US presidency: tariffs upset global trade as Trump administration seeks ‘deals’
When US President Donald Trump imposed sweeping new tariffs on US imports in April, global markets reacted strongly. Stocks and bonds fell and economists warned of recession, while supply chains were heavily affected. The President declared the tariffs would liberate the US from dependence on foreign goods.
Later in April, Treasury Secretary Scott Bessent persuaded President Trump to pause his most punitive tariffs on major trading partners – except China – which averted a larger financial crisis. Markets stabilised and the White House began promoting talk of ‘deals’. Early announcements of agreements with the UK and China signal that at least a ten per cent tariff on all US imports will remain. But negotiations behind the scenes appear haphazard.
‘It’s an obvious violation of the World Trade Organization’s tariff binding and transparency rules,’ says Raj Bhala, an officer of the IBA International Trade and Customs Law Committee. The President’s actions, Bhala argues, undermine key principles of global commerce – good faith, transparency and the rule of law.
Some commentators say President Trump’s protectionist approach is coercive and unlawful under both international and domestic US law – and that it’ll probably prove self-defeating. Frank Garcia, a professor at the Boston College Law School, is equally critical. ‘What we’re really seeing is coercion that is masquerading as trade policy,’ he says. ‘You create leverage by doing illegal and outrageous things that leave others off balance.’
That approach, Garcia says, is beginning to backfire. ‘We’re seeing more and more recognition that this is actually going to damage American businesses a great deal,’ he says. The longer Trump’s tariffs remain in effect, the more economic pain US businesses and consumers will feel, says Garcia.
Congress is not doing its job, so the courts are being asked to step in. If the lawsuits are successful, it’s not clear these tariffs will stay on
Raj Bhala
Officer, IBA International Trade and Customs Law Committee
Keith Rockwell, Senior Research Fellow at the Hinrich Foundation and a former World Trade Organization (WTO) spokesperson, agrees. ‘It’s going to have to take some time for the pain to settle in and for people to get really, really angry. But that’s not far away,’ Rockwell says. He believes President Trump needs to find a face-saving way out and that the most effective route would have been to address US concerns through the WTO rather than escalating conflicts.
White House officials say the administration is engaging in a series of bilateral negotiations with more than a dozen countries in the hopes of securing trade concessions. And in May, President Trump and the UK Prime Minister, Keir Starmer, announced the framework of a trade deal.
‘Our Deal with the United Kingdom yesterday was AMAZING for both Countries and, in addition to everything else, British Airways just ordered $10 Billion Dollars worth of new Boeing planes,’ said President Trump on social media. ‘We’re going to make a fortune with Tariffs, only smart people understand that.’
Despite the fanfare, Trump and Starmer’s deal isn’t final and leaves in place the 10 per cent tariff on UK goods that the US President imposed in April. It removes a threatened 25 per cent tariff on the UK’s cars and steel. Meanwhile, it calls for the easing of UK tariffs and quotas on American beef and ethanol exports.
US and Chinese officials met in Geneva in early May. With trade between the world’s two largest economies at a near standstill, expectations were low.
President Trump had imposed a prohibitive 145 per cent on Chinese goods, prompting Beijing to retaliate with 125 per cent tariffs and a halt to exports of critical minerals used in electric vehicle production.
Mary Lovely, a senior fellow at the Peterson Institute for International Economics, saw the talks as a step forward. ‘Each side realises that the stakes are very high,’ she said. ‘We’re on the edge of really doing very serious damage.’
In Geneva, both countries stepped back from the brink, agreeing to hold tariffs at 10 per cent for 90 days while talks continue. President Trump declared the talks ‘GREAT PROGRESS’ and ‘a total reset,’ but the agreement doesn’t reach any of the underlying trade concerns the US has with China. Trump’s 20 per cent fentanyl-related tariff on China remains. This leaves the effective US tariff on Chinese goods at 30 per cent – still very high.
The EU, meanwhile, is preparing retaliatory tariffs on more than €95bn worth of US goods and launching proceedings against the US with the WTO. Bhala, who’s Brenneisen Distinguished Professor at the University of Kansas School of Law, says the US won’t have ‘a plausible defence’ on balance of payments or national security grounds. President Trump has imposed a 25 per cent tariff on EU cars and auto parts and proposed a 20 per cent tariff on imports totalling €380bn.
‘Deals are on the table,’ says Devin Sikes, an international trade lawyer at Akin in Houston. ‘Countries have express interest in negotiating within the next 90 days in response to the reciprocal tariffs.’
There are limits, however, to what President Trump can agree. Without an act of Congress, he lacks authority to set tariffs beyond reversing his own emergency orders. Any meaningful US concessions must be ratified by the legislature.
Meanwhile, seven lawsuits have been filed in US courts alleging that President Trump has overstepped his authority under the International Emergency Economic Powers Act (IEEPA). Plaintiffs argue that Trump imposed tariffs unilaterally without proper congressional approval. Trump’s lawyers argue Congress clearly delegated authority to impose tariffs to the president in the IEEPA, and courts can’t review the president’s constitutionally independent finding that an emergency exists.
‘The president’s authority is being challenged,’ Bhala says. ‘Congress is not doing its job, so the courts are being asked to step in. If the lawsuits are successful, it’s not clear these tariffs will stay on.’ Ultimately, as with other legal challenges to President Trump’s broad claims of executive power, these cases could land before the US Supreme Court.
Image credit: freshidea/AdobeStock.com