Washington D.C. – President Donald Trump, reacting to a Supreme Court ruling that struck down his previous attempts to impose broad tariffs, announced he will sign an executive order enacting a new 10% “global tariff” on all imports. The move, utilizing Section 122 of the Trade Act of 1974, represents a significant shift in trade policy and raises questions about its legality and potential economic impact.
The Supreme Court’s decision, delivered earlier , invalidated the legal basis for tariffs previously imposed under the International Emergency Economic Powers Act (IEEPA). The court ruled that IEEPA did not grant the President the authority to levy tariffs, a setback for Trump’s long-standing trade agenda focused on protecting American manufacturing and reducing trade deficits.
Undeterred, Trump framed the new tariffs as a necessary step to safeguard the U.S. Economy. “I’m ashamed of certain members of the court, absolutely ashamed for not having the courage to do what’s right for our country,” he stated during a White House press briefing, according to reports from CNBC and the BBC. He characterized the court’s decision as “deeply disappointing” and vowed to find alternative methods to achieve his trade objectives.
Section 122 of the Trade Act of 1974, the legal foundation for the new tariffs, has remained largely unused since its enactment. Unlike IEEPA, it doesn’t require a declaration of national emergency. The law allows the President to impose tariffs of up to 15% for a period of 150 days, after which Congress would need to authorize an extension. This 150-day window is intended to allow time for negotiations or Congressional action, but the immediate implementation power is a key difference from previous approaches.
The implications of this new tariff are far-reaching. A White House official clarified that countries with existing trade deals with the U.S., including the United Kingdom, India and the European Union, will now be subject to the 10% global tariff under Section 122, rather than the previously negotiated, lower rates. The administration expects these countries to continue adhering to the concessions made in those trade agreements, a potentially contentious expectation given the altered tariff landscape.
The use of Section 122 is notable for its speed and lack of procedural hurdles. It bypasses the need for investigations into unfair trade practices or national security concerns, which are typically required for other tariff mechanisms. This flexibility, however, also raises concerns about potential legal challenges. Experts suggest the legal justification for invoking Section 122 in the current economic climate – absent a clear balance of payments crisis or dollar devaluation – is debatable.
Historically, Section 122 was designed to address acute imbalances in international payments, such as significant deficits in the current account or a rapid decline in the value of the dollar. However, with the shift to floating exchange rates in 1973, the need for such interventions diminished. Monetary and fiscal policies became the primary tools for managing external balances, rendering Section 122 largely obsolete.
The Cato Institute noted that while the Supreme Court’s ruling on IEEPA was a victory for limiting presidential power, the potential use of Section 122 shouldn’t be cause for celebration. The law, while limited in scope and duration, still grants the President considerable authority to disrupt global trade flows.
The 10% tariff applies to all imports, regardless of origin, and is intended to be non-discriminatory. However, the President retains the power to grant exemptions on a case-by-case basis. The long-term effects of the tariff remain uncertain, but economists anticipate potential disruptions to supply chains, increased costs for consumers, and retaliatory measures from other countries.
The administration plans to use the 150-day period to initiate new investigations under Section 301 of the Trade Act of 1974, which could lead to more permanent tariffs. This suggests the current move is not merely a temporary response to the Supreme Court ruling, but rather a strategic maneuver to reassert control over trade policy and potentially establish a more protectionist trade regime.
The immediate impact on financial markets is yet to be fully realized. Investors are closely monitoring the situation for signs of escalation and potential trade wars. The uncertainty surrounding the new tariffs is likely to weigh on business confidence and investment decisions in the coming months. The effectiveness of this strategy, and whether it will truly “rebuild America’s shrinking manufacturing base” as Trump claims, remains to be seen.
