The Trump administration is facing a rapidly approaching deadline to reinstate import taxes after the Supreme Court struck down key tariffs in February. The tariffs, which had previously generated significant revenue for the U.S. Treasury, were imposed under President Donald Trump's authority and impacted imports from nearly every country.
Initially, the administration turned to Section 122 of the Trade Act of 1974, allowing for a 10% global tariff. However, these tariffs are only authorized for 150 days and are set to expire on July 24. With the midterm elections approaching and voter concerns about the cost of living, it is unlikely that Congress will extend these tariffs. This has prompted the administration to seek more durable legal avenues.
Trade attorneys and analysts anticipate that the administration will successfully replace the expiring Section 122 tariffs with broader Section 301 tariffs before the July 24 deadline. "They’re going to raise the tariff wall again," said trade lawyer Ryan Majerus, a partner at King & Spalding and a former trade official.
The Supreme Court's February ruling determined that the administration could not use the International Emergency Economic Powers Act (IEEPA) to impose tariffs, a power constitutionally vested in Congress. This decision led to the administration issuing refunds to importers, turning the tariff revenue into a deficit for the Treasury. Revenue from import taxes peaked at over $31.4 billion last October, but after the Supreme Court ruling, it dwindled to $22 billion in March and April. By May, the Treasury faced a $42 million shortfall, which ballooned to a $25.6 billion loss in June as refunds were processed.
Trump and Treasury Secretary Scott Bessent have stated their intention to use other legal authorities to recoup the lost income. Section 301 of the Trade Act of 1974 grants the president the power to impose and adjust tariffs in response to countries' trade practices. This section has no explicit limits on the tariff amounts and they can be renewed after an initial four-year period.
To implement new Section 301 tariffs, the administration must follow procedural steps, including collecting public comments and holding hearings. "They’re operating about as fast as legally possible," said Nathaniel Halvorson, a partner at Baker McKenzie law firm and former trade official, regarding the administration's efforts.
The administration has initiated two major Section 301 investigations to replace lost tariff revenue. One investigation targets 60 countries, accused of not adequately combating imports produced through forced labor. U.S. Trade Representative Jamieson Greer has proposed tariffs – 10% on 16 countries and 12.5% on 44 – as a response to this issue. Public comments are still being received, and the tariffs have not yet been formally imposed.
The second investigation examines whether 16 U.S. trading partners, including China, the European Union, and Japan, are overproducing goods, which allegedly drives down global prices and disadvantages American manufacturers. Majerus anticipates that the administration will propose significant tariffs in this case within the next one to two months, potentially timed after the midterm elections.
Trump, who has referred to himself as "Tariff Man," has expressed a desire to reintroduce substantial import taxes. Some analysts, like Sarah Bianchi, chief strategist of international political affairs at Evercore ISI, suggest that using Section 301 for universal tariffs could face legal challenges, although Section 301 tariffs have historically been legally durable. The uncertainty surrounding the administration's tariff policies has created hesitation for businesses regarding investment and decision-making.