Trump's backup options for tariffs

0:01NPR.

0:11This is The Indicator from Planet Money. I'm Stephen Passaja. And I'm Waylon Wong. You know, Stephen, the Supreme Court math is not looking so good for President Donald Trump's favorite tariff law. No, not based on my back of the napkin numbers. And, you know, the law behind President Trump's reciprocal tariffs went before the Supreme Court last week. And three of the court's conservative justices had pointed questions for the government. If just two of them joined the liberal justices against the government, well, that's the end of Trump's favorite tariffs. Or is it? At the hearing last week, even the lawyer arguing against the Trump administration, Neil Katyal, said there are other options it could use.

0:51I do think if you ruled, as we're suggesting you do, against the government, they can go and try and seek to use other authorities, whether it's 338, Section 122, etc. Et cetera. Et cetera. On today's show, we dig into et cetera. Some of the other tariff options the Trump administration still has, no matter how the Supreme Court decides this case.

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2:18Same goes for where you invest. Level up and invest smarter with Schwab. Get market insights, education, and human help when you need it. So if there's so many tariff laws, why did Trump go with this one that's before the court? the International Emergency Economic Powers Act, also known as AIPA. The reason is that at least with how the administration is interpreting AIPA, it gives the president everything he wants from tariffs. No congressional oversight. Target any country with a quick emergency declaration. Rates he can change whenever into whatever he wants. You know, the everything bagel of tariff laws.

2:55But the problem is, it might not even be a tariff law. AIPA does not even mention the word tariffs. and several of the justices pointed this out. Phil Magnus is with the Independent Institute, a pro-free market think tank. President Trump is the first president in 50 years that IEPA has existed to ever claim a tariff power under it. So he had all his predecessors. They enacted tariffs through other clauses of the law that have more rigorous restrictions and procedures you have to abide by. They're much more limited. If the Supreme Court rules against using IEPA for tariffs, Trump will likely have to use more limited tariff laws instead.

3:33So let's dig into what those options are. The first, Section 338 of the Tariff Act of 1930. And hey, the word tariff's actually in this one, right there in the name. So the Tariff Act of 1930 is more famously known as the Smoot-Hawley Tariff. Oh, the Smoot-Hawley Tariff. We know all about this one. Everyone's favorite. Oh, yes. You know it from Ferris Bueller's Day Off, and it is also very notorious. Because it plunged to the United States much more deeply into the Great Depression. It happens right on the heel of the stock market crash. Yeah, so understandable why Trump might not want to hang his signature economic policy on a law with Great Depression baggage.

4:15Yeah. Smoot-Hawley also states that the president needs to find that another country is discriminating against U.S. commerce. Though there's some legal debate about whether they need to prove that first. But once you get past all that, the law does allow Trump to set a tariff on that country up to 50 percent. It does seem to give him the power he wants, just maybe not as easily as he would want it. Exactly. It's the it's the closest to IEPA as a backup option. And Scott Besson and several people in the administration have pretty openly hinted that they're exploring that use. So to sum up Smoot Hawley, troubled past, maybe not quite as speedy, but the likely backup pick.

4:52But it's not Trump's only backup option. Next up is Section 122. And this comes from the Trade Act of 1974. This law is untested, but it does appear to let the president use tariffs without needing an investigation first. So it's a quicker tool. But it can only be used for 150 days. Any longer it needs Congress's approval. And that time limit would be a big change from Trump's IEPA tariffs. The Congressional Budget Office puts out projections assuming these tariffs will be in place for 10 years. So it's 150 days versus 10 years. It's a very different picture. And it's limited up to 15 percent, do I have that right?

5:30Indeed. So maximum rate, 15 percent. And you compare that with like the Liberation Day schedule had rates going up as high as 50 percent. So this would be much more constrained. So that's the speedy option. Likely no specific investigation needed, but limited time, limited size. And Waylon, I believe that puts us in etc. territory. And to help us wade through all this etc. is Inu Manik. She's a senior fellow at the Council on Foreign Relations, whose stated mission is to inform U.S. engagement with the world. Inu tried to wait in line to watch the oral arguments at the Supreme Court in person.

6:07But it was too cold and I went back to my office and listened to them on the audio. Oh, so you did it from the office, you were like kind of cuddled up with a blanket and all that had some popcorn? Exactly. I'd rather just be in my office where it's warm and listen there. So our next tariff option, Section 232. This comes from the Trade Expansion Act of 1962. He actually already used Section 232 in his first term to levy tariffs on steel and aluminum imports. OK, you might have actually caught the important difference here from the other laws, steel and aluminum. This option is all about tariffs on specific goods, not countries.

6:46Trump's also used it this year to target foreign-assembled cars and auto parts. And Inu says Trump's got a lot more in the pipeline. So there's pharmaceuticals, semiconductors, and so it's really wide-ranging. One restriction, though, is that it requires an investigation showing these imports are a threat to national security. But one thing it has in common with AIPA is Trump can set these tariffs at whatever rate and for however long he wants. There's no restriction on how high the tariff can be. And this is why President Trump has threatened everywhere from 25 to 100 percent tariffs on a whole range of products.

7:20Yeah, but he could go up to like a thousand percent with this if he wanted to, right? Technically, he could. The law is very vague on that. Now, there is another important option that any president has when it comes to tariffs. And it is the oldest option. I mean, the obvious thing would be to go to Congress, right? Go to Congress. This whole debate before the Supreme Court is whether or not the president is overstepping and taking away what's supposed to be Congress's power to tax and regulate foreign commerce. During those oral arguments last week, Justice Neil Gorsuch grilled U.S. Solicitor General John Sauer.

7:53What's the reason to accept the notion that Congress can hand off the power to declare war to the president? Well, we don't content that again. Well, you do. You say it's unreviewable. There's no manageable standard, nothing to be done. and now you're, I think you, tell me if I'm wrong, you backed off that position. Uh, maybe that's fair to say. Okay, all right, thank you. Because that would be an abdication. Ooh, Gursa just really putting the screws to the lawyer there. Oh no, he had the boxing gloves on for this one. Inu says until the 30s, it was Congress setting tariff rates, and even after that, presidents still often got Congress to sign off.

8:29So why not just do that? Well, the reality is that maybe members of Congress don't want to put these tariffs in place. If you're looking at the views of the American public, the tariffs just aren't that popular. And so if the president wants to enact and keep his tariffs in place, he's probably going to have to do that on his own somehow and not have Congress there to support him. Whether these alternative tariff laws are needed will come down to the Supreme Court's decision. That could come as early as next month. This episode was produced by Julia Ritchie with engineering by Jimmy Keely. It was fact-checked by Sierra Juarez.

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