Trump Tariffs' Challenges May Take Long Time in Trade Court
(Bloomberg) -- Foreign nations and domestic customers harmed by President Donald Trump’s steel and aluminum tariffs, announced Thursday, shouldn’t expect swift justice through legal venues.
Countries can complain to the Geneva-based World Trade Organization, triggering a dispute-settlement process that’s designed to encourage member nations to smooth stormy trade relations instead of pursuing all-or-nothing litigation. Countries may claim the tariffs aren’t based on a true national security need, as Trump said while announcing the tariffs.
If there is no settlement, countries may request a panel of arbitrators that determines whether a violation has occurred. After review and appeal, which typically takes one to two years, the WTO can tell a country to stop violating the rules. If it doesn’t, the WTO can authorize a wronged nation to put in place its own retaliatory trade barriers.
The WTO ruled against temporary steel tariffs imposed by President George W. Bush in 2002. Bush initially said he’d keep the tariffs in place, but then backed down in the face of threatened EU retaliation.
Wronged nations often choose their retaliation target for maximum symbolic or political effect. The EU has threatened it may go after blue jeans, agricultural products, bourbon from Senate Majority leader Mitch McConnell’s home state of Kentucky and motorcycles made by Harley Davidson Inc., which is headquartered in House Speaker Paul Ryan’s Wisconsin.
The WTO process is limited to member countries. Industrial buyers in the U.S. that make products out of steel and aluminum -- soda cans, airplanes, construction materials, cars and trucks, home appliances -- have fewer legal options.
Trump is invoking Section 232 of the Trade Expansion Act of 1962, a U.S. law that allows him to take action against imports that "threaten to impair the national security." The provision lines up with Article XXI of the General Agreement on Tariffs and Trade, which exempts actions that protect a nation’s "essential security interests."
Critics claim Trump’s use of a national security exception is abusive and a possible threat to the WTO system if it creates a precedent for countries to dress up protectionist policies as national security measures.
Companies can sue in U.S. courts to block the tariffs, but experts say they are unlikely to succeed, because of the president’s broad powers under Section 232. Their best shot to challenge the tariffs in court would be to claim the administration failed to follow established procedures.
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