MARK ABRAMSON
ON FEBRUARY 20TH the Supreme Court ruled that Donald Trump could not use emergency powers to impose sweeping tariffs. On February 21st the president announced a new levy of 15% on nearly all imports, using a different law. The speed of the pivot suggested a man who had the answer ready before the question was asked.
The earlier tariffs had relied on a statute allowing presidents to act during international emergencies. The court found, 6-3, that a trade deficit however big did not count. Mr Trump’s team barely paused for breath. Section 122 of the Trade Act of 1974 permits temporary, across-the-board tariffs of up to 15% for 150 days without congressional approval. By setting the rate at the maximum, the administration signalled that its aims had not changed.
The result is a uniform tax on imports from almost everywhere, regardless of diplomatic relationships. Countries that recently signed trade deals with America, hoping for preferential access, now face the same hurdle as everyone else. India, which endured domestic criticism for opening its agricultural markets to American farmers, watches its concessions rendered moot. Indonesia finalised an agreement on February 19th, only to be slapped with new tariffs.
Some exemptions apply. Cars and steel already carry separate duties under “national security” provisions. Goods covered by the USMCA deal with Canada and Mexico are safe, as are imports from a handful of Central American countries covered by a 2004 pact. Semiconductors and certain agricultural products, like beef, slip through. But for most other goods the rule is now a flat 15%.
The economic logic of the original tariffs was always disputed. The new version makes the contradictions plainer. Mr Trump’s stated goal is to bring down America’s goods trade deficit, which hit a record last year. Yet the deficit is driven by macroeconomic fundamentals—strong consumer demand, a hefty government spending bill, a powerful dollar—not by the absence of tariffs. Imports from China have indeed fallen by nearly 30% over the last year. But American buyers shifted to Vietnam, Mexico and Taiwan. The deficit geographically recomposed itself, meaning it did not disappear.
Manufacturing output has risen modestly in some sectors, but jobs in the industry fell by more than 80,000 last year. Tariffs did not revive the factory floor. Temporary dips in the trade data, caused by businesses stockpiling goods or by swings in gold and pharmaceutical imports, created a misleading impression of progress. As Brad Setser of the Council on Foreign Relations notes, the structure of the deficit barely budged.
The political calculation is clearer. Tarries play well with voters who see trade as a zero-sum game. Mr Trump’s base enjoys the spectacle of toughness even if the economic returns are poor. The new levy, capped at 15% and limited to 150 days, now forces Congress into the game. If the president wants to extend it, he must either win legislative approval or switch to other statutes, such as Section 301, which allows for country-specific retaliation. Legal challenges are certain. Foreign governments, meanwhile, must decide whether to wait out the clock or retaliate. ■
