What Happens if the Supreme Court Kills Trump’s Tariffs?

Dmitri Alperovitch and Silverado trade experts Sarah Stewart and John Corrigan examine the implications of the upcoming Supreme Court ruling on Trump's reciprocal and fentanyl tariffs. They explore the stakes of this constitutional challenge, including whether the government might have to refund the substantial tariff revenues already collected and how the administration could respond should the Court rule against them.   00:00 Introduction   02:16 Types of Tariffs Currently in Place   12:13 Supreme Court Timeline and the Issue of Refunds   14:33 Alternative Tariff Options   22:14 A New Weapon for the Trump Administration: Section 338 Tariffs   31:14 Back to the Future With an Old Tool: Section 421 Tariffs   38:14 Why Countries Shouldn't Rush to Celebrate Potential End of IAEPA Tariffs

Episode Transcript

(00:05):
Welcome to Geopolitics Decanted.
I'm your host, Dmitri Alperovitch, Chairman of Silverado Policy Accelerator, a geopoliticsthink tank in Washington, DC.
And today we're discussing tariffs and specifically the implications of the upcomingSupreme Court decision about the constitutionality of the administration's decision to use
the International Emergency Economic Powers Act of 1977 or IEAPA to institute thesedramatic so-called reciprocal tariffs on virtually the entire world.

(00:32):
Now.
This is not a legal podcast and we're not going to go through the rationale on both sidesof this argument, other than to mention that because there is nothing in the IEAPA law
that explicitly authorizes the president to levy tariffs only to regulate importation, theadministration's argument hinges in many respects on the idea that tariffs are not a tax
and thus do not fall squarely within Article 1 powers of the Constitution that of coursegrants the power to tax to Congress.

(00:57):
It's fair to say that there was a lot of skepticism about this argument from the SupremeCourt bench during the Q &A and that there is at least a 50 % chance, if not even better,
that the administration ultimately loses this case.
And that's what we wanted to do today is to start thinking through that outcome anddiscuss what options might be available to the Trump administration if that eventuality
comes to pass.

(01:18):
And once again, I have assembled a terrific trade expert group here to discuss this.
Sarah Stewart is CEO at Silverado and a former longtime trade negotiator.
one of the lead negotiators on the USMCA in the Trump 45 term, where she worked underJamieson Greer who is the current US Trade Representative, or USTR And John Corrigan is
another Silverado trade expert.
He's our Senior Director on Trade and Industrial Strategy, and is also a USTR alum.

(01:43):
Welcome both to the show.
Thanks Dmitri
All right, so Sarah, let's start with you.
So there's a lot of tariffs that have been levied, not just this year, but of course inprior years, both during the Trump administration and the Biden administration, but this
year, things have certainly accelerated dramatically, but not all of them are using thisIEAPA statute to levy tariffs, right?

(02:04):
So let's go through what has actually been instituted, particularly since January 20th bythe Trump administration, what might fall under this case and might get reversed by the
Supreme Court, and what is likely to stay.
improvement So we have a lot of different types of tariffs.
So I'm going to lay them all out.
There are some that predated this administration, as you mentioned, Dmitri and that is theSection 301 tariffs.

(02:29):
So all of these are tariffs named after different sections of law.
That's all these numbers really mean.
But the Section 301 tariffs are generally focused on imposing tariffs on countries wherethere is evidence that
a country is engaging in trade that results in unjustifiable or unreasonable burdens orrestrictions on US commerce, right?

(02:52):
of unfair trade, not necessarily national security tariffs,
This is not a national security based statute.
It does really focus on what is the burden on US commerce from different types of tradepractices.
So we had a very large case and John worked on this.
So I'm sure he can tell us more under the first Trump administration that looked atChina's practices with regard to things like IP theft and forced technology transfer.

(03:21):
And that really resulted in
hundreds of billions of dollars in tariffs that the US imposed on Chinese imports.
So we've been living with those tariffs for a while and those were tariffs that werecontinued under President Biden and have continued on under President Trump.
That's a big chunk of tariffs, but it's on a subset of products and it is focused onChina.

