President Trump has several tools at his disposal that he can use to impose tariffs despite a court ruling that ordered the reversal of his hefty “Liberation Day” taxes, two major Wall Street banks said on Thursday.
The US Court of International Trade on Wednesday blocked many of Trump’s steepest levies, arguing federal law does not grant him “unbounded authority” to tax imports from nations around the world.
His administration immediately filed plans to appeal the decision, which halts 6.7 percentage points of levies.
“The tariff levels that we had yesterday are probably going to be the tariff levels that we have tomorrow, because there are so many different authorities the administration can reach into to put it back together,” Michael Zezas, Morgan Stanley’s global head of fixed income and thematic research, told Bloomberg TV on Thursday.
Trump’s power to “raise and escalate — it might be a little bit slower moving, but it is still there,” he added.
Alec Phillips, chief US political economist at Goldman Sachs, wrote in a note to clients that the 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.”
Negotiations with other countries, like the ongoing talks with Japan, were always likely to take time, according to Zezas.
While they continue, the White House would be able to “stitch together that authority on the other tariffs that went away — so all the same leverage is effectively there during the negotiation.”
The Trump administration on Thursday signaled it’s unlikely to pursue alternative methods to levy tariffs.
“There are different approaches that would take a couple of months,” Kevin Hassett, director of the National Economic Council, said on Fox Business.
“But we’re not planning to pursue those right now because we’re very, very confident that this really is incorrect.”
One such alternative is the use of Section 232 of the Trade Expansion Act, which allows the president to impose tariffs if an investigation finds excessive foreign imports pose a national security risk.
These taxes are already in place on steel, aluminum and auto imports, which alone add 7.6 percentage points, the analysts said.
Trump could also use Section 122 of the Trade Act of 1974, which deals with “large and persistent” trade balance surpluses, to swiftly impose tariffs without the formal investigation requirement.
“The administration could quickly replace the 10% across-the-board tariff with a similar tariff of up to 15% under Sec. 122,” Goldman analysts said in the note.
However, these tariffs would only last up to 150 days, at which point they would require Congressional approval.
The White House could launch Section 301 investigations on major trading partners, which allow the president to take action against foreign nations that are restricting or burdening US commerce.
But this is another longer route, likely to take several weeks at a minimum, Goldman warned.
Trump also has the ability to use Section 338, a Great Depression-era rule that gives the president authority to levy tariffs of up to 50% on foreign nations that exhibit discriminatory behavior.
This measure has not been used before, Goldman analysts noted.
Goldman’s Phillips said he does not expect the court’s ruling to impact the massive Republican tax bill that passed the House last week since “tariff revenue was never counted toward offsetting the cost of the package, and most lawmakers never made a clear link between the two issues.”
Yet the tariffs were likely to raise nearly $200 billion on an annual basis – approximately the same amount by which the spending bill would raise the deficit next year, Phillips wrote.
“For now, we expect the Trump administration will find other ways to impose tariffs, so we still expect most of this revenue to materialize,” he added.
The Court of International Trade’s ruling gave Trump 10 days to roll back the duties after arguing the president’s tariffs “exceed any authority granted” to the executive branch.
