Donald Trump’s third attempt to impose a global tariffs regime is being tested by the same panel of judges that deemed his previous attempts illegal.
On Wednesday, the US Court of International Trade, which struck down those earlier tariffs, heard arguments in a challenge brought by importers and 25 Democrat-led states to the 10 to 12.5 per cent tariffs imposed on about 60 economies and 86 countries (the 27-member European Union was treated as a single economy) in late July.
The tariffs (including a 12.5 per cent tariff on Australian exports to the US) were introduced, ostensibly, because of those countries’ failure to adequately prevent imports of goods made with forced labour.
The Trump administration argues (as it has to under the legislation being used to implement the tariffs) that those failures gave them an unfair advantage over US producers and “burdens or restricts” US commerce.
The “forced labour” tariffs are a transparent attempt to recreate the global tariff regime that the Court of International Trade ruled illegal last May; a judgment that the US Supreme Court confirmed in February.
The administration responded to the Supreme Court setback with a temporary replacement for the illegal tariffs, using a different section of the US Trade Act, which allows a president to impose tariffs of up to 15 per cent for a maximum of 150 days in a balance of payments crisis.
The US doesn’t have – with a floating exchange rate it can’t have – a balance of payments crisis, and so those tariffs, too, were ruled unlawful by the trade court.
The administration has appealed that decision but, in any event, those tariffs have expired and been replaced by those now being scrutinised by the court.
Section 301 of the Trade Act, which the administration is relying on for the forced labour tariffs (and another set that it plans to impose on 16 countries for “excess manufacturing capacity and production” that is still in the pipeline), has been tested in the courts previously and held up.
It’s not previously been used, however, to create a blanket global tariff regime.
Its provisions require detailed country-specific investigations, consultations with the targeted country or countries, hearings and evidence of the country’s failings and the harm it has caused to US businesses.
The administration’s cause hasn’t been helped by public comments by Trump and other officials that have made it clear the use of the forced labour provisions is a device to resurrect the tariff regime the Supreme Court decision had demolished.
Treasury Secretary Scott Bessent declared after that decision that the rates would go back to exactly where they had been before the tariffs were removed. Trump himself told Fox News that the new tariffs were “doing the same thing” as the ones ruled out by the Supreme Court.
These comments have been cited by those challenging the tariffs, who have argued that the expressed concerns about forced labour are just a pretext for recreating what the courts have already deemed illegal.
They have also argued, more substantively, that the administration has failed to satisfy the legal requirements for implementing the tariffs, saying that in its haste to replace the interim tariffs (the investigations, consultations, public hearings and analysis of harm to US companies done by 86 countries took about two and a half months) it had not adequately followed the country-specific processes and made the country-specific analysis and findings required by the law.
“If you’re going to do it at breakneck speed and try to cover the entire globe, you still have to satisfy the statutory requirements,” a lawyer for the challengers argued.
The administration’s lawyer said the US Trade Representative had thoroughly evaluated the prevalence of goods made with forced labour in international commerce and didn’t need to show “with metaphysical certainty” that forced labour was a burden on US commerce before imposing the tariffs.
He was questioned by the judges on how forced labour had created unfair competition for US companies, and whether the administration’s report had demonstrated that harm had been done.
He claimed it had produced ample evidence. The government, he also said, had wide discretion to decide the sorts of foreign practices that would allow Section 301 tariffs to be imposed.
The judges could, as they did with Trump’s earlier attempts, simply deem the latest tariffs illegal. They also raised the possibility that they could hand the whole matter back to the US Trade Representative’s office, with directions to redo the entire process properly.
For Trump, a third courtroom loss would be a blow. He’s already had to disgorge most of the $US166 billion ($239 billion) of revenue (plus interest) raised by his initial “Liberation Day” tariffs. Depending on the outcome of the administration’s appeal, it might have to refund tens of billions of dollars raised by the interim tariffs.
It would also undermine the leverage he has had in using tariffs and the threat of tariffs to coerce and punish other countries. While there are other mechanisms for imposing tariffs, which he has used, there is no apparent fourth option to create a global tariff regime.
Mind you, if Trump’s tariffs were knocked out it would be a good thing for US companies and consumers, who effectively pay them, and for the US inflation rate.
It might also, counterintuitively, be good for the US manufacturing sector Trump used as justification for his tariffs. There might be a boom in data centre construction, but manufacturing has been faltering despite – or perhaps because of – Trump’s tariffs.
Manufacturing investment and jobs have shrunk ever since Trump regained office, after peaking in 2024, when Joe Biden was president.
That may be because of the volatile economic environment Trump’s policies have created, but it might also be because the range of tariffs he has had in place have raised the costs of the imported intermediate productions feeding into the manufacturing sector.
Trump’s tariffs have also failed to have any material impact on the US goods trade deficit. Even at their peak, they raised only a fraction of the revenue he claimed would enable him to eradicate America’s $US2 trillion a year budget deficit, or abolish income taxes, or fund $US5000 cheques to Americans that would cost more than $US1 trillion.
Tariffs, as it has been demonstrated, aren’t (and never could be) the magic pudding Trump thought – and still thinks – they are.
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