Commentary:
I was getting frustrated with my business contact. I have been working with his company to expand their operations for a few months. We had meetings, I collected information, and I was waiting for more information to proceed. After intense initial communications, my contact seemed to disappear, and the follow-up information never arrived. I started to think that the project was mothballed. Out of frustration, I sent one last e-mail asking for the information. I finally received a response: “ I am so sorry, Jerry that I have not been able to collect and send you the information. Almost all of my time during the past few weeks has been spent dealing with tariff mitigation.”
His company is involved in multiple industries, including the automotive industry, which has been on a roller coaster ride since Donald Trump started imposing punitive and reciprocal tariffs on the products of most countries of the world. I told my contact that I understood and pledged to be more patient as he navigated the tariff issue for his company.
Trump’s tariffs have not only created economic uncertainty for U.S. and foreign companies, but they have also created controversy and confusion in the legal arena. Just recently, a little-known court called the U.S. Court of International Trade ruled that Trump’s tariffs were unlawful. When the ruling became public, many of my business colleagues cheered and assumed that the tariff issue was firmly settled. I had to kindly correct them that the tariff issue was far from settled.
Trump used the International Emergency Economic Powers Act (IEEPA) to impose tariffs on China and reciprocal tariffs against other nations. The IEEPA is a 1977 law that allows the President power to act when the U.S. is presented with extraordinary threats. However, the IEEPA does not mention the use of tariffs. The court concluded that the importation of foreign goods into the U.S. did not constitute an extraordinary threat, and ruled that Trump had exceeded his authority to impose tariffs using the IEEPA. The Trump Administration immediately criticized and appealed the court’s ruling. An appeals court ruled that it would allow the tariffs to remain while it considers the case.
As the tariffs imposed under the IEEPA go through the legal process, other tariffs remain. Trump imposed tariffs on goods such as aluminum and steel invoking the Section 232 rule, which allows the President to impose tariffs based on national security concerns. Trump has stated that the importation of steel and aluminum from countries such as Brazil, China, Canada, and Mexico constitute a national security concern because of our reliance on foreign countries for these critical materials. Theoretically, these countries could restrict steel and aluminum exports to the U.S. in times of conflict and our country would be at risk. The U.S. Court of International Trade’s ruling does not apply to the Section 232 tariffs, and they remain.
So, what now? A lot of litigation will take place going forward, and it remains far from certain when tariffs invoked under the IEEPA will eventually be adjudicated. Per the 1974 Trade Act, the President does have the power to impose tariffs for up to 150 days. Trump has not yet utilized this power. He will probably not have to as long as the IEEPA tariffs remain in effect as the appeals court reviews them.
Trump also has another option, which is to appeal to Congress to grant him the power to freely impose tariffs as he sees fit. Trump’s Republican party currently controls both Houses of Congress, so at face value this would seem to be a credible solution to his ability to invoke tariffs. However, digging deeper this is not as easy as it appears. First, it is probably safe to say that many Republican lawmakers do not support broad import tariffs as a method to manage trade policy. Second, many Republicans in Congress represent industries such as agriculture and automotive that have been negatively affected by Trump’s import tariffs. If they support granting the President the unlimited freedom to impose tariffs, they may be subject to severe backlash from their constituents who have suffered the effects that tariffs have caused to their livelihoods.
Meanwhile, people like my business contact will have to wade the choppy waters of having tariffs imposed today, tariffs revoked tomorrow, and then tariffs reinstalled the next day. Needless to say, this makes it incredibly difficult to strategically plan and to move major projects forward.
Jerry Pacheco is president of the Border Industrial Association. Jerry Pacheco's opinions are his own and do not necessarily reflect the views of KRWG Public Media or NMSU.