After a federal trade court invalidated many of the Trump administration’s tariffs, stocks soared. Yet despite the ruling, experts cautioned the president may have several options available to continue with his tariff plans.
Still, trade experts and analysts warned that Trump’s tariff plans and the ongoing negotiations with major trading partners may continue as before, despite the roadblock.
“This ruling represents a setback for the administration’s tariff plans and increases uncertainty but might not change the final outcome for most major US trading partners,” Goldman Sachs analysts wrote in a Wednesday note.
Far from changing direction, lawyers for the Trump administration have already appealed the ruling. Businesses and countries negotiating with the U.S. should not take this recent development as a signal that trade policy will change, said international trade law expert and University of Kansas law school professor Raj Bhala.
“This is nothing more than a suspension, a hiatus, a delay in what we know are dogged second Trump administration tariff plans—dogged plans to address the trade imbalances and what it regards as unfair trade practices by other countries,” Bhala told Fortune.
Otherwise, President Trump can also ask Congress to pass a bill giving him authority on some tariff and trade matters. This move would need to be limited in scope, possibly by sector, and would likely require specifics on the duration of tariffs, or a periodic congressional review, but Bhala said it would likely receive bipartisan support.
“Find me enough Democrats and a handful of Republicans who are going to oppose that, knowing that they’re up for reelection in a year and a half, I don’t think you’re going find that,” he said.
The third route would be to adjust tariffs through provisions of the existing Trade Act of 1974, which may slow the process but could also succeed, said Bhala.
According to analysts at Goldman Sachs, the Trump administration could replace its 10% baseline tariff with a broad tariff of up to 15%, under Sec. 122 of U.S. trade law for up to 150 days before congressional action is required. This could be the quickest way to work around the court ruling as Sec. 122 doesn’t require any investigation, but it would need to be tailored to address trade deficits and can’t be used for general trade disputes.
President Trump could also broaden the tariffs which are underpinned by Sec. 232 of U.S. trade law, like those applied on steel, aluminum, and autos. These tariffs, which are justified as necessary for national security, could be broadened to other sectors, the analysts noted.
Finally the administration could utilize Sec. 338 of the 1930 Tariff Act, to enact up to 50% tariffs for countries that discriminate against the U.S. in commerce. Although, the analysts noted that this authority has never been used and could be shot down by the courts. While the level of tariffs is limited to 50%, no formal investigation is needed.
In a statement to Fortune, White House spokesperson Kush Desai said addressing the large and historic trade deficits the U.S. runs with other countries is urgent.
“It is not for unelected judges to decide how to properly address a national emergency,” Desai wrote.
Bhala noted that even as the Trump administration faces a setback from the courts, tariff policy is a major priority for the president, and one he likely won’t give up so easily.
“If I’m a business, if I’m a foreign government, I am hedging my risk, and I am assuming that in one way or the other, some form of tariffs, reciprocity tariffs, are going to be imposed under some kind of legal authority,” he said.
