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US court rules 'global 10% tariff' invalid... "Confusing balance of payments and trade balance"
Originally scheduled to end in July, 'temporary measure' character... Preparation for high tariffs based on Trade Act Section 301
Following the US Federal Supreme Court's ruling against reciprocal tariffs, the US court's decision that the 'global 10% tariff' imposed to replace them is also invalid is seen as a continuous blow to the legal legitimacy of the Donald Trump administration's trade policy.
However, the global tariff, which expires in July, was originally merely a temporary measure used by the Trump administration, and the effect of this decision is limited to the plaintiffs who filed the lawsuit, so the immediate ripple effect on the US administration's tariff policy or existing tariff negotiations is expected to be limited.
It is expected that the Trump administration will buy time by appealing this court decision and impose new tariffs based on Trade Act Section 301.
◇ Emerged as a substitute for illegal reciprocal tariffs... Immediately entered legal dispute
Previously, on February 20, after the Federal Supreme Court ruled that the imposition of reciprocal tariffs (country-specific tariffs) based on the International Emergency Economic Powers Act (IEEPA) was illegal, President Trump signed an executive order on the same day to impose a global 10% tariff on all countries worldwide under Trade Act Section 122.
Trade Act Section 122 grants the President the authority to impose tariffs of up to 15% for a maximum of 150 days to address large and serious balance of payments deficits.
This was the first time in 52 years since the law was enacted in 1974 that the US administration actually imposed global tariffs using this law.
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This executive order took effect on February 24, US Eastern Time, and was specified to remain in effect until July 24.President Trump also announced a plan to raise the tariff rate based on this provision to the legal maximum of 15%, but it did not lead to actual implementation.
When global tariffs were imposed, two small importers, including Burap & Barrel and toy importer Basic Fun, filed a lawsuit with the Federal Court of International Trade in March, arguing that the 10% global tariff imposed by the Trump administration based on Trade Act Section 122 was illegal.
In addition, about 24 states, including Washington State, also filed similar lawsuits against the Trump administration, further expanding the legal dispute.
◇ "Again, without basis..." Consecutive blows to the legitimacy of key policies
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The court's judgment that the Trump administration repeatedly imposed tariffs without legal basis is even more painful given that President Trump is preparing for a summit with Chinese President Xi Jinping.The New York Times (NYT) evaluated, "The ruling is a major blow as President Trump prepares to visit China next week to discuss trade issues," adding, "With tariffs expected to be a key agenda item for the summit, this decision could weaken President Trump's negotiating leverage."
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The British daily Financial Times (FT) also described the ruling as "the latest legal blow to President Trump's trade policy after the US Supreme Court ruled that the president could not use emergency economic powers to impose tariffs."</>
Whether President Trump could invoke Trade Act Section 122 based on the trade deficit issue had been a subject of controversy early on, regardless of political affiliation.</>
Earlier, former federal prosecutor Andrew McCarthy pointed out in an article for the conservative media National Review that "the new tariffs are even more clearly illegal than the IEEPA tariffs."</>
The majority of judges on the three-judge panel of the US Federal Court of International Trade ruled on this day that President Trump's executive order on global 10% tariffs did not meet the legal requirements.</>
They stated that the balance of payments deficit and trade deficit are fundamentally different concepts, and these were confused.</>
The balance of payments is a concept that includes all external economic transactions, such as transactions of goods, services, and income, as well as capital transfers and financial investments, while the trade deficit is an indicator limited to goods trade.
◇ Analysis: "Tariffs originally scheduled to end in July... immediate ripple effects limited"
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While the Trump administration is expected to appeal this decision, analysts suggest that the immediate impact of this ruling on tariff negotiations or the US administration's tariff policy stance will be limited.</>
Experts believe that the Trade Act Section 122 tariffs were originally planned as a temporary measure and 'bridge policy,' given that they automatically expire on July 24.</>
President Trump has also repeatedly emphasized that a new tariff system would be established soon.</>
The US Trade Representative (USTR) has already initiated Trade Act Section 301 investigations, a preliminary procedure for imposing additional tariffs related to structural overproduction issues, against 16 economic entities, including Korea, to replace the 10% global tariffs.</>
Concurrently, separate Trade Act Section 301 investigations have been launched against 60 economic entities believed to be failing to properly prohibit the import of products produced with forced labor.</>
Trade Act Section 301 grants the administration the authority to respond to unfair, unreasonable, or discriminatory actions, policies, and practices of foreign governments that restrict or burden US trade, through measures such as tariff imposition.</>
If an investigation concludes that a foreign country has unfair trade practices, measures such as imposing tariffs can be taken. Tariffs based on this law have no limit on their rate.</>
Furthermore, the court's refusal to apply the 10% global tariff prohibition order universally in its decision today, limiting its effect only to the plaintiffs, also restricts the ripple effect of the ruling.</>
The Wall Street Journal (WSJ) evaluated the ruling today, stating, "The immediate impact of the ruling may be limited," adding, "The 10% tariff under Trade Act Section 122 was scheduled to expire in July, and at that point, the administration planned to transition to a different tariff system."</>
It continued, "Also, because the court denied a universal injunction, not all importers nationwide will receive immediate relief under this ruling."</>
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