Trump’s Latest Tariffs Face A Fresh Set Of Legal Hurdles

Just three weeks after the Supreme Court handed President Donald Trump a stinging defeat over the sweeping tariffs he imposed last year, the legal battle over his first move to replace those import taxes is heating up.

Democratic attorneys general and governors from 24 states and a libertarian group representing two small businesses filed their first legal briefs Friday asking a federal trade court to strike down the 10 percent tariffs Trump imposed on most U.S. trading partners in February.

Trump promised to hike those tariffs to 15 percent, but hasn’t yet done so.

Legal experts told POLITICO that Trump’s backup tariffs are probably on stronger legal footing than the “Liberation Day” taxes the high court struck down.

Despite that, his challengers are exuding bravado about their chances.

"We are 100 percent confident that we will be successful in the Court of International Trade," New York Attorney General Letitia James told reporters last week.

Trump is also projecting confidence, repeatedly claiming that the same Supreme Court went ahead and blessed his use of other authorities, like the so-called Section 122 tariffs he’s turned to as a short-term fix.

That is not true. While the three justices who dissented from last month’s decision did cite Section 122 as one of the tools Trump could use to rebuild his tariff scheme, the court’s six-justice majority explicitly declined to embrace that position. “We do not speculate on hypothetical cases not before us,” Chief Justice John Roberts wrote.

While Trump called his new approach “time tested,” that authority has never been invoked before and the high court has not given its blessing to Trump using that specific law in the current circumstances.

Here’s a look at the key issues in the legal fight over Trump’s replacement tariffs:

A new rationale

The Supreme Court resolved the earlier Trump tariff case by finding that the statute Trump invoked, the International Economic Emergency Powers Act, conferred no power on any president to impose tariffs. With that off the table, the court did not have to examine whether the global emergency Trump asserted existed.

The new challenges could face a bigger hurdle because their arguments will require judges to second guess Trump’s conclusion that the U.S. faces a “large and serious balance-of-payments deficit.”

“The bottom line here is: How much deference does the president get in determining … this sort of predicate condition — that there's a large and serious payments problem?” said Matthew Seligman, a lawyer representing importers seeking refunds of the previous tariffs. “How much deference does the president get in his determination in deciding how large is large and how serious is serious?”

“I think [it] will probably be the court's instinct to defer to the president's determination that, whatever it is ‘balance of payments’ means, that the requisite facts on the ground exist,” Duke University law professor Timothy Meyer said.

Defining ‘balance of payments’

The text of the law Trump invoked for his latest round of tariffs, Section 122 of the Trade Act of 1974, makes eight references to “balance of payments” issues. Yet, it offers no definition of the term.

Some experts contend the phrase refers to a specific problem the U.S. faced in the years leading up to the law’s enactment, involving the U.S. government buying or selling foreign currency to adjust or maintain exchange rates.

“A balance of payments deficit is a term of art incorporating into law a settled meaning from international financial accounting,” the blue states’ lawsuit says. “A trade deficit does not qualify, either as a matter of economics or of law, as a balance of payments deficit.”

“The president has tried to pull a fast one by switching the term balance of payments to mean balance of trade, in other words, a trade deficit. But those two things aren't the same thing,” said Jeffrey Schwab of the Liberty Justice Center.

However, other experts say the lack of a definition may indicate that different lawmakers had different views of what “balance of payments” meant and what problem they were trying to fix.

“They had a broader set of problems in mind … .They weren't seemingly talking about just official payments,” said Brad Setser, a Treasury Department official under President Barack Obama and an adviser to the U.S. Trade Representative under President Joe Biden.

One awkward aspect for the White House: during the pitched battle over the “Liberation Day” tariffs, the administration’s lawyers suggested that Section 122 wasn’t a viable option to address the trade deficit. “Trade deficits … are conceptually distinct from balance-of-payments deficits,” Justice Department attorneys told the Court of Appeals for the Federal Circuit last June.

Trump’s carve-outs

The law Trump invoked for the replacement tariffs says they should be “of broad and uniform application,” but the president’s approach seems far from that standard. Attached to the proclamation he issued are 88 pages of exemptions and exceptions.

The fine print waives the new tariffs for Mexico and Canada and some goods coming from Costa Rica, the Dominican Republic, El Salvador, Guatemala, Honduras, or Nicaragua. Trump also carved out a slew of product categories where consumers regularly complain about higher prices, including many foods, cars and prescription drugs.

“The exemptions and exceptions the President has made are in direct violation of the text of Section 122, which requires generally uniform treatment the President is declining to observe,” Liberty Justice Center argues in the lawsuit filed on behalf of two importers, Burlap and Barrel and Basic Fun!

But the law does contain wiggle room to exclude some products or single out countries in some circumstances. Trump’s proclamation seeks to invoke those exceptions, although many dispute whether his assertions about the current state of global trade and “the needs of the United States economy” are actually true or are just parroting the language in the statute.

It’s unclear whether judges will accept Trump’s claims at face value and whether they have time to dig into such factual disputes on the accelerated timetable the challengers have demanded. Another uncertainty is whether a court that strikes down the carve-outs would throw out the tariffs altogether or do what Trump’s proclamation urges in such a scenario: wipe out the exemption and keep the broader tariffs.

Can the courts beat the clock?

The law Trump used to deploy the new tariffs limits his move to 150 days, roughly five months. While that may weaken Trump’s hand in negotiations with trading partners and force him to look to other tools to sustain his tariff policies, the short fuse means that the courts are unlikely to deliver a final verdict on the legality of the president’s action before it expires on July 24.

In the challenges to Trump’s earlier tariffs, lower courts ruled against the policies but allowed the administration to keep collecting the duties while the fight played out. If the pattern holds, it could take months for the lower courts to consider the issues and a year or more if the Supreme Court decides to weigh in.

To actually halt the tariffs, opponents will likely have to persuade the trade court or the Federal Circuit to refuse to issue the stays that the White House won the last time around.

The Court of International Trade has set arguments on the pending suits, including a request for a preliminary injunction, for April 10. But some expect these cases to take longer to decide than the last time.

“I would expect, at every level, that the time to write an opinion would be longer than it was in the IEEPA case because the issues are just more complicated,” Meyer said.

Would Trump double dip?

Some trade experts have speculated that, if the courts don’t stop the new tariffs by the time they are set to expire in July, Trump could attempt to re-issue them for another 150 days, perhaps with a few tweaks to make them a bit different than during the first phase. The statute doesn’t directly prohibit re-upping, but does say it’s up to Congress to extend such tariffs beyond the 150-day period.

“It's arguably a little ambiguous, if he wanted to re-declare a balance of payments emergency right after,” said Stanford Law Professor Alan Sykes. “Certainly the statutory language, to me, implies that the Congress did not want to leave that loophole in place. If I were the judge, I would say that that's not permissible.”