Making Tariffs Great Again: Does President Trump Have Legal Authority to Implement New Tariffs on U.S. Trading Partners and China

Commentary by Warren Maruyama, Lyric Galvin, andWilliam Alan Reinsch

Published October 9, 2024

Introduction

If former president Donald Trump wins back the White House, U.S. trading partners are likely to face a barrage of renewed tariff threats. Trump has announced that, if reelected, he will impose a 10-20 percent across-the-board tariff on imports into the United States, as well as an additional 60 percent tariff on all imports from China.

Trump has multiple potential sources of legal authority that could support his tariffs, if reelected, including Section 232, Section 301, the International Emergency Economic Powers Act, Section 122 Balance of Payments Authority, and even older statutes like Section 338 of the Tariff Act of 1930. Vice President Kamala Harris has blasted Trump's tariff plan, arguing that it would represent a $3,900 sales tax on Americans and drive up prices and inflation.

That tariffs have reemerged as a central policy debate between the two presidential hopefuls has not only rattled allies and trading partners but also parts of the business community, which have been left in the political wilderness as both political parties compete to bash China and repudiate trade liberalization.

A key question is whether a president has the authority to implement the types of across-the-board tariffs being discussed by Trump. The U.S. Constitution plainly grants the power to impose tariffs to Congress, not the president: "The Congress shall have Power To lay and collect Taxes, Duties, . . . To regulate Commerce with foreign Nations" (Article 1, Section 8). However, Congress has delegated extensive authorities that allow the president to impose tariffs if certain statutory conditions are met.

While some analysts have tried to reassure investors and markets by asserting that Trump would lack the legal authority to implement his tariffs plans, this reflects an overly optimistic view of the limits of presidential tariff authority. As of today, there are multiple legal authorities that Trump could rely on to justify the imposition of increased tariffs, including many that Trump already availed himself of during his presidency. These include Sections 232 and 301, the International Emergency Economic Powers Act (IEEPA), Section 122 Balance-of-Payments Authority, and Section 338 of the Tariff Act of 1930. While Section 232 requires an investigation by the Department of Commerce and Section 301 requires an investigation and determination by the Office of the U.S. Trade Representative (USTR), these procedural niceties could be accomplished in relatively short order by cabinet officials, particularly since undue delay could put them at risk of getting fired. Regardless, any investigation or public comment period would allow anticipation to build, enhancing Trump's negotiating leverage, which is likely one of the main points of the exercise.

Section232

Section 232 of the Trade Expansion Act of 1962 (known as the Trade Expansion Act) grants the president broad power to adjust imports if they are found to be a threat to U.S. national security, including through the imposition of tariffs.

Trump has used Section 232 to impose 10-25 percent tariffs in the past. After the Department of Commerce determined in 2018 that the quantities and circumstances of steel and aluminum imports "threaten to impair U.S. national security," then president Trump applied 25 percent tariffs on imports of steel and 10 percent tariffs on aluminum. While this tariff originally applied to all countries, exemptions were granted to Brazil, South Korea, Canada, Mexico, and Argentina in exchange for quota arrangements, and Australia was exempted. While the Biden administration kept the Section 232 tariffs, it reached separate agreements with the European Union, Japan, and the United Kingdom on tariff-rate quota arrangements.

While some argue that it would be a stretch for Trump to claim that all imports are a threat to U.S. national security under Section 232, the courts have routinely deferred to presidents on foreign affairs and trade policy, and legal challenges to the Section 232 tariffs haven't gone anywhere. USP Holdings, Inc. v. United States affirmed the Court of International Trade determination upholding the Trump administration's Section 232 tariffs on steel imports, and American Institute for International Steel (AIIS) v. United States affirmed the Court of International Trade determination that Section 232 did not violate the Constitution's Separation of Powers.

Section301

Section 301(b) of the Trade Act of 1974 gives the president broad authority to take all appropriate action, including retaliatory tariffs, to obtain the removal of any act, policy, or practice of a foreign government that is unjustified, unreasonable, or discriminatory, and that burdens or restricts U.S. commerce. If the USTR determines that the alleged conduct is unfair or violates U.S. rights under trade agreements, then it can decide what action to take subject to the direction of the president. Section 301 authorizes the USTR to (1) impose duties or other import restrictions, (2) withdraw or suspend trade agreement concessions, or (3) enter into binding agreements with foreign governments to eliminate the conduct in question or provide compensation.

Again, Trump used this authority to impose tariffs during his presidency. While the USTR initiated six investigations during the Trump administration, two investigations resulted in the imposition of tariffs. The first was on U.S. imports from China, due to China's technology transfer, intellectual property, and innovation policies, and led to 25.0 and 7.5 percent tariffs on roughly $370 billion worth of imports from China. The second was on imports from the European Union caused by EU subsidies on large civil aircraft, which led to additional tariffs of 15-25 percent on roughly $7.5 billion worth of imports from the European Union. Trump also launched 301 investigations into digital services taxes on a number of countries, as well as currency practices and timber from Vietnam.

Section 301 tariffs are an additional tool that could permit President Trump to impose a 10-20 percent tariff on all imports to the United States, as well as a 60 percent tariff on imports from China, as long as he finds that the acts of all U.S. trading partners are unfair.

