The U.S. Court of International Trade (USCIT) on the 7th local time ruled that President Donald Trump's 10% "global tariff" imposed on all imports under Section 122 of the Trade Act was unlawful. After the Supreme Court in February invalidated reciprocal tariffs based on the International Emergency Economic Powers Act (IEEPA), the alternative card used to replace it was blocked in the first instance.
Section 122, enacted in 1974, allows the president to impose additional tariffs of up to 15% for a maximum of 150 days to prevent a serious balance of payments deficit or an imminent dollar depreciation. The court found that the $1.2 trillion (about 1.66 quadrillion won) goods trade deficit cited by Trump as the basis differed from the balance of payments crisis contemplated by Section 122.
Trump-style tariff diplomacy has focused on pressuring all trading partners at once and dragging counterparts to the negotiating table. It then produced results through multilateral talks. After the United States implemented IEEPA reciprocal tariffs in April last year, it secured a string of trade agreements with the United Kingdom, Japan, Korea, the European Union (EU), Indonesia, Vietnam, the Philippines, Malaysia and Thailand. The United Kingdom expanded quotas for U.S. beef, and Japan and Korea each pledged investments worth hundreds of billions of dollars in the United States while holding the auto tariff rate at 15%. The EU agreed to a 15% tariff rate in exchange for purchasing $750 billion in U.S. energy and pledging $600 billion in investment. Indonesia and the Philippines lowered their tariff rates from the 20% range to 19% on the condition of effectively opening duty-free markets to U.S. products.
Trade experts said that while Trump's tariff power appears to have collapsed twice, the Trump administration still has a thick set of remaining cards. Shortly after the USCIT ruling, Trump told reporters, "When a ruling comes out, we do it another way." This is interpreted to mean that, instead of broad-based tariffs uniformly applied to all imports worldwide, the administration will use the remaining lawful authority for precision tariffs to select specific items such as automobiles, steel and semiconductors and adjust tariffs.
Among the remaining cards, the most certain sanction tool is Section 232 of the Trade Expansion Act. Under this provision, the administration can impose tariffs on strategic items such as automobiles, steel, aluminum, semiconductors and pharmaceuticals on national security grounds. Unlike Section 122, which was blocked this time, Section 232 is invoked after a security rationale by item and a Commerce Department investigation. Its legal defensibility is also strong. During Trump's first term, tariffs of 25% on steel and 10% on aluminum were already imposed under this provision.
Even immediately after losing under Section 122, President Trump pointedly warned the European Union (EU), saying, "If you don't implement the trade agreement by July 4, I will impose much higher tariffs on EU goods." This means he would roll EU auto tariffs back to 25% from the agreed 15%. This authority also relies on Section 232. The United States had already imposed a 25% tariff on auto imports overall last year under Section 232. After a separate U.S.-EU agreement, EU-made vehicles have been held at 15%.
Section 301 of the Trade Act, which the U.S. administration has often used, is procedurally more complex to implement than Section 232. Section 301 is a provision that imposes tariffs by targeting unfair practices by foreign governments, subsidies, forced labor and overcapacity. Most of the China-focused tariffs during Trump's first term were imposed under this provision. The New York Times (NYT) reported that the Office of the U.S. Trade Representative (USTR) is currently conducting two Section 301 investigations targeting transactions in forced-labor products and the manufacturing capabilities of major trading partners. This is seen as evidence that the Trump administration had laid alternative cards in anticipation of losing under Section 122. However, Section 301 requires investigation, hearings and public comment before invocation. If Section 122 was a card that could hit the world in a matter of days, Section 301 is a card that, after months of investigation, is invoked with a precise aim at specific countries and items.
Section 201 safeguards and anti-dumping and countervailing tariffs also remain. Section 201 is invoked when a surge in specific imports causes serious injury to U.S. industry. Anti-dumping and countervailing tariffs are imposed on specific corporations and items. Their political impact is smaller than broad-based tariffs, but for the targeted corporations they serve as a tool that can destroy price competitiveness itself. Korea's steel, battery and solar industries have already experienced these measures multiple times.
Experts predicted that Sections 232 and 301, which have higher legal stability, will stand at the center of the new tariff strategy. Items that can easily carry a national security rationale—such as automobiles, semiconductors, pharmaceuticals and steel—and areas that neatly bundle unfair practices such as China's overcapacity and forced labor are likely to be the first targets. Some also predicted that, with broad-based tariffs blocked, Trump will choose the timing and targets of announcements more aggressively to maximize political effect. A representative at the Washington trade law firm Wiley Rein told the NYT, "With this ruling, the Section 301 investigations, which were the administration's 'Plan C,' are likely to lead to a new tariff announcement around July."