Goldman Sachs' Perspective on Yesterday's Decision Regarding Trump's Tariffs
On Wednesday, a federal court ruling suspended certain tariffs imposed by the Trump administration, but analysts at Goldman Sachs suggest this may not significantly alter the president's trade strategy. The court ruling invalidated President Donald Trump's use of emergency powers under the International Emergency Economic Powers Act (IEEPA) to implement broad tariffs, leaving sector-specific tariffs intact.
The White House swiftly appealed the decision, which claimed the administration had exceeded its authority. In a statement released later in the day, Goldman Sachs analysts stated, "This ruling constitutes a setback for the administration's tariff plan, increasing uncertainty, but it might not fundamentally change the outcome for most major U.S. trading partners."
Goldman Sachs provided further insights:
- The court ruling does not affect tariffs on imported steel, aluminum, and automobiles, nor does it prevent the administration from imposing additional sector-related tariffs.
- The administration could resurrect similar tariffs using alternative means, such as through Section 301 investigations conducted by the U.S. Trade Representative or Section 330 of the Trade Act of 1930. These options, however, are limited in scope and require consultations or lengthy investigations to complete.
- If the White House finds it has diminished flexibility when imposing country-focused tariffs, it may turn to sectoral tariffs instead.
Goldman Sachs' analysis concludes that even if the current court proceedings take some time to resolve, the Trump administration may find other ways to implement tariffs in their trade policy. The investment bank stated, "For now, we expect the Trump administration will find alternative ways to impose tariffs."
Additional context:
- Section 122 of the Trade Act of 1974 allows tariffs to be imposed temporarily for up to 150 days to address trade imbalances. This option is less broad and aggressive compared to IEEPA and is subject to more administrative checks and limitations.
- The administration has also pursued tariffs on the grounds of national security under Section 232 of the Trade Expansion Act of 1962, affecting items such as steel, aluminum, and automobiles. This approach is narrower in scope and requires justifications based on national security concerns.
- Experts suggest that the administration could consider at least three or four additional legal mechanisms for imposing tariffs, although the specifics are yet to be clarified. The administration has expressed confidence in its appeal process and has not publicly committed to pursuing these alternate avenues.
- Goldman Sachs analyses suggest that the court ruling might not significantly alter the Trump administration's trade strategy, as the administration could resort to alternative methods for imposing tariffs, such as Section 301 investigations or Section 330 of the Trade Act of 1930.
- Despite the court ruling that invalidated President Donald Trump's use of emergency powers under the International Emergency Economic Powers Act (IEEPA) to implement broad tariffs, the administration could still impose tariffs on imported steel, aluminum, and automobiles, or pursue additional sector-related tariffs using alternative means.
- Goldman Sachs further stated that if the White House finds it has diminished flexibility when imposing country-focused tariffs, it may turn to sectoral tariffs instead, as these options are less aggressive and subject to fewer administrative checks compared to temporary tariffs imposed under Section 122 of the Trade Act of 1974.
