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That was quite the shock. Wednesday’s ruling from the Court of International Trade saying Donald Trump had wrongly used the International Emergency Economic Powers Act to slap tariffs at will on trading partners seems to the layperson no more than common sense.
But given the extent to which courts generally defer to the executive on national security issues, it’s a dramatic and largely unexpected interruption to one of his most elemental policies.
This is of course very much not the end of it. The so-called section 232 tariffs on cars and steel are unaffected by the ruling. Trump will appeal this decision to the federal circuit court; beyond that he has a pliant Supreme Court waiting for him if need be; there are other obscure pieces of decades-old legislation he can dust off to resume his tariff campaign. But it does underline that his trade policy is not just ludicrous in substance but vulnerable to events, be they the courts or the financial markets, or in this case the two contriving to work in tandem. Equity futures duly shot higher as the decision was announced.
The court’s timing is accidentally superb. It comes as the EU has entered an intense stage of talks with Trump. Brussels is trying to avoid a 50 per cent general tariff that the president threatened them with on Friday unless they did a trade deal by June 1. After a conversation with European Commission president Ursula von der Leyen at the weekend, the president postponed the day of reckoning to July 9.
Did Trump blink by moving back the deadline or did von der Leyen flinch by agreeing to intensify talks? Perhaps both. Trump marching his tariff troops to the top of the hill and down again is now a familiar manoeuvre, especially as he initially claimed on Friday he did not want a deal with the EU. His response to the idea of the Taco (“Trump always chickens out”) trade, based on his always backing off from tariff rises because of adverse financial market movements, does not stop it being true.
Still, Trump’s threat did force Brussels to engage properly and apparently prepare a retreat rather than standing aloof from talks with theatrical disdain. The FT reports that the commission has planned to drop its insistence on Trump abolishing the 10 per cent baseline “reciprocal” duty — in any case now invalidated by this court ruling — and instead offer unilateral concessions. Von der Leyen has come under pressure from EU governments, particularly Italy, whose Prime Minister Giorgia Meloni’s electoral base is in the country’s export-oriented industrial north.
On grounds of credibility and substance, including the implications for what remains of the rules-based global trading system of which it is a self-styled guardian, it would be a dire outcome for the EU if a deal with Trump ended up looking anything like his flimsy stop-gap agreements with the UK or China. Having criticised the UK for its nonbinding deal — there is still no target date for the US to remove the steel and car tariffs the UK supposedly negotiated away — the EU would look ridiculous making unilateral concessions in a pact with no legal standing.
The court ruling provides an excellent opportunity for the EU to regroup, screw up its courage and recognise that Trump is far more vulnerable than his bluster suggests. Better defiance than trying to protect the soft underbelly of the bloc’s member states and big exporters, who instinctively prefer to smudge the bright lines of international trade law rather than allow their sales abroad to be harmed.
Bigger things are at stake than exports of handbags and cognac, or even cars. The EU was always destined to be Trump’s hardest negotiating partner. Former Trump administration officials say the EU embodies everything the president instinctively dislikes: woke liberalism, an attachment to process and supranational rules and a failure to bow to the raw power of US supremacy. To be fanciful for a moment, you might even see von der Leyen’s EU versus Trump’s US as an elemental clash of order against chaos or right against might.
The court ruling will at the very least create weeks or months of chaos and confusion as Trump’s administration flounders around trying to regain its tariff powers while the financial markets threaten to remind him of the folly of doing so. The best thing for the EU and the world trading system would be for Brussels to eschew all talk of unilateral concessions and at the most insist only on meaningful reciprocal agreements on products like cars, while occasionally pointing snidely at the markets and signing deals elsewhere.
A long-delayed trade agreement with the South American Mercosur bloc, for example, awaits ratification. Let Trump rage against judges and fret about the Treasury market while the rest of the world gets on with trading.
Trade negotiations are frequently as much about struggles between domestic constituencies as between countries. A weak deal with Trump driven by expedient mercantilism among EU governments would suggest the bloc cannot make the necessary sacrifices to become a heavyweight geopolitical power that upholds the rule of law. Recently that ambition took another knock with the EU restricting imports of grain, poultry and sugar from Ukraine at the behest of Polish and French farmers, despite the imperative of backing its neighbour and aspirant member against Russian aggression.
The rest of the world should hope that the EU, of all trading powers, can stand up to Trump. European governments have long wanted to assert global leadership. They have declared the “hour of Europe” before and then failed. Trade is one area where the EU indisputably has the legitimacy to act collectively and the size and economic resilience to resist Trump’s bullying. The US Court of International Trade has given Brussels an excellent opportunity to do so. It should take it.
alan.beattie@ft.com
