CNAS Insights | Trump's Plan B for Tariffs

On February 20, the Supreme Court ruled that the International Emergency Economic Powers Act (IEEPA), the legal statute President Donald Trump has relied upon for most of the tariffs imposed during his second term, does not grant the president the power to tariff. This is a significant blow to the cornerstone of President Trump’s foreign policy.

But as the president made clear at a press conference later that day, the decision does not mean tariffs are going away. The administration is already pivoting to a new tariff architecture that will mostly, though not entirely, recreate his previous tariffs. To do so, however, it will need to rely on alternative legal bases that have more constraints and procedural hurdles than the open-ended IEEPA—which means it will become much more difficult for the president to reach for tariffs as the solution to every foreign policy problem he identifies. Here’s what the tariff plan B will look like.

The first step is invoking Section 122 of the Trade Act of 1974, which authorizes the president to impose tariffs of up to 15 percent to address “large and serious” balance-of-payments deficits. The same day the Supreme Court struck down Trump’s tariffs, the White House released a presidential proclamation announcing a baseline 10 percent tariff under Section 122, set to take effect almost immediately. The next day Trump announced via a social media post he would be raising this baseline tariff from 10 percent to 15 percent, although to date the White House has not released a formal statement to effectuate this change.

From the administration’s perspective, however, there are three serious shortcomings with relying on Section 122 as the primary tariff authority. First, by statute the maximum tariff rate under this law is capped at 15 percent; using IEEPA authorities Trump has imposed tariffs of more than 20 percent on many countries and threatened to go far higher. Second, these tariffs are (at least in principle) time-bound: The tariffs expire 150 days after they are first imposed, unless Congress affirmatively votes to extend them. There may be something of a legal loophole, however, if the tariffs expire on day 150 and then Trump re-imposes them again on day 151, restarting the clock. Third, Section 122 tariffs apply universally, rather than allowing for varying rates for different countries. This ability to discriminate among trading partners is critical for Trump’s efforts to leverage tariff threats into other trade concessions.

For all these reasons, the administration intends to pair Section 122 tariffs with additional levies imposed under Section 301 of the Trade Act of 1974, which is designed to counter foreign countries’ unfair trade practices. Section 301 doesn’t have the same shortcomings as Section 122: There is no cap on the tariff level, no meaningful time limits (Section 301 tariffs need to be reviewed after four years, but the administration can unilaterally choose to keep them in place), and it allows for differential rates across countries. The main downside for the administration is that Section 301 tariffs require a formal investigation and analysis of the unfair trade practices of each foreign trade partner, a process which can take time. But U.S. Trade Representative lawyers and analysts have surely already been at work planning for this possibility and will be able to put together Section 301 investigations quickly. And the administration doesn’t necessarily need an investigation for every country in the world: The top 10 U.S. import partners (treating the EU as a single entity) account for about four-fifths of total U.S. imports, so 10 Section 301 reports would go a long way to cover most U.S. trade.

In addition to the new baseline tariff and a series of new country-based tariffs, the administration will also continue its pre-existing plans to impose various product-specific tariffs on certain strategic goods using Section 232 of the Trade Expansion Act of 1962. This is the basis for existing tariffs on autos, lumber, and steel and aluminum, and possible future tariffs on semiconductors and pharmaceuticals, among other products. Collectively, this series of authorities will allow the president to re-establish a comprehensive tariff web: a general baseline tariff matched with higher tariffs on certain countries and certain goods, which the administration could ratchet up or down as it chooses.

But the new tariff authorities can’t do everything that the old IEEPA tariffs could. In particular, the president invoked IEEPA to impose or threaten immediate coercive tariffs in pursuit of a range of foreign policy objectives: compelling Colombia to accept migrant deportation flights, pushing Brazil to drop a court case against its former leader, and insisting European countries acquiesce to the United States acquiring Greenland. The president also used IEEPA to impose novel “secondary tariffs,” modeled on secondary sanctions, that punished third parties for trading with countries sanctioned by the United States. None of the other tariff authorities at the president’s disposal appears to provide any equivalent option for this type of coercive punishment.

The Supreme Court’s decision will not necessarily result in significantly lower tariffs overall. But it could serve as a pivot point in the administration’s trade wars, an opportunity to move on from some of the chaos and incoherence of the last year and toward a more stable and predictable, if still protectionist, trade regime. The president can still impose ample tariffs. But he can no longer credibly threaten via a 2:00 a.m. Truth Social post that the source of his latest grievance will face punitive tariffs tomorrow. This, at least, is a welcome change.

Geoffrey Gertz is a senior fellow in the Energy, Economics, and Security Program at the Center for a New American Security.