Following the Supreme Court's ruling in February that Trump could no longer invoke the International Emergency Economic Powers Act to impose broad tariffs, the White House is turning to new legal tools to continue its trade policy. The latest move is a 25% tariff on several categories of Brazilian imports, which will take effect later this month.

Using Section 301 investigation to advance tax increases

This new round of tariffs is based on Section 301 of the Trade Act of 1974. After a year-long investigation, the Office of the United States Trade Representative determined that Brazil engaged in unfair trade practices, thus providing the legal basis for the tariffs.

This also means that the Trump administration is shifting from a faster, but more legally challenging, approach to a slower, potentially longer-lasting one. Trump used this tool multiple times during his first term, including imposing a 25% tariff on approximately $250 billion worth of Chinese imports. While these measures were challenged, they were not overturned by the courts.

Seeking alternative paths after Supreme Court ruling

In February of this year, the U.S. Supreme Court ruled that Trump could not impose tariffs under the International Emergency Economic Powers Act. Monthly reports from the U.S. Treasury Department show that importers have received approximately $71 billion in refunds, with total refunds expected to reach $166 billion.

Meanwhile, the US domestic manufacturing sector performed poorly. As of June, manufacturing growth was only 1.1% year-on-year. This meant that tariffs failed to generate the expected substantial fiscal revenue and did not significantly boost manufacturing.

Following the ruling, Trump temporarily imposed a 10% global import tariff under Section 122 of the Trade Act of 1974, but this measure only lasted 150 days and will expire later this month. In contrast, a Section 301 investigation takes longer, but once the investigation is completed, subsequent adjustments to the tariff rate do not require restarting the entire process.

The impact may extend to more trading partners.

The report notes that Brazil may be just the beginning. The Trump administration has proposed tariffs against dozens of trading partners, including the EU, with some investigations focusing on these economies' compliance with bans on forced labor products.

However, the new tariffs do not mean there will be no more lawsuits. Businesses and industry organizations believe that future disputes may focus on two issues: first, whether the government has sufficiently proven that the relevant foreign practices have harmed the U.S. economy; and second, whether the tariffs will truly solve these problems.

For businesses, the more direct impact remains uncertainty. When tariffs were implemented quickly previously, importers were forced to adjust their compliance and procurement arrangements in a short period. If a new round of tariffs is overturned by the courts again, businesses may have to go through the process of "paying taxes first, then getting a refund" once more.

Furthermore, additional tariffs could drive up import costs, increase price pressures, and limit the Federal Reserve's room for interest rate cuts. If the Republicans lose some control of Congress after the midterm elections, trade policy may become one of the executive tools Trump uses more frequently.