Brisbane, Feb 22 (The Conversation) US President Donald Trump has announced the United States will increase baseline tariffs on imports from all countries to 15 per cent, as the fallout continues from a seismic Supreme Court ruling on Friday.
Trump had imposed sweeping “reciprocal tariffs” last year under an emergency powers act, but the court ruled this law did not authorise him to do so.
Speaking in the wake of the ruling on Friday, Trump admonished the justices of the Supreme Court. He called the Democratic justices who ruled against the tariffs a “disgrace to the nation”.
He also said he felt “ashamed” of members of the court he considered conservative who had voted against his use of emergency powers.
Trump’s statement was riddled with insults and inaccuracies. However, he admitted he had tried to “make things simple” by using the emergency powers act. He went on to say he does have other options, but those options would take more time. This was one part of his speech that was indeed accurate.
With the clock already ticking on his landmark trade agenda, and the multi-billion dollar question of refunds looming, what might Trump do next? Here’s what could now be in store for both Australia and the world.
Scrambling for alternatives
The new 15 per cent rate is an increase on the 10 per cent global baseline tariff enacted shortly after the ruling using a different law, and will hit some Australian exports.
This part of the law has never been used. However, it appears to clearly allow the president to impose tariffs of up to 15 per cent, and for a period of no more than 150 days.
But Trump said during this five-month period, his administration would investigate the use of yet another law, section 301 of the Trade Act of 1974.
This section does allow the president to impose tariffs in response to foreign countries who violate US rights under international trade agreements, or that burden or restrict US commerce in “unjustifiable”, “unreasonable” or “discriminatory” ways. However, it requires some steps to be followed.
The process for using this law is detailed and cannot be subverted. It would likely take either years or vast amounts of resources to introduce tariffs that were anywhere near the “Liberation Day” tariffs.
If nothing else, it requires consultations with the countries upon whose goods those tariffs will be imposed.
Section 301 has previously been used to impose tariffs on China, following an investigation by the United States Trade Representative in 2018.
Another option
Another avenue for the president to bypass Congress is a specific section of a different law, Section 232 of the Trade Expansion Act of 1962, that applies to a particular sector of the economy.
This is the power used to impose tariffs on steel and aluminium in the first Trump administration in 2018.
However, it can’t be used to recreate sweeping tariffs on all foreign imports. This provision is generally product-specific and requires an investigation into the national security threat.
Its use to impose steel and aluminium tariffs has been challenged by multiple trading partners at the World Trade Organisation. A panel of experts ruled the US had used a special national security exception erroneously.
However, despite this violation, Trump has suggested that he isn’t bound by international law.
The question of refunds
The Supreme Court’s ruling on Friday means all tariffs introduced under the International Emergency Economic Powers Act (IEEPA) were unlawfully collected.
If all collected duties are refunded, it’s estimated the total repayment could reach approximately USD 175 billion (AUD 247 billion).
Much to the president’s frustration, there was no clarity within the Supreme Court’s ruling on the process for refunds of illegally collected tariffs.
That silence, which prompted Trump to refer to the decision as “terrible” and “defective”, was likely because this would be handled by other courts.
Back in December, the US Court of International Trade stated it would have the authority to order reliquidation and refunds of the sweeping tariffs if the Supreme Court ultimately ruled them unlawful.
Many large companies had already anticipated this ruling, and acted to get on the front foot. For example, in late November, large retailer Costco sued the Trump administration to secure a full refund of tariffs in the event the Supreme Court deemed them unlawful.
In late December, faced with an avalanche of similar cases, the Court of International Trade temporarily halted all cases where companies were claiming relief from IEEPA tariffs ahead of the Supreme Court’s ruling.
Refunds may not be straightforward
Some importers have argued that because the tariff payments were itemised, receiving refunds should not be messy.
But the process for refunds may not be as straightforward as it should be. Trump suggested they could be “in court for the next five years”.
What does this all mean for Australia?
Australia’s previous 10 per cent rate was much lower than many other nations, but now at 15 per cent the playing field has been levelled – at least for the next 150 days.
Australian exporters don’t pay these tariffs directly themselves, but may be pressured to absorb some of the cost, and it makes their imports less competitive in the US market.
However, not all Australian exporters are in the same position. The proclamation issued by the White House listed some exceptions, including beef, critical minerals, energy products and pharmaceuticals.
At Friday’s press conference, Trump said “great certainty” had been brought back to the United States and the world. In truth, the uncertainty is far from over. (The Conversation)
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