International Emergency Economic Powers Act

The IEEPA provides broad presidential authority to deal with international economic emergencies, which Trump would almost certainly be prepared to find. Indeed, Trump nearly became the first president to use IEEPA to impose tariffs in 2019, when he threatened a 5 percent across-the-board tariff on Mexican goods unless the country stemmed illegal migration into the United States. A deal was struck in 2019, rendering reliance on IEEPA unnecessary, but the option remains. While some argue that using IEEPA in this manner is contrary to the intent of the statute, the language is broad: "Any authority granted to the President by section 1702 of this title may be exercised to deal with any unusual and extraordinary threat . . . if the President declares a national emergency with respect to such threat." IEEPA has been used to target specific countries as well as broader concerns involving export controls, human rights, security, and election interference. It is not a stretch to imagine a President Trump expanding IEEPA to address large U.S. trade deficits.

More importantly, IEEPA is the successor to the Trading with the Enemy Act, which President Nixon invoked in 1971 to justify a 10 percent import tariff due to a balance-of-payments crisis and which the U.S. Court of Customs and Patent Appeals upheld in Yoshida v. United States.

Section 122 Balance-of-Payments Authority

The president's balance-of-payments authority in Section 122 of the Trade Act of 1974 allows the president to impose an additional 15 percent tariff on imports for 150 days "Whenever fundamental international payments problems require special import measures to restrict imports-(1) to deal with large and serious United States balance-of-payments deficits, (2) to prevent an imminent and significant depreciation of the dollar in foreign exchange markets." This authority was specifically added by Congress after President Nixon used the Trading with the Enemy Act (IEEPA's predecessor) to impose a 10 percent surcharge on U.S. trading partners to address rising U.S. trade deficits and the overvaluation of the dollar under the Bretton Woods gold standard. However, this approach would limit the tariffs to a period of only 150 days (unless extended by Congress).

Section 338 of the Tariff Act of 1930

Finally, there are a number of older authorities that could be used to justify an increase in tariffs on imports from allies and adversaries alike. Section 338 of the Tariff Act of 1930, for example, allows the president to impose additional tariffs up to 50 percent on any country that discriminates against U.S. products. Section 338 of the Tariff Act of 1930 would also allow the president to block imports completely for any country that increases their discrimination against U.S. products. However, this provision hasn't been used for over 70 years.

Legal Challenges

The use of any of these authorities to impose tariffs would likely be challenged by importers or other stakeholders. However, despite the Supreme Court's recent decision in the June 2024 case Loper Bright Enterprises v. Raimondo, any legal challenges to future Trump tariffs likely would face a steep uphill climb. The courts, including the Supreme Court, traditionally have been reluctant to interfere with the president's exercise of foreign affairs and tariff powers. For instance, in United States v. Curtiss-Wright Export Corp., the Supreme Court found that the president has certain inherent powers in foreign affairs that do not require an affirmative grant of statutory authority from Congress. In J. W. Hampton, Jr. & Co. v. United States, it found that presidential authority under Section 315 of the Tariff Act was a valid constitutional delegation of authority as long as it sets out "intelligible principle." Federal Energy Administration v. Algonquin SNG, Inc. upheld Section 232(b) tariffs on imported oil, after finding that Section 232 sets out an "intelligible principle" to guide presidential decisionmaking. Lastly, the Court of Appeals for the Federal Circuit decided in Maple Leaf Fish Co. v. United States that courts have "a very limited role" in reviewing presidential trade actions "of a highly discretionary kind," such as Section 201, and such actions can only be set aside if they involve "a clear misconstruction of the governing statute, a significant procedural violation, or action outside delegated authority."

The Maple Leaf Fish Co. case is particularly important since the Court of Appeals for the Federal Circuit has jurisdiction over most trade law appeals. While precedent plays less of a role under the current Supreme Court, these past cases suggest that the courts are likely to take an especially deferential approach to executive branch decisions involving foreign policy, national security, and international economic policymaking, recognizing that it falls outside their normal purview and expertise. While the inevitable appeals to any litigation will take years to wind their way through the judicial system, from a business perspective, the real issue would be the immediate effect on costs, trade flows, and supply chains, and not on what might eventually be the legal outcome three years down the road.

While Congress always has the option of passing legislation to amend or revoke some of the president's delegated tariff-setting authority, it's difficult to see that happening with a veto-proof majority in the current political climate.

Conclusion

If Trump wins back the White House, U.S. trading partners are likely to face a barrage of renewed tariff threats, which has left many companies and trading partners struggling to better understand what measures may be coming. During Trump's first term, he used tariffs for a variety of purposes, including diversifying supply chains (e.g., China), addressing global excess capacity (e.g., steel and aluminum), and for leverage in negotiations with Europe, China, Canada, and Mexico. Trump also has a longstanding view that U.S. average tariff rates are too low, a vestige of past General Agreement on Tariffs and Trade rounds, the 1994 Uruguay Round Agreements, and the World Trade Organization, which locked in U.S. tariffs through negotiated tariff "bindings." If he is reelected, there appear to be few practical or legal barriers to Trump making good on his campaign promise.

Trump's decisionmaking process is also highly adaptable, so the ultimate outcomes are less clear. He likes to throw out provocative ideas that grab attention but sometimes abandons or adapts them if there's too much of a backlash. More than anything else, he is a dealmaker who uses provocative threats, including tariffs, for negotiating leverage and attention. Whether the tariff threats would become reality is anyone's guess, but as China, U.S. trading partners, and foreign steel and aluminum makers found out in Trump's first term, it would be foolish to write them off.

Warren Maruyama served as general counsel of the Office of the U.S. Trade Representative during the administration of President George W. Bush and as associate director for International Economic Policy on the White House policy staff during the administration of President George H.W. Bush. Lyric Galvin graduated magna cum laude from the Georgetown University Law Center and now practices international trade and investment law. William A. Reinsch holds the Scholl Chair in International Business at the Center for Strategic and International Studies in Washington, D.C.

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