(03:47):
So enter the Trump administration part two.
in 2025, and we start to see new tariffs coming into play, including national securitytariffs.
Now, national security tariffs go by Section 232.
It's rooted in a 1962 trade statute.

(04:11):
And those had started off actually also under the first Trump administration, where
They said, look, we need to have for our national security a steady and secure supply ofsteel and aluminum.
And we feel that actions that are being taken around the world, including by China, butother countries as well, threaten the national security with regard to our supply of these

(04:40):
particular products.
So tariffs were imposed across the board.
Now, unlike the 301 tariffs that were focused on China and a subset of
products, these national security tariffs under Trump 1.0, and I'll get to 2.0 in aminute, but under Trump 1.0 were across the board.
So these applied to all countries, but they applied to only steel and aluminum, right?

(05:06):
So all of these different tariffs have different scopes of who's covered and what iscovered.
The steel and aluminum tariffs continued under President Biden.
And there were exceptions made or exclusions for certain types of steel and certain typesof aluminum.
And, you know, different countries were able to negotiate different deals, maybe lowertariffs or just a quota instead of a tariff.

(05:33):
So President Trump comes in in 2025 and says, we're not doing that anymore.
We're going to close all these loopholes.
We're not going to have any more exclusions.
Nobody's going to get a better deal on this right away.
Now that changed, but that was the going in position.
He also, I think very importantly, initiated a number of investigations under thisnational security statute.

(05:58):
And this is important because unlike with IEAPA, they can't just institute tariffs day oneunder 232 or 301, right?
They need to go through the process of investigation.
there is a long process of investigation that can be expedited, but it neverthelessrequires there to be some showing.

(06:18):
So for 301, that process is actually longer.
If you look at the section 301 report that USTR prepared, and again, I think John hadworked on this, it's very extensive.
They built a very significant record.
against China before they imposed those tariffs.
And they had hearings and they collected input from various different stakeholders and hadmany, many inter-agency meetings at, you know, principal level.

(06:45):
So, you know, it was not something that, you know, just gets slapped on to a country.
Now, a Section 232 national security tariff also requires an investigation.
This time, instead of USTR doing the investigation or the US Trade Representative, whichdoes the 301, the Section 232 is headed by the Department of Commerce.

(07:07):
So they have to do an investigation.
But whatever they find, they give that to the president and the president has discretion.
So the president can say, you know what, for a variety of reasons, while I understand thatimports from
countries are threatening our national security for this particular product, I don't wantto impose a tariff or I want to do some other remedy.

(07:32):
And he has that discretion under the statute.
So, you know, there's a lot of, there's a lot of nuance to how these, these trade toolsare used and you might pick and choose different ones if you're in the administration to
achieve different objectives.
So we come in 2025, we've got the 301 on China, we've got the steel and aluminum 232tariffs, and then the president initiates some more 232 investigations on autos, on

(07:59):
polysilicon, on semiconductors, and a number of others, and copper as well.
And so we've got a lot of section 232 investigations that are pending right now and havenot yet necessarily been acted upon.
believe that we've got autos and copper in effect, but the others are still pending.
So the other important thing that the Trump administration did is they said, you know,we've got this country specific remedy with 301 and we've got, you know, this product

(08:30):
specific remedy with 232, but we're very, very upset about what we perceive to be ahistorical persistent deficit in goods trade.
And in order to remedy that, none of these tools to the administration's liking were goingto be optimal.
And so they chose instead to use what you mentioned earlier, IEAPA authority.

(08:55):
Now IEAPA authority is typically used when we're talking about sanctions or we're going toblock a transaction with a known cyber criminal or a known drug trafficking ring.
So that's typically how IEAPA is used.
Its predecessor statute was used one time under President Nixon to impose tariffs, butthis particular statute has not ever been used to impose tariffs.

