U.S. factory equipment maker OTC Industrial Technologies has long used low-cost countries to supply components – first China and later India – but President Donald Trump’s blitz of tariffs on numerous trade partners has upended the supply chain math for CEO Bill Canady.
“We moved things out of China and went to some of those other countries, and now the tariffs on those are as bad or worse,” Canady told Reuters. “We just have to hang on and navigate our way through this so we don’t all go broke in the short run.”
It is a dilemma that is sinking in with companies, foreign trade ministries, trade lawyers and economists as the U.S. Supreme Court considers the legality of Trump’s global tariffs, with arguments, opens new tab set for Wednesday. Under one legal authority or another, Trump’s tariffs are expected to stay in place long term.
LOWER COURTS RULE AGAINST TRUMP
The court, whose 6-3 conservative majority has backed Trump in a series of major decisions this year, is hearing his administration’s appeal after lower courts ruled that the Republican president overstepped his authority in imposing sweeping tariffs under a federal law meant for emergencies.
A ruling striking down Trump’s use of the 1977 International Emergency Economic Powers Act, or IEEPA, to quickly impose broad global tariffs also would eliminate a favorite cudgel to punish countries that draw his ire on non-trade political matters.
These have ranged from Brazil’s prosecution of former president Jair Bolsonaro to India’s purchases of Russian oil that help fund Russia’s war in Ukraine.
“If we don’t have tariffs, we don’t have national security, and the rest of the world would laugh at us because they’ve used tariffs against us for years and took advantage of us,” Trump told reporters on Air Force One on Sunday.
“We were subject to being abused by a lot of other countries, including China – for years, not anymore. Tariffs have brought us tremendous national security,” Trump said, reinforcing a key justification for the duties.
Trump added that he will not attend Wednesday’s arguments, but Treasury Secretary Scott Bessent told the Fox News Channel that he would attend to “emphasize that this is an economic emergency.”
Trump is the first president to invoke this statute – which often has been used to apply punitive economic sanctions to adversaries – to impose tariffs. The law provides a president broad authority to regulate a variety of economic transactions when a national emergency is declared.
In this case, Trump deemed a $1.2 trillion U.S. goods trade deficit in 2024 a national emergency – even though the United States has run trade deficits every year since 1975 – and also cited overdoses of the often-abused painkiller fentanyl.
Bessent told Reuters that he expects the Supreme Court to uphold the IEEPA-based tariffs. But if it strikes down the tariffs, Bessent said in an interview, the administration will simply switch to other tariff authorities, including Section 122 of the Trade Act of 1974, which allows broad 15% tariffs for 150 days to calm trade imbalances.
Bessent said Trump also can invoke Section 338 of the Tariff Act of 1930, a statute that allows tariffs up to 50% on countries that discriminate against U.S. commerce.
“You should assume that they’re here to stay,” Bessent said of Trump’s tariffs.
For countries that have negotiated tariff-lowering trade deals with Trump, “you should honor your agreement,” Bessent added. “Those of you who got a good deal should stick with it.”
The Supreme Court case covers only a portion of the tariffs Trump has imposed this year. His administration already is using other authorities for certain tariffs. He is busy piling up tariffs under Section 232 of the Trade Expansion Act of 1962 involving national security concerns to protect strategic sectors including autos, copper, semiconductors, pharmaceuticals, robotics and aircraft, as well as tariffs under Section 301 of the Trade Act of 1974 involving unfair trade practices investigations.
“This administration is committed to tariffs as a cornerstone of economic policy, and companies and industries should plan accordingly,” said Tim Brightbill, co-chair of law firm Wiley Rein’s trade law practice in Washington.
NEGOTIATING POWER
Trump administration officials have touted his tariffs as pushing major trading partners such as Japan and the European Union to negotiate major concessions that will help to reduce the U.S. trade deficit, arguing those concessions will survive any Supreme Court ruling.
U.S. trade partners are not waiting for a Supreme Court ruling in deciding how to proceed. The U.S. Trade Representative’s office has announced finalized framework trade deals with Vietnam, Malaysia, Thailand and Cambodia, locking in tariff rates of 19% to 20%. South Korea agreed to terms on a $350 billion investment plan, unlocking a 15% tariff for its cars and other goods.
Negotiations with China have proven more difficult due to its willingness to retaliate against the United States and cut off its supplies of rare earth minerals and magnets essential for U.S. high-tech manufacturing from autos to semiconductors.
Instead of major concessions, Trump’s administration has had to settle for extensions of a delicate truce under which American and Chinese tariffs were reduced to keep the rare earths flowing.
In South Korea last Thursday, Trump agreed in talks with Chinese President Xi Jinping to halve the U.S. tariff rate on Chinese goods related to fentanyl to 10% and to delay tighter technology export controls for a year in exchange for China’s year-long pause on its tough licensing requirements for global rare-earth exports.
Xi agreed to resume purchases of American soybeans that China had halted for months, while Trump paused new U.S. port fees for China-linked ships for a year.
REVENUE, INVESTMENT CONCERNS
Some investors have said financial markets, which have grown accustomed to the Trump tariff status quo, could be thrown into turmoil if the Supreme Court strikes down the IEEPA tariffs.
A major reason for concern, particularly in the Treasury debt market, is the risk of having to refund more than $100 billion in IEEPA tariff collections and forgoing hundreds of billions of dollars of revenue annually.
The IEEPA tariffs collected so far this year make up the biggest portion of a $118 billion increase in net customs receipts in the 2025 fiscal year that ended on September 30. That helped offset rising healthcare, Social Security, interest and military outlays, helping shrink the U.S. deficit slightly to $1.715 trillion.
“It’s a significant political economy risk that we get addicted to tariff revenue,” said Ernie Tedeschi, a senior fellow at the Yale University Budget Lab, adding that makes it harder for any future presidential administration to lower the duties.
Getting the money back also would be difficult, as a tariff reversal “is unprecedented at this scale” for U.S. Customs and Border Protection, said Angela Lewis, global head of customs at freight forwarder and customs broker Flexport.
The onus could be on individual importers to apply for “post-summary corrections” with the agency, a messy process that could take years and not be worthwhile for some smaller firms, Lewis said. For those getting refunds, U.S. taxpayers also would be on the hook for 6% annual interest costs compounded daily.
Source: https://www.reuters.com/world/china/supreme-court-wont-stop-trumps-tariffs-deal-with-it-officials-say-2025-11-03/
