Judicial roadblocks for trade tariffs won't change Donald Trump's mind

United States (US) President Donald Trump’s trade policy has received another blow from the country’s judiciary. The US Court of International Trade, a federal court that adjudicates civil disputes arising out of Customs and trade laws, last week ruled in favour of a company, Burlap and Barrel, which had said that the President had exceeded his legal authority in imposing 10 per cent tariffs on imports under Section 122 of the Trade Act of 1974. The Section was designed for the executive to quickly respond to a serious crisis in the balance of payments, by imposing across-the-board tariffs on all imports. Clearly, the intent behind the law was to stave off the immediate expenditure on imports at a moment of financial instability. The President, however, imposed these tariffs when the US Supreme Court earlier this year struck down his so-called reciprocal tariffs under the International Emergency Economic Powers Act (IEEPA). The court, however, limited the immediate impact of this verdict by indicating that only the specific complainant be reimbursed, not every single importer that has so far been forced to pay the 10 per cent levy. 

On the one hand, this makes planning for trade to the US even more complicated. It introduces additional uncertainty since it is not certain who will appeal to have tariffs rebated, and who will win its case and when. On the other hand, it does not mean that the President, who has designed his economic policies around tariffs and has been a strong supporter of protectionism for decades, will necessarily retreat from his position. There are still other options in his arsenal, including the possibility of import duties under Section 301, which empowers the US Trade Representative (USTR) to investigate and retaliate against foreign nations’ trade policies that are found to be unreasonable or discriminatory. The administration had warned that it would try multiple routes to restore higher tariffs after the Supreme Court’s verdict. 

For many countries around the world, including India, the possibility of Section 301 tariffs is even more concerning than the arbitrary IEEPA levies the President introduced last year. While they are procedurally more complex to introduce, requiring a formal investigation alongside a consultation with the economy being targeted, they are also much harder to remove. India’s placement on the USTR’s Special 301 Priority Watch List — alongside China, Indonesia, Russia, Chile and Venezuela — is a danger signal. This list is formalised following a supposed review of “the state of IP (intellectual property) protection and enforcement in US trading partners around the world”. The USTR has also claimed that there is evidence that India has structural levels of excess capacity, which it views as an unfair advantage in trade. 

The sectors it has highlighted include solar module manufacturing, which, it says, has the ability to produce up to three times the domestic demand, as well as petrochemicals and steel. The danger should not be minimised. The President’s tariff agenda is not a negotiation tactic as much as it is the core of his economic nationalism — and, as such, is unlikely to be much diluted, whatever legal roadblocks are thrown in his way. While courts might constrain and change the methods, they are unlikely to cause him to waver from his objective. It is, therefore, important for India to state its position clearly and avoid getting trapped by tariffs imposed under different laws that lack economic logic.