Tariff Turnover: How the CIT Ruling Could Change US Trade Policy

Tariff headlines continue to roll in. On the night of 28 May, the US Court for International Trade (CIT) rejected President Trump’s use of the International Emergency Economic Powers Act of 1977 (IEEPA) to impose tariffs. The Trump administration has already appealed the decision. Eventually, I expect the Supreme Court to review (and likely uphold) the ruling. Here, I recap how the ruling would change the current trade landscape in the US.

What goes

The CIT ruling voids all Liberation Day tariffs authorized using IEEPA authority, including:

• A baseline 10% tariff on most trading partners
• Reciprocal tariffs (most of which are on pause) on many US trading partners
• Tariffs on non-USMCA-compliant goods from Canada and Mexico
• Tariffs on China (some of which are on pause)
• Closing the de minimis loophole for China

What stays

Tariffs imposed using other trade laws are not affected. The sectoral tariffs imposed so far (or soon-to-be imposed) remain in place:

• 25% on steel and aluminum (President Trump announced that these tariffs will increase to 50% on 4 June)
• 25% on vehicles
• 25% on vehicle parts
• Prohibitive tariffs on solar panel imports from Cambodia, Vietnam, Malaysia, and Thailand
• 211% tariffs on molded fiber imports from Vietnam
• All tariffs Trump imposed during his first term (former President Biden didn’t lift them)
• US export controls, such as on AI chips to China

Additionally, in the budget just passed by the US House of Representatives, the de minimis loophole was closed for all countries, not just China. The budget has not been passed by the Senate. But if this provision remains and becomes law, it will be enforced by the president.  

What’s next

The administration is investigating unfair trade involving lumber, timber, copper, semiconductors, critical metals and pharmaceuticals. I think it likely that tariffs will be imposed on those sectors this year, probably in the 20% to 25% range. The administration has also threatened tariffs on electronics, including smartphones, computers, laptops and semiconductor devices, as well as movies produced outside of the US. The president does not need the IEEPA to impose such sectoral tariffs; various laws about unfair trade grant the authority. Finally, President Trump has threatened 25% tariffs on countries that purchase oil from Venezuela, but may not be able to do so without IEEPA authority.

Importantly, the courts may allow President Trump to use the IEEPA to impose tariffs on China, if the administration can make a case that China is a rising security threat as it expands its military and aggression against Taiwan.

The CIT’s ruling may close one door in the trade war, but there are plenty of other doors waiting to be opened. There are other tariff laws the president can use, together or in sequence, that could replicate much of what he did with the IEEPA—just with a slower timeline. It is likely that President Trump will use these other tariff laws; the trade war may be delayed, but it is not over.

Uncertainty appears to be our greatest certainty

As the Loomis Sayles Macro Strategies team has said elsewhere, trying to forecast the economy with flip-flopping trade policy is like building a house on shifting sands—it’s hard to feel confident without a solid foundation. According to JP Morgan, the immediate suspension of all IEEPA tariffs but keeping all current sectoral tariffs would lower the effective tariff rate from 13.4% to 6.7%—still the highest level since the late 1960s. The back-and-forth could distort data and inhibit investment and hiring decisions globally. At this point, our greatest certainty is continued uncertainty and volatility.

Source for CIT Ruling

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Market conditions are extremely fluid and change frequently.

This blog post is provided for informational purposes only and should not be construed as investment advice. Any opinions or forecasts contained herein reflect the subjective judgments and assumptions of the authors only and do not necessarily reflect the views of Loomis, Sayles & Company, L.P. Information, including that obtained from outside sources, is believed to be correct, but Loomis Sayles cannot guarantee its accuracy. This material cannot be copied, reproduced or redistributed without authorization. This information is subject to change at any time without notice.