New York: The consistency of judicial rulings against Trump tariffs offers a lesson for the US' trading partners: don't panic when a new tariff is announced. Chances are that a US court will question or strike it down. Nor should countries rush into trade deals to pre-empt tariff threats. Instead, they should challenge the legality of measures and cultivate informal ties with American corporations, civil rights groups, consumer organisations and the legal community, encouraging, where possible, domestic legal challenges in US courts.
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Trump's tariff mess will be cleared by US courts. Just last week, the US Court of International Trade invalidated 10% tariff on virtually all imports that the president announced after Supreme Court annulled Liberation Day tariffs (LDTs). Because of court verdicts, Trump's days of announcing tariffs via late-night posts are over. The new channel the US is pursuing - Section 301 of the US Trade Act 1974 - requires a formal investigative process, including written submissions and public hearings. It allows businesses, workers, consumers and other stakeholders to participate in public hearings.
Treasury secretary Scott Bessent says that the government will 'recreate the exact tariff structure' that it had prior to the apex court's February verdict, using Sec 301 by July. With that aim, USTR's office is investigating 16 countries. The logic of these investigations remains deeply flawed and tariffs imposed based on this logic will be overturned by US courts.
Sec 301 allows the government to impose tariffs on countries with policies that burden or restrict US commerce. USTR is using the most absurd interpretation of law to convene its investigation. It has coined a new term - 'structural excess capacity' - to describe countries 'producing more than they can consume', and has argued that their over-production prevents US companies to invest and expand manufacturing capacities in the US.
By this logic, all nations that export anything to the US would be violating Sec 301. Indeed, the logic of 'structural excess capacity' goes against spirit of international trade. Many of the US' top exporters could be accused of structural overcapacity. While there is no doubt that by July, Trump will announce new tariffs under Sec 301, these tariffs would be challenged in courts. Sec 301 tariffs will meet the same fate that LDTs did.
Despite the mess, one must marvel at the speed at which the US institutions operate. Within 11 mths of the LDT announcement, 3 US courts, including the top one, declared them illegal.
When Supreme Court judgment came in Feb, everyone, including the government and even justices of the top court, expressed concerns about delays in providing refunds to importers. This was the primary criticism of the Supreme Court's verdict that had left it up to trade courts to determine logistics of how importers would get their tariff refunds. Yet, in 2 mths, importers have started getting refunds plus interest in their online accounts.
Within weeks of the top court judgment, a trade court judge ordered the government to begin the refund process. US Customs and Border Protection (CBP) has promised that refunds will be issued within 60-90 days following the acceptance of a claim, unless a compliance concern requires a CBP review. The actual process is faster. By April 20, CBP began receiving refund claims, and by May 11, importers began receiving the refunds plus interest.
The same is likely to happen to the tariffs paid under Sec 122. Perhaps the process would be even quicker given that some teething problems in the refunding process are getting resolved. True, this theatre of absurdities could have been avoided if Trump had not overreached his authority. According to government data, some 3,30,000 importers have paid more than $166 bn in tariffs, and the government will repay an additional interest amount of more than $650 mn, which will increase for every month of delay.
So far, LDTs have created uncertainty for businesses and higher prices for consumers. They were supposed to bring billions of dollars to the US exchequer. Instead, they have imposed an additional interest burden that will continue to increase if there are delays in refunds.
The writer is professor of social policy, Columbia University, US.