(09:23):
And as you pointed out, it's not explicitly stated that that is authorized under thestatute.
But the government said, you know what?
We think it is.
We interpret the statute to give us this authority.
We want to correct.
this, you know, this trade deficit that, you know, we believe is really harming Americans.
And so we are going to invoke these powers and we're going to apply broad-based tariffsacross the board on all imports from almost all countries.

(09:54):
And without investigations, right?
That was another appealing factor of this.
this, that's exactly right.
It was a very expedited way of going about this.
Now, you know, the administration might say, well, we have a lot of evidence of thesepersistent trade deficits.
Okay.
But there wasn't the type of stakeholder process, you know, or long investigation thatpreceded the imposition of those tariffs.

(10:19):
So now we have these...
IEAPA tariffs that deal with persistent trade deficits, otherwise termed by theadministration as reciprocal tariffs.
In addition to that, the president identified three other national emergencies under theIEAPA statute, and he imposed tariffs on China, Canada, and Mexico, all related to the

(10:46):
administration's perception that they were not taking
adequate action to stop trade in fentanyl from coming to the United States.
So we have multiple different tariffs that are in place under a range of authorities.
And this doesn't even include the anti-dumping and countervailing duties that we collecton a range of products that are under yet another trade statute.

(11:14):
So at issue right now for the Supreme Court is
just the IEAPA tariffs, the ones that deal with the persistent trade deficit and the onesthat deal with the fentanyl crisis.
So that's what we're looking at.
That's what the court's going to decide.
And what's interesting is that regardless, and this is my view, regardless of where thecourt comes out on this, all of these other authorities that I just mentioned do provide

(11:42):
quite a bit of coverage.
on countries and on products so on net even if the supreme court reverses you know or oror or finds in favor of the plaintiffs and says that the IEAPA statute either Bans the
administration from using tariffs or Greatly limits the administration's power to usetariffs under that statute.

(12:07):
There is a range of other authorities and we're already using them
gonna get into that.
But first, John, let me bring you in.
The Supreme Court just heard this case.
Typically, the Supreme Court tends to release their decisions in June, right at the end ofthe term.
Do you expect the same here?
Obviously, we don't know.
They can do whatever they want.
Or do you expect a decision faster given the huge ramifications here?

(12:31):
These tariffs are being collected every single day.
We're talking about
over $100 billion that's been collected already, I believe.
What do you expect in terms of the timeline for the decision here?
Thanks, Dmitri.
Yeah, I would think that quarter one, 2026 would be a reasonable time to expect a findingby the court.
That said, it could happen much more quickly.

(12:53):
And given, know, as we'll discuss here, that refunds are at issue.
I think the issue of sort of cash piling up is a consideration for the court in reaching adecision more quickly.
You know, very roughly speaking, you're looking at about $16 billion per month.
in revenue if you take a simple average over 1-6, that's right.

(13:15):
So, you know, in order to kind of sidestep really considering ever larger amounts of moneywell into 2026, they might want to move more quickly.
And you mentioned refunds, that's a really interesting topic because, you know,theoretically the court can rule against the statute, obviously it can rule for it, but if
it rules against it, they may not necessarily require refunds, but traditionally, Ibelieve in every case where tariffs have been overturned, there was refunds and in fact

(13:45):
interest on the money collected that had to be issued.
How much money are we talking about here in total that might need to be returned back tothe importers if the statute gets overturned?
Well, that number is not publicly available, but one can use public U.S.
trade data to reach an estimate.
Annualized for 2025, going back to the start of the imposition of the IEAPA duties, you'dget to somewhere in the ballpark of about $125 billion, and those would be duties assessed

(14:16):
strictly under IEAPA.
So you'd have to net out the other forms of tariffs that Sarah mentioned.
But taking that $125 billion and going back however many months since it was in positionis how I get to about $16 billion per month.
All right, so let's talk about if this does get overturned.
As I mentioned, there's a lot of skepticism on the court about the use of this authority.

(14:41):
I thought Justice Gorsuch, obviously conservative voice on the court, had a veryinteresting question to the Solicitor General representing the government about whether a
future Democratic president might declare a national emergency due to climate change andInstitute tariffs based on that.
And the answer from the Solicitor General, well, yes, of course,
was probably not satisfactory to the conservatives that are on that court.

(15:04):
So let's assume for the sake of argument here that this does get overturned.
What can an administration do sort of on day one or very quickly to compensate for that?
Because obviously the president believes that these tariffs are very important.
He's in the midst of negotiating these trade agreements with various countries.
The tariffs are leverage that he needed to negotiate that.

(15:26):
So Sarah,
You've talked about 232, 301 authorities and, you know, national security ones andproduct-based, the 301 authority is a country-based.
Can you sort of use those authorities and other authorities maybe to cobble togetherenough tariffs to basically compensate for the loss of the IEAPA ones?

(15:47):
And how quickly?
Yeah, so I'm going to talk to you about what I think he can do with the existingauthorities.
But I want John to talk about another one that I think is novel and very interesting.
So like I said, we have a number of other Section 232 investigations that are pending.

(16:07):
We've not seen any movement in months now on a lot of these investigations afterstakeholders had put in comments.
So for example, on semiconductors, on critical minerals, on polysilicon, we're stillwaiting on what the president may or may not decide that he wants to do on some of these
very critical and key national security products that represent quite a bit of trade.

(16:33):
So I think that
on day one, they can hit the ground running with decisions on all of the pending 232s.
Separately,
And is there a limit to how much they can tariff under 232 or 301?
under the 232, there is no limit.
And again, they can use tariff remedies and other remedies.

(16:55):
So, for example, we put in at Silverado comments and recommendations about what theDepartment of Commerce might recommend to the president in terms of a remedy for
semiconductors.
part of our...
thought process was not only, might the president want to impose tariffs on foreignimports of semiconductors in just a pure wafer form, but also semiconductors that are

(17:26):
included in a downstream product like a phone.
And also
thinking there was that we don't actually import a lot of wafers ourselves because thepackaging and the assembly typically happens in Asia for microelectronics.
So we import iPhones and laptops.
We don't import the individual chips to assemble into laptops and iPhones here typically.

(17:47):
right.
That's exactly right.
I think we import about $2 billion dollars worth of chips in a wafer form, but tens ofbillions or hundreds of billions of dollars of downstream products that include a chip.
So that would be a more traditional tariff remedy, even though a component tariff is notnecessarily something that we've done repeatedly.

(18:10):
But we also suggested that other types of remedies might make sense here.
remedies that would go towards enhancing domestic investment in the fabrication, thestandup of new fabs in the United States.
So the president really has wide discretion of what he could do with the remedies here.

(18:34):
There's no limit and it's indefinite.
So there's a lot of upsides to using the national security 232 tariffs.
as you mentioned, there are a number of investigations that presumably have already beendone and just waiting for a decision.
What about new ones if he wants to do tariffs on a new product?
know, kitchen cabinets, I think is something that he's expressed interest does thatrequire, you know, if you're going to do it on national security grounds somehow, does

(19:02):
that require a new investigation?
What is the timeframe for that?
Like how quickly could you get it done if you sort of pushed on all cylinders to
to get it out as quickly as possible.
Yeah, and I think that the cabinets were related to a sort of broader look at trade intimber products
you know,
was probably already covered by 232, right?

(19:23):
Yes, If they wanted to cover new areas, could be anything, right?
It could be related to components that we need to secure our energy supply or other suchthings where you could see a national security nexus as well as
a threat of not having a secure domestic supply chain where this would be relevant.

(19:47):
And that's where we could see new investigations taking place on an expedited timeframe.
A lot of the investigations that they've initiated to date on the 232 have gone through avery fast and yet extensive public comment process with the expectation that a remedy

(20:08):
could be out quickly.
Now they haven't been in a lot of these cases for other political reasons, but if therewas a desire by the president to move more quickly, he certainly,
And what's quickly here?
It's not a couple days, right?
It still will take a couple months.
couple of days.
We're still looking at, I would think, and I don't have a hard and fast number, but Iwould think you could probably get most of this up.

(20:35):
Certainly for the pending investigations, that could be a couple of days, but for newinvestigations, you're probably looking at three to six months, three being very expedited
and pretty unprecedented.
And what about the 301s that are country specific?
I want to make a few points on 301 and 232 following from what Sarah said.

(20:57):
Given, you know, sort of the legal developments around IEAPA, I think it's important topoint out that during the first Trump administration and following some action into the
Biden administration, the government was generally very successful in defending its use ofboth the 232 and 301 statutes.
So in the 232 context, for example, during the first Trump administration, they modifiedduties on specific to Turkey on on steel.

(21:26):
And that was challenged in court.
And basically what was challenged was you can't just, you know, indefinitely have theability to modify these duties.
And the government prevailed in court at the Court of Appeals for the Federal Circuit.
I believe the Supreme Court declined to take that case.
And then with the 301.
there's actually a statutory requirement to review those duties after four years.

(21:48):
So it was during the Biden administration that we actually raised the duty on electricvehicles from China to 100%.
So that gets to that question of limits, right?
But so as the government looks at potential alternate authorities, a really key point isthat they have sort of a process knowledge and experience with the 232 and 301 that could

(22:11):
come in handy.
as they look to pivot pretty quickly.
But I think another key point here is it goes back to April.
And I think it's something that particularly Secretary Bessent is sensitive to or at leastconsiders, which is potential bond market reactions in the event that the Supreme Court
says, OK, this stream of revenue is no longer available to you legally.

(22:33):
I'd imagine that folks at Treasury are thinking, OK,
What sort of window do we have to placate market participants by assuring them that the USis not going to be in some fundamentally different fiscal position because we can no
longer generate revenue from tariffs?
So as you both know, I've long sort of seen an unused statute to date, unused in the termsthat the United States has not actually used this statute to apply tariffs in the past.

(23:00):
It's considered it long ago.
but that's section 338 of the Tariff Act of 1930.
And that statute pertains to discrimination by foreign countries.
And the statute specifically describes how that discrimination can occur.
But in brief, what it allows the president to do, it explicitly says he can apply new oradditional duties, which the statute caps at 50 % ad valorem from any foreign country

(23:30):
that quotes discriminates in fact against the commerce of the United States, moving alonga little bit in the language, compared with the commerce of any foreign country.
So key thing there is it's capped at 50 % ad valorem, which in sheer sort of tariffmagnitude terms would fit if you were trying to move away from the IEAPA duties, right?

(23:52):
So then,
I think there's a key caveat that when you talk about or think about the termdiscrimination, various folks in the administration have presented slightly different
rationales for the IEAPA duties.
But I understand them over these past few months to essentially be saying that a US goodsdeficit vis-a-vis any exporter constitutes discrimination in some way, form.

(24:18):
So I don't think it's out of the realm of possibility that it's
if we're importing more stuff from these countries than we're exporting to them, thatdeficit is unfair and we have to address it.
Exactly.
And that gets to their use of the word reciprocal and that essentially, I mean, it's beenstated by certain administration officials that trade should basically be balanced.

(24:38):
So one could infer from that that they could look at this statute and say, well,unbalanced trade is evidence of discrimination.
So 338 to me ticks the box of the sort of magnitude of the tariffs that you need toreplace IEAPA.
I think you could make a callable argument that discrimination is happening with some ormany countries.

(25:00):
And then you get to the question of timing.
And while the statute contemplates sort of input from the U.S.
International Trade Commission, which is an independent agency, to the president, I thinkone could also read the statute to say that the White House could, on its own, decide that
this discrimination is occurring

(25:21):
And then you get to the point of, how quickly could you actually apply tariffs?
And there's some rather flexible language that says, essentially, after the point at whichthe president issues a proclamation regarding discrimination, 30 days later, tariffs shall
be in place.
A reasonable person could read that to mean one could make the proclamation and thetariffs would be in place within 18 hours or 12 or six, however many.

(25:47):
and then you'd still be meeting the requirement of statute that tariffs are in placewithin 30 days.
So I...
it takes a month, that would still probably be acceptable to the White House.
So you do need to notify importers in order not to stop all trades.
Some sort of notification period is, I think, appropriate.
But let me ask you, John, because I've talked to some trade experts on this and there is atheory out there that Congress actually implicitly repealed it when they passed IEAPA.

(26:18):
So there's some controversy about whether this authority
is also legal.
What's your answer to that?
Well, I'm an economist.
I'll leave that question to the lawyers.
I've read other folks who I work with and know quite well who don't believe that the 338has been repealed.
And so the expectation from some folks is that it is usable.

(26:38):
But sort of maybe to close out on the 338, I think the key advantage, and this goes backto Sarah's earlier point on timing, the key advantage that if it was to be used would have
over the 301 and the 232 route is that you could do it pretty quickly.
Even if it required those full 30 days, it would almost certainly be faster than a new 301or a new 232.

(27:03):
And I understand Sarah's point that you have certain 232s that may be
literally on the shelf right now that could be rolled out pretty quickly.
And Sarah, you actually are a trade lawyer.
So what's your view on whether 338 has or has not been repealed?
I don't think it's been repealed.
I've heard this argument too.

(27:23):
I think people think that it's dead letter law, it's been superseded by section 301 andother statutes, but I do believe it's still there for the taking.
I don't think that that would bar the administration from proceeding with it if itperceived that that was the right path here.
Because even if Supreme Court overturns them, that will be probably another year from now.

(27:47):
So you would get more tariffs in place even if that ultimately does get revoked,
Yeah, I think that's right.
I mean, I think that that cuts both ways though.
If they do face a loss on the IEAPA tariffs, particularly one that would be very broadbased where the court rules likely in a six three posture that, you know, there's no

(28:11):
authority under IEAPA.
to impose tariffs versus, you know, well, you could in some instances, just not this onethat you've done.
If they face sort of a categorical loss on IEAPA, I think they have to really think aboutwhether or not they want to take that on again.

(28:34):
And so that would be the sort of other side of 338.
You know, do we want to
go and wade into the use of yet another tariff that really hasn't been used for this,where there's a lot of skepticism about how big our authorities, if any, exist under this
tariff, and then have to deal with more refunds and more court cases later on down theline.

(28:58):
Now...
if they get a little bit more authority under IEAPA, maybe they don't feel that they needto resort to 338.
So I think that there's a lot of really interesting considerations if you're in theadministration right now.
And I'm sure that they are wargaming all of these scenarios out.
But isn't one of the purposes of these tariffs, it's not certainly the only one because Ithink Donald Trump ultimately believes in tariffs and wants at least 10 or 15 % tariffs on

(29:25):
almost anyone.
But a huge reasoning for these tariffs is to do better deals, right?
And he's doing some of these deals, he announced EU, Japan, Malaysia, many others, and thetariffs have unequivocally provided him leverage to do that.
So if he can get another year,
of tariffs at least up to 50 % that gives them time to do more deals with other countriesthat are still in flight, is that correct?

(29:51):
I do think that that will be one of the considerations that they will be thinking about.
They can drum up a lot of leverage with the Section 232 investigations as well.
So they're not at a total loss if they don't go with something broad-based, like theSection 338.

(30:12):
Um, but it's definitely something that they're going to, to have to consider.
I mean, it worked, the leverage worked with the recent agreements.
It worked with the agreement with Canada and Mexico, the USMCA agreement back in 2018,under the first Trump administration, this concept of, you know, look, we've been wronged

(30:34):
by these trading partners for a long time.
This has not been a balanced relationship.
going to impose these tariffs to correct that imbalance.
And at the same time, that increases our leverage.
I I think that that is like the thinking.
So, you know, they're definitely going to be wanting to make sure that they've got enoughleverage.

(30:56):
if their, consideration is that the 232 process on products alone, even though it appliesto all countries,
is not going to give them enough leverage, then Section 338 starts looking a lot moreenticing, even if they have to defend it.
another section, we're overwhelming our listeners with 301, 232, 338, IAEPA.

(31:21):
Let me throw one more number out, 421.
What is your reaction to that, Sarah?
Okay, so this is something that I really would love to see this administration andCongress give a lot more thought to.
So the Section 421 is a China specific safeguard mechanism.

(31:45):
So what does that mean?
All of these statutes that we've talked about, they all have a different purpose.
So the Section 421 statute was passed
for the specific purpose of being able to address import surges from China in particular,who had acknowledged decades ago that its non-market system would lead to overcapacity in

(32:15):
some sectors and that that capacity would have to be and would likely be exported.
And so the safeguard mechanism is time limited.
So it's, think, 18 months or some such.
And it would not, so it wouldn't be forever, but it would still have a lot of presidentialdiscretion.

(32:38):
But what it would allow you to do is kind of get at this gap where you don't yet have
an unfair or unreasonable burden on US commerce.
So there's just a threat of it.
It hasn't happened yet.
And it's not necessarily a national security product.
So it doesn't fit neatly into the 232.

(32:59):
And you don't really have any injury per se yet that would allow you to go through thehoops of bringing an anti-dumping or countervailing a duty investigation.
But you need a fast
and effective safeguard mechanism that basically amounts to almost like a block.
It's a tariff, but it could also be a quota against import surges.

(33:24):
So of course, we're seeing this in the trade data.
We're seeing China has not stopped its non-market activities, right?
If anything, since it joined the WTO a couple of decades ago,
We've seen industrial policy in China being ratcheted up and up.
It's taken out full sectors.
I mean, look at what happened with solar.

(33:45):
Our steel industry has been battered for years.
um now, yeah, and now we see all sorts of other sectors that are in the crosshairs,whether it's foundational semiconductors or capacitors for different types of nuclear
energy.
or displays that we need for our phones and laptops, and the list goes on, right?

(34:09):
So all of those sectors are getting massive government infusions of money that nobody, noother country in the world can compete with.
Companies are operating without any regard for profitability.
High capital costs are not really a concern.
They're getting free electricity below market loans and all of all of these things and soyou're ending up with sectors that are designed by the government's own policies to

(34:38):
not be tethered to any particular global or domestic demand, but rather
Although the devil's advocate here is that all of the things you just mentioned, you couldsay are national security related and you can use a 232.
So from a process perspective, does 421 offer you any benefits over 232?
I think it does because the import surge from these products might not necessarily makethe cut for what we would consider to be in the scope of a 232 investigation.

(35:10):
Now that has grown by leaps and bounds under the last nine months from where it used tobe.
but I still think that there's a number of products that we import from, from China thatwouldn't necessarily fall under the 232 rubric.

(35:31):
And so this is a law that sunset.
It is gone.
And the whole reason that it is gone is because there was an expectation and a promise byChina when it joined the WTO that
they would have turned towards a more market oriented economy by 2013.

(35:52):
That was part of their accession protocol.
And they actually gave permission, not just to the United States, but to all countries touse this type of China specific safeguard against them because they explicitly
acknowledged that import surges could be part of the outcome of their policies.

(36:15):
And so, you know, what has me here scratching my head, and John and I have spent a lot oftime thinking about this, is so China gets to come into the WTO and make all sorts of
demands.
It doesn't change towards a market economy, but yet the tools that were given to us toaddress that are taken away from us.

(36:38):
So there's a real asymmetry there.
And I think that it's time for the US and partner countries to really think about how weresurrect that specific tool to get at, you know, some of these issues that may be left in
a gap.
ah
not something we could use today.
This is something that Congress has to pass, too.

(36:59):
that Congress has to pass and there's lots of ways that you could change it and modify itand improve it from where it was before.
And I think that there's a lot of appetite for this.
It just has to, you know, we have to breathe life into it and remind people that this wasa tool that should never have gone away.

(37:21):
I want to point there really quickly, Sarah mentioned, partner countries.
Another appealing element of the China specific safeguard is I think it has the sort ofimprimatur of the WTO, even though measure expired, that I think in theory, you could get
more uptake from partner countries to address the China problem using a measure like thatthan some of these other sort of unilateral US statutes that we're talking about.

(37:47):
Although it's worth mentioning that in mid 2024, Canada applied duties to imports ofsteel, aluminum, EVs, batteries, a few other products under their sort of analog to the
Section 301 statute.
So there is unilateral action there, but in a larger WTO context, it seems like peoplewant to operate as a group.
Although I'm not sure that anyone believes that WTO is any longer relevant, not sure thatthat's going to be very attractive to the administration.

(38:14):
But let's do the bottom line here on this discussion.
Very interesting deep dive into all these sections 232, 301, 338.
But if I were to summarize it, it sounds like even if the Supreme Court rules tomorrow andinvalidates IEAPA, what I'm hearing you both say is that A.
We have other tariffs, first of all, existing obviously 232 and 301 tariffs will remain.

(38:39):
Two, we have other 232s that are sitting on the shelf waiting for a decision that could bedone in a matter of days or even hours that could be introduced to compensate at least for
some of the IEAPA tariffs.
And then we have the 338 that John also believes can be used quickly up to 50 % tocompensate for the IEAPA tariffs.

(39:01):
So.
The bottom line sounds like that importers and our trading partners should not becelebrating that this is the end of the reciprocal tariffs because the administration has
many other options, including new investigations on 232 and 301 that they could kick offand accelerate to try to compensate for that authority.
Is that about right?

(39:21):
I think so.
I think that the scope of the new tariffs could change and some industry sectors maybenefit from that or not benefit from that.
But on net, I think we end up in a very similar place.
And so I wouldn't go out and shift supply chains just yet because I think that there's alot more to come on this.

(39:47):
The one thing I'd add actually two very interestingly in July of this year, USTR initiateda Section 301 investigation on Brazil.
So the specific acts, policies and practices that USTR is investigating relate to digitaltrade.
unfair preferential tariffs, anti-corruption enforcement, IP protection, treatment of USethanol exports, and illegal deforestation.

(40:07):
At the time, I and a few others viewed that as a potential template for how USTR couldtake a country-specific 301 action that's quite broad, get to some potentially high
tariffs in the long run, and to kind of replace, i.e.
the duty should the court rule against them.
So that Brazil investigation is quite interesting.
Secondly,

(40:28):
Has it been completed?
What's the time frame on that?
It's underway.
It has not been completed.
But secondly, and again, back to something that Sarah mentioned, it's really helpful whenyou think about US negotiating counterparties.
They're looking at their export profiles to the United States and thinking about, are mykey goods still in the IEAPA lane or are they in the 232 lane?

(40:48):
Are they shifting?
Because
If you see your exports in the 232 lane, you might on balance be a little less willing toengage in negotiations that are based on the IEAPA duties.
And you might also think, well, if my key exports eventually fall into the 232 lane, Icould reasonably assume that those duties are probably pretty durable, or at least more

(41:11):
durable than duties under IEAPA.
So.
The tariff treatment of your key exports is a key piece of information that informs howyou negotiate vis-a-vis the United States.
Well, fascinating discussion.
You're not going to get this depth of trade talk, I think anywhere else.
So please come to Silverado, reach out to us if you want to have private conversations onthis topic, if you're interested in learning more.

(41:33):
And thank you both for joining us.
And I guess we shall see when the Supreme Court rules, how it rules and what theadministration is going to do next.
But bottom line,
Don't celebrate just yet if you're an importer or if you're a country that thinks thatthose tariffs are gonna go away.
The administration has many more cards up its sleeve.
Thanks so much.
Thank you.
Thank you.