War to war: The White House is suing for the right to impose trade duties
On May 28, a New York court blocked most of the duties imposed by Donald Trump, including a universal "reciprocal" tariff of 10% against the rest of the world. The judges decided that the US president should not have used his emergency powers to impose tariffs. Less than a day later, the decision was successfully challenged in the Court of Appeal. Judging by the way events are developing, the parties intend to fight to the end. This means that the final verdict will be delivered by the US Supreme Court. His decision is capable of dealing a heavy blow to the policy of the Trump administration, which planned to transfer jobs to the United States due to the barriers introduced, and at the same time replenish the budget. In the meantime, the markets have gone up against expectations, and the stock boom has also led to a sharp rise in the ruble exchange rate. Details can be found in the Izvestia article.
Who blocked the tariffs
The decision to suspend the duties was made on the evening of May 28 by a three-judge panel sitting at the Court of International Trade in Manhattan. In their opinion, the president exceeded his authority. Firstly, according to the judges, there is not a word about tariffs in the law on the emergency situation in the economy. Secondly, some duties were imposed — as the White House explicitly stated — for purposes not directly related to the economy and the balance of payments. For example, in the case of Mexico and Canada, claims were made about the transit of the dangerous drug fentanyl. But in this case, the judges conclude, the duties were a measure of influence on other countries and did not fulfill the task of combating the "emergency situation" in the American economy.
The decision was made unanimously by all three judges, with one of them personally appointed by Trump during his first term. The other two are nominees of past presidents: Barack Obama and Ronald Reagan. A complaint against Trump's decrees was filed by a conservative organization, The Liberty Justice Center. All this makes it much more difficult to advance the agenda of the US president, showing that dissatisfaction with the policy of duties exists on both sides of the political spectrum.
Who unblocked the tariffs
The White House immediately promised to appeal the verdict, and it succeeded literally the very next day.
However, it should be noted that the decision of the appellate instance is not a reversal of the verdict, but only of the court order. In the future, the same court will consider the case on its merits, and the jurisdiction of the Court of International Trade will be the object of study. Trump's representatives believe that challenging the executive branch's decisions on foreign trade regulation is beyond the competence and authority of "unelected judges."
In this sense, it is significant that the lawsuit was initiated not by the Senate, which has such powers, but in fact by a public organization. It is obvious that in the future the authorities of democratic states will join it.
The parties have time to prepare, the plaintiffs have until June 5, and the administration has until the 9th.
"The court's intervention seems extremely inappropriate. When the Senate had the opportunity to overturn the President's decision, the Senate decided not to use its powers to set the agenda for the United States. This administration is committed to fair trade, and we make the most profitable deals for the American people, and everything the courts do to prevent this is harmful to the American people, both in terms of trade and revenue from duties," commented Treasury Secretary Scott Bessent.
What duties are being contested
First of all, we are talking about a "flat" tariff of 10%, imposed against most countries of the world. In addition, additional duties under the IEEPA program (the very "economic emergency") against Canada, Mexico, China and Hong Kong are affected. In total, these measures have made it possible to raise about $13 billion in the US budget only by the end of April.
Other duties remained in effect. It is noteworthy that most of the tariffs against China remain unchanged (and they accounted for about three-quarters of the total tariff revenue). In addition, duties on aluminum, steel, automobiles, and solar energy products are not affected. They were accepted outside the IEEPA program. In fact, this means that point-applied duties have a much greater viability from the point of view of American courts. Although proceedings on them are possible in the future.
Everything will be decided by the Supreme
Some senior White House officials in charge of economic policy have downplayed the significance of the court decision. "If anyone thinks this took the administration by surprise, think again," said Peter Navarro, Trump's trade adviser. According to him, the administration has a strong legal position on the IEEPA program. He added that in case of defeat, other measures will simply be taken. U.S. Trade Representative Jameson Greer will talk about the available tools, and that "you'll hear from him [news] soon."
Among the possible measures, Navarro mentioned tariffs under article 122, which involve the imposition of duties of up to 15% for a period of 150 days. The reason why they were not used initially is precisely because of their short-term nature. However, Kevin Hassett, director of the National Economic Council, said the administration was not yet considering alternatives, expressing his confidence in the success of the appeal. However, if absolutely necessary, the president's team is ready to go to the Supreme Court.
The latter is largely staffed by the current president's allies. Six of the nine judges of the Supreme Court are conservatives to one degree or another, three are appointed by Trump himself. However, as the experience of the International Trade Court shows, this in itself is not a guarantee of the administration's victory in the courts. And the Supreme Court itself has previously made decisions that went against Trump's policies.
At the same time, the administration has various options to evade court orders and look for loopholes to circumvent them. This experience has also been applied in the last few months. Finally, it is possible to adopt new decrees with different formulations and justifications, but with the same end result.
There is an option to impose 15% tariffs on products from countries with which the United States has a trade deficit. In addition, the White House can use a universal formula for "threats to national security" that can be applied in almost any situation.
However, experts believe that in these cases, the Trump administration will not be able to avoid litigation.
Even the ruble soared
However, the initial decision of the Commercial Court was made with great optimism in the financial markets. Investors feared that tariffs could plunge the whole world, including the United States itself, into recession this year (in the case of the United States, GDP declined already in the first quarter of this year, but this is a distortion related not so much to duties as to a reaction to them). Accordingly, the abolition of at least part of the duties significantly improves the situation in global supply chains. The American S&P 500 index gained more than a percent. Oil prices jumped by one and a half points at once, even despite the news of another production increase approved by OPEC+.
The Russian ruble turned out to be in the black, which rose both against the dollar (the American currency was trading below 78 rubles on the interbank market on May 29) and against the yuan — the "Chinese" fell below 11 rubles.
Double effect and awkward questions
From the point of view of the global economy, the effect may be positive, but for the Trump administration it is a rather unpleasant blow. It's not even so much that the decision overturns plans for large-scale reforms of the American economy, the return of jobs to the country and the equalization of the balance of payments. This can be achieved in other ways. Right now, the issue of "live" money is much more relevant for Trump and his team.
Tariffs are beneficial for the state, as they bring in tens of billions of dollars a month, and this amount could grow in the coming months. And the money is needed to at least balance the budget, especially after the adoption of the tax law, which allowed Republicans to defend low rates and a number of deductions due to a larger hole in the national finances. Tariffs could just compensate for most of the shortfall. If the program of their introduction is disrupted, then all approaches to economic policy will have to be reviewed.
According to calculations by Bloomberg Economics, the court's decision to abolish tariffs potentially threatens to reduce the effective rate of US customs duties from 27% to 6% fixed in April. According to the agency, such a sharp drop threatens the American economy with stagflation.
At the same time, the duties were unpopular, and most Americans did not approve of their introduction — at least on such a scale. Only 37% of US citizens perceive the introduction of tariffs positively.
Thus, from a political point of view, the administration can turn this decision in its favor by referring to the "deep state" that is hindering reform, while at the same time avoiding responsibility for the possible decline as a result of the imposition of duties. At least America's trading partners (except China) can breathe a sigh of relief at the moment.
But the most difficult question is that in the event of a negative decision by the Supreme Court, it remains completely unclear what to do with the funds already earned (and spent) in the trade war, which amounts to tens of billions of dollars.
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