Supreme Court Strikes Down Trump Tariffs
The U.S. Supreme Court on Friday, in a 6-3 decision, struck down tariffs implemented by President Trump under the 1977 International Emergency Economic Powers Act (IEEPA). The case involved two categories of IEEPA tariffs, one imposed on almost every U.S. trading partner and the other on Mexico, Canada, and China. The Court rejected the idea that the president had the authority to impose tariffs under the law. The opinion, written by Chief Justice John Roberts said, “Had Congress intended to convey the distinct and extraordinary power to impose tariffs, it would have done so expressly.”
In response, President Trump on Friday afternoon announced the “global” imposition of a 10% tariff under Section 122 of the Trade Act of 1974. On Saturday, he upped the ante by announcing on social media he would increase the tariffs to 15%. Section 122, which has never been used before or tested in court, allows tariffs of up to 15% to be imposed for 150 days. The White House said exemptions to the tariffs would be provided. Agricultural exemptions include beef, tomatoes, oranges, and fertilizers that cannot be mined or produced in the U.S. The president also directed the Office of the United States Trade Representative to use its section 301 authority to investigate unreasonable and discriminatory acts, policies, and practices by trading partners which burden or restrict U.S. commerce. Findings of unfair trade can be used to place permanent tariffs on countries. In the past Section 301 was used to investigate the European Union’s (EU) ban on beef from hormone-treated cattle. The investigation ultimately led an agreement between the U.S. and EU on the matter.
The events of the past few days have implications for agriculture both as an importer of inputs and as an exporter of goods. A study by the North Dakota State University (NDSU) Center for Agricultural Policy and Trade Studies reported the IEEPA tariffs pushed the average rate on farm inputs from slightly below 1% to 12%. Another NDSU study says the tariffs raised around $958 million in revenue from agricultural imports from February through October of last year, roughly $110 million coming from the tax on fertilizers, $530 million from farm machinery, and $273 million from chemicals. (The next story discusses the effects of tariffs on fertilizer prices last year.)
On the export side, the IEEPA tariffs resulted in disruptions, distortions, and shifts in agricultural export markets. Some importing countries retaliated by imposing tariffs on U.S. agricultural products. Others shifted purchases to competing exporting countries. Others negotiated trade agreements with the U.S. It’s unclear how importing countries will respond to the events. One commodities market analyst on KRVN radio noted on Friday of “reports that South Korea, a significant buyer of U.S. corn and meat, signaled it is reviewing its national interests following the ruling.” Other reports said the European Union was putting the approval of a trade agreement on hold until the situation clears.
Answers to several questions will ultimately determine how the events will affect agriculture. Will the new Section 122 tariffs apply to farm inputs? Will the tariffs be stacked on pre-Trump tariffs? Will they be stacked on top of rates agreed to in trade deals? Will trade agreements reached in response to the IEEPA tariffs remain in force? Will U.S. trading partners seek to reopen the agreements? Or will the U.S. seek to reopen them? How will the new tariffs affect the review of the United State-Mexico-Canada agreement?
This trade story has many chapters yet to be written. In all the uncertainty, one thing is certain—trade attorneys and lobbyists will be winners. The effects on other businesses and consumers are much less clear.