US: Restructuring raises policy uncertainty – Rabobank

Rabobank’s Senior US Strategist Philip Marey explains that after the Supreme Court blocked use of IEEPA for reciprocal and fentanyl-related tariffs, President Trump swiftly shifted to a 15% global tariff under Section 122 of the Trade Act of 1974. The administration plans to transition to more permanent Section 301 measures, keeping US protectionism elevated and reshaping the tariff framework.

Supreme Court ruling forces tariff pivot

"On Friday, February 20, the Supreme Court ruled that President Trump exceeded his power when he imposed the reciprocal and fentanyl-related tariffs by using the International Emergency Economic Powers Act of 1977 (IEEPA). On the same day, President Trump imposed a new 10% global tariff based on Section 122 of the Trade Act of 1974. On Saturday, Trump raised this global tariff to 15%."

"Without Congressional approval, which seems the most likely outcome at the moment, the administration can shift to Section 301 of the same Trade Act of 1974 if the USTR can prove that a country is using unfair trade practices against the United States. This allows permanent tariffs at possibly higher rates. The White House has indicated that this is the likely next step after imposing the global 15% tariffs based on Section 122."

"The Yale Budget Lab estimated that the average effective US tariff rate was 16% before the Supreme Court ruling, 9.1% immediately afterward, but has rebounded to 13.7% because of the new 15% global tariff. This suggests that the projected tariff revenue for the US federal government will be somewhat lower than before the ruling. This should lead to a slightly higher budget deficit in fiscal years 2026 and beyond."

"Also, longer-term, with the midterm elections and the next presidential election in mind, we would warn against thinking that US protectionism will be over soon. Republicans and Democrats are competing for the working class vote and any government will appreciate the revenues that tariffs are bringing in. Keep in mind that Biden did not reverse the tariffs from Trump’s first term and even added to it."

(This article was created with the help of an Artificial Intelligence tool and reviewed by an editor.)