News / US tariffs land – and court hears of Trump's 'breathtaking claim to power'

© Konstantin Shaklein |

1 August has arrived – and with it a comprehensive list of tariffs the US has unilaterally imposed on the world, starting in seven days’ time. 

While today was supposed to – at the very least – add clarity and certainty to global trade, there remain numerous questions. 

“This is unlikely to be the final word, as it still seems likely that some other countries will reach their own deals with the US, while there is a chance that the US courts will eventually strike down these tariffs,” commented Stephen Brown, Capital Economics’ deputy chief North America economist, reportedly. 

Many countries, such as Canada (35%), are expecting to negotiate their tariffs downwards. The EU (15%), Switzerland (39%), Taiwan (20%), and India (25%) have all indicated they believe the tariffs are temporary, and could be lowered through further trade talks. (The full list of tariffs is here)

The US executive order notes that some countries are on the verge of agreeing “meaningful trade and security commitments”, indicating that the levels announced yesterday are not set in stone. 

The tariffs will affect goods withdrawn from warehouses for consumption in seven days after the 31 July date of the order, except those in transit which enter the country before 5 October. 

One big point many shippers have been waiting for is a definition of ‘transhipment’ – which, in the executive order, remains absent. 

But it notes: “An article determined by CBP to have been transhipped to evade applicable duties …shall be subject to an additional ad valorem rate of duty of 40% …  CBP shall not allow… for mitigation or remission of the penalties assessed on imports found to be transshipped to evade applicable duties.” 

It adds that every six months the US will publish “a list of countries and specific facilities used in circumvention schemes”. 

But alongside the hopes of many countries for lower tariff levels,  a US court is considering the legality of the executive order. 

Yesterday, the US Court of Appeals heard arguments both from government and a group of US importers, as well as 11 Democrat-controlled states, on whether the president has the authority to impose tariffs under the International Emergency Economic Powers Act (IEEPA).

The judges appeared sceptical (you can see various arguments put forward below). 

But President Trump appears undaunted, repeating his claim that the trade deficit is a “national emergency”. The case is expected to end up before the Supreme Court.  

In the midst of companies reporting second-quarter results, the impact of tariffs so far has been seen to be significant – while the impact on US consumers has yet to be fully analysed, as companies consider their pricing strategies. 

But research by pricing management platform Enable found that 76% of businesses had already seen profits fall, while 84% planned to increase prices to offset the ‘tax’ – and 91% are “worried”, with 33% “extremely concerned”. 

“The research exposes a dangerous gap between the speed of tariff changes and businesses’ ability to respond. While 84% of companies plan to increase prices to offset tariff impacts, 59% admit it takes weeks or months to implement price changes,” noted the study.   

“With costs shifting unpredictably, and 93% of businesses admitting their current pricing responsiveness risks further profit loss, pricing agility has become an essential survival skill,” said Andrew Butt, founder and CEO of Enable. “The lag between tariff updates and implementing price changes creates a window where competitors with faster pricing capabilities can capture significant market advantage.” 

He added: “Organisations that can rapidly assess tariff impacts, model response scenarios, and execute changes will be best positioned to protect margins and establish a competitive market advantage.”  

The legal challenge 

In a two–hour session, resulting in 99 pages of transcript, judges and claimants queried the president’s authority to impose tariffs, while the government fought back. Below is a selection of various arguments put by parties involved and judges.

“It’s undisputed that IEEPA would clearly provide the president with the authority to prohibit all imports, say … from China. That is an extraordinary power, and that is a power that IEEPA expressly authorises the president to take. And so the authority that the president invoked here is the power to regulate importation. But that isn’t what he’s done. He hasn’t blocked … he has imposed tariffs.” 

“If the president says there’s a problem with our military readiness and he puts a 20% tax on coffee, that doesn’t seem to necessarily deal with [it]”. 

“Can a trade deficit be an extraordinary and unusual threat when we’ve had trade deficits for decades? 

“Well, the president identified a severe spike in the trading deficit over the last four years … it’s reached a tipping point. It’s affecting our military readiness. It’s affecting our domestic manufacturing capabilities. So yes, absolutely.” 

“Why would the president ever rely on  … trade statutes if he has under IEEPA this unbounded power?” 

“You just heard an argument … that our federal courts are powerless, that the president can do whatever he wants, whenever he wants, for as long as he wants; so long as he declares an emergency. That is as major a question as it gets, a breathtaking claim to power that no president has asserted in 200 years, and the consequences are staggering.” 

“The whole idea is that tariffs and taxation are always tempting for kings and for presidents. And so that’s why that power was located in Congress. And every single time Congress has departed and given that power to the president, they’ve done so clearly.” 

“Nixon put a ceiling on the tariffs at, quote, the rate prescribed by Congress. It didn’t supplant the entire tariff scheme of Congress.  

“And they said it was very important that Nixon announced those ex-ante in advance, that it was a temporary measure. That’s unlike here.” 

“The fact that the president’s action in this case may be broader than President Nixon’s action doesn’t make this action illegal, unless the plaintiffs can point to any specific violation of the statute. And they haven’t here.”