President Donald Trump’s sweeping tariffs were intended to boost billions of dollars in government revenue while boosting American manufacturing. After being forced by a Supreme Court ruling to refund much of the money it collected, the Trump administration is now looking for ways to still impose tariffs.
Such a workaround will take effect later this month if the Trump administration takes action 25% tariffs on many imports from Brazil. The new tariffs announced this week came after the U.S. Trade Representative’s office conducted a year-long investigation under Section 301 of the Trade Act of 1974 that concluded that Brazil engaged in unfair trade practices.
The move revives a battle the Trump administration has been waging specifically against Brazil since last year, when the White House imposed tariffs totaling 50% on certain Brazilian imports after Brazil’s former President Jair Bolsonaro was accused of leading a conspiracy to overturn his 2022 re-election defeat. Bolsonaro was later sentenced to 27 years in prison.
Still, the administration’s actions against Brazil could also be the start of an alternative plan to impose tariffs in line with the president’s wishes, although the effectiveness of such tariffs is so far in question, experts say.
Tariff disappointment
Since the Supreme Court ruled in February that Trump could not use the International Emergency Economic Powers Act (IEEPA) to impose tariffs, importers have been worried $71 billion in refundssaid the monthly statement from the US Treasury Department. A total of $166 billion in refunds is expected to be paid out – and domestic production has increased In June it was only 1.1% year-on-year“Trump’s tariffs are proving to be more of a drag than a blessing to government revenues,” said James Knightley, chief international affairs economist at ING.
“The hope was that the tariffs would be a big source of revenue, and right now it looks like the tariffs will potentially be a loser in the second half of this year,” Knightley said Assets.
It is these very poor results so far that may prompt the government to push even harder to implement its tariffs, Knightley added.
Shortly after the Supreme Court struck down many of Trump’s tariffs in February, it imposed a temporary 10% global import surcharge, citing Section 122 of the Trade Act of 1974. However, this measure is only valid for 150 days and will expire later this month.
The government is now taking a slower but potentially more sustained approach: examining countries’ trading practices under Section 301 of the Trade Act of 1974, as it did in the case of Brazil.
Although the method requires a sometimes lengthy investigation and gives companies the opportunity to comment, it is effective. Trump used this approach several times during his first term, including imposing 25% tariffs on about $250 billion in Chinese imports. Although challenged, Trump’s tariffs against China have not been overturned by the courts.
Once an investigation is complete, tariff rates can also be adjusted without restarting the entire process, said Melissa Irmen, advocacy director for the National Association of Foreign-Trade Zones Assets.
“For example, if you set the rate at 15% and assume it needs to be changed, changing it to 30% is not the same burdensome process,” she said.
The government has proposed tariffs against dozens of trading partners, including the European Union, following investigations into its enforcement of bans on goods made using forced labor. This could mean that Brazil is just the first of many economies to be hit by new tariffs.
Business effects
That doesn’t mean the new duties are immune from lawsuits. Irmen said lawsuits could seek to argue that the government failed to prove that a foreign practice harmed the U.S. economy. You might also wonder whether tariffs would repair the alleged damage.
Regardless, importers are tired of the uncertainty. After the rapid imposition of tariffs under IEEPA last year, companies had to scramble to comply, she said. Just like last time, companies could again pay tariffs for months or years, only to demand a refund again when the courts overturn them.
“We may have the same situation where tariffs are imposed, tariffs are collected for a period of time, and until the court decision comes down, if it actually goes the way IEEPA did, we may have to see a refund process again,” Irmen said.
Longer investigations may give companies more time to prepare, but many companies will still be left wondering which countries or products Trump will target next, disrupting their long-term planning.
“Uncertainty is not a good thing in any business planning,” said Irmen.
More tariffs could also raise prices and make it harder for the Federal Reserve to cut interest rates, Knightley added, which would impact businesses overall.
Still, Trump is likely to press ahead with his tariff plan — even as he has repeatedly insisted that the Fed cut interest rates — as trade policy could soon become one of the few tools left at his disposal.
Some polls have predicted After the midterm elections, Democrats could win the House of Representatives and split the Senate. If Republicans lose control of Congress and Trump struggles to pass legislation that advances his agenda, he could rely more heavily on his executive power, Knightley said.
“If you can’t worry about taxes and spending, you’re going to be more limited to areas where the president has executive authority,” he said. “And of course retail is one of them.”