What is the likely future for Trump's tariffs?

Alan Wm. Wolff (PIIE)
Date July 29, 2025 11:48 AM
Photo Credit: Sipa USA/Corine Solberg

• When does the current US protectionist trade regime return to what it was prior to the Trump and Biden administrations? 
• What was largely normal for the United States until 2017 had been in place for most of the prior 80 years. It was a trading system credited by most economists with helping the United States create and maintain the modern, largely open, world economy. 
• How is the return to more outward looking, open trade policy to be achieved? Will the rollback of tariffs be achieved through the courts, the Congress, through multilateral or bilateral negotiations, or through a unilateral rollback under a newly elected US administration?

This essay speculates about a possible future for the multiple new tariffs that President Donald Trump has imposed since taking office for his second term.

The road back will be long, difficult, and uneven, but efficiency eventually will win out over protectionism, as it did once before. This time the triumph of efficiency should be achieved without coming at the expense of the welfare of workers. Policy in the future will, it is to be hoped, soften the impact of disruptive change.

The judicial process

The Federal Circuit will affirm the decision of the Court of International Trade (CIT) declaring the new tariffs illegitimate. On May 28, the CIT flatly rejected the notion that the Trump "Liberation Day" tariffs were authorized. Its decision was based on the Constitution, statutes, and prior cases, in a full and well-reasoned opinion that the president lacked the authority to impose these tariffs. The Federal Circuit, with all 12 judges sitting for the appeal, will, it is expected, soon fully endorse the view that the president acted beyond his power. However, it is likely to leave open a door allowing presidents to use tariffs to regulate trade, at least selectively, in future cases of presidential findings of emergencies. After the Federal Circuit issues its opinion, the Supreme Court will permit the tariffs to stay in place pending the Court hearing argument on an appeal from the administration.

The Supreme Court, as politically attuned as it is, will side with the president, probably by a 6-3 vote. The context for this likely decision is that Trump was elected based on stating that he would impose broad tariffs on all imports and targeted tariffs against China. It was not a side issue in the last presidential election; it was central to the president's platform. The result of the US election, like the UK's Brexit vote, was not binding in a legal sense but was nevertheless dispositive of the way that events would unfold. How will the Supreme Court reach a different result from the lower courts? On the law as they see it, the justices may well find that the president's foreign affairs power came into play, at least when other sovereigns—e.g., the UK, Japan, EU, etc.—reached agreements with the United States, in effect ratifying his actions. Equally the Court may find that an emergency that was not apparent while it was developing, for example bilateral trade deficits and unfair trading practices, can be found to exist when the level of concern rises sufficiently (the frog was beginning to get boiled). The Court may therefore find that the statutory test is met, that the president could find that trade deficits and unfair foreign trade practices had cumulatively become an "unusual and extraordinary threat, which has its source in whole or substantial part outside the United States, to the national security, foreign policy, or economy of the United States," providing the basis for presidential action. It is likely also to reject the notion that there is no tariff authority to be found in the International Emergency Economic Powers Act (regardless of circumstances), as determined by the DC District Court in a parallel case to the CIT/