President Donald Trump will enact a 10pc tax on all US imports from 24 February to replace the emergency tariffs struck down by the Supreme Court on Friday, but the new tariffs will exempt energy, critical minerals, fertilizers and certain agricultural imports.
The new 10pc tax, which will be in effect for 150 days — until 24 July — will also exempt imports eligible for duty-free treatment under the US-Mexico-Canada free trade agreement (USMCA).
Trump's proclamation of the new tariff invokes Section 122 of the 1974 Trade Act, which allows imposing tariffs of up to 15pc to address a balance of payments issue.
The Section 122 tariffs will also exempt "natural resources and fertilizers that cannot be grown, mined, or otherwise produced in the US", according to a White House fact sheet. Trump's proclamation also exempts beef, oranges and tomatoes from the 10pc tariff.
The new tariff will not apply to steel, aluminum, cars, auto parts and any other products subject to sectoral tariffs Trump's administration has imposed in the past year or plans to tax in the future.
Trump directed the US Trade Representative's office (USTR) to immediately launch "Section 301" investigations to justify future tariffs directed at specific, yet unnamed countries. A Section 301 investigation would target a specific country on the grounds that it is discriminating against US exports. China almost certainly would be subject to import taxes under this rubric. USTR launched a Section 301 investigation against China last October, citing its lack of compliance with the 2020 US-China deal.
The Supreme Court earlier on Friday threw out most of the tariffs Trump has imposed on nearly all US trading partners, finding his ability to unilaterally impose tariffs under the pretext of economic emergencies exceeded his powers under a decades-old law.
Uncertainty ahead
The announcement of exemptions for USMCA, energy and other products addresses concerns raised by US importers in the wake of the Supreme Court rulings. The exemption regime is the same established under the emergency tariffs Trump applied since last year.
But Trump's choice of the legal avenue for reverse-engineering the now invalid emergency tariffs points to more uncertainty ahead.
The administration can impose those tariffs only for a period of 150 days, according to law. Any extensions would require explicit authorization from Congress.
"Is the 150 day limit an actual limit? We'll see," Georgetown University law professor Kathleen Claussen said on Friday. No president has previously invoked Section 122 to impose tariffs, and "it's hard to see what would stop him from trying to" unilaterally extend it by a further 150 days, she said during a webinar hosted by WITA - The International Trade Membership Association.
The Republican-led US Congress has not challenged Trump's tariff authority to date, although lawmakers have increasingly voiced concerns about the effect of tariffs on prices. The House of Representatives and the Senate have voted on separate resolutions challenging the tariffs Trump has imposed on imports from Canada and Brazil, but they have not passed any tariff legislation.
"Congress and the administration will determine the best path forward in the coming weeks" with respect to tariffs, House of Representatives speaker Mike Johnson (R-Louisiana) said.
But Trump likely would have trouble finding enough votes on Capitol Hill to support his tariffs. "The president must refrain from any further unilateral action on tariffs," House Democratic leader Hakeem Jeffries (D-New York) said.
No clarity on refunds
Trump on Friday also signed an executive order formally rescinding all his previous tariffs that were imposed by invoking the economic emergency authority that the Supreme Court found to be illegal, including those on Brazil and those threatened against countries doing business with Iran.
The US will immediately stop collecting duties imposed under the emergency tariffs. But the order makes no mention of any mechanism to refund the previously collected emergency tariff revenues.
Trump said earlier today he is expecting a years-long court fight over whether his administration must refund an estimated $175bn in emergency tariffs.
