala said it would likely receive bipartisan support.
“Find me enough Democrats and a handful of Republicans who are going to oppose that, knowing that they’re up for reelection in a year and a half, I don’t think you’re going find that,” he said.
The third route would be to adjust tariffs through provisions of the existing Trade Act of 1974, which may slow the process but could also succeed, said Bhala.
Using the law
According to analysts at Goldman Sachs, the Trump administration could replace its 10% baseline tariff with a broad tariff of up to 15%, under Sec. 122 of U.S. trade law for up to 150 days before congressional action is required. This could be the quickest way to work around the court ruling as Sec. 122 doesn’t require any investigation, but it would need to be tailored to address trade deficits and can’t be used for general trade disputes.
The administration could also launch investigations into its trading partners under Sec. 301 of U.S. trade law. These investigations give the administration authority to look into other countries’ trade practices that it deems “unjustifiable” or “unreasonable.” This could take longer but there are no limits on the level or duration of such tariffs. Trump’s first administration previously used Sec. 301 in 2017 to investigate China for intellectual property along with other issues and to later impose tariffs.
President Trump could also broaden the tariffs which are underpinned by Sec. 232 of U.S. trade law, like those applied on steel, aluminum, and autos. These tariffs, which are justified as necessary for national security, could be broadened to other sectors, the analysts noted.
Finally the administration could utilize Sec. 338 of the 1930 Tariff Act, to enact up to 50% tariffs for countries that discriminate against the U.S. in commerce. Although, the analysts noted that this authority has never been used and could be shot down by the courts. While the level of tariffs is limited to 50%, no formal investigation is needed.
In a statement to Fortune, White House spokesperson Kush Desai said addressing the large and historic trade deficits the U.S. runs with other countries is urgent.
“It is not for unelected judges to decide how to properly address a national emergency,” Desai wrote.
Bhala noted that even as the Trump administration faces a setback from the courts, tariff policy is a major priority for the president, and one he likely won’t give up so easily.
“If I’m a business, if I’m a foreign government, I am hedging my risk, and I am assuming that in one way or the other, some form of tariffs, reciprocity tariffs, are going to be imposed under some kind of legal authority,” he said.
This story was originally featured on Fortune.com
This story originally appeared on Fortune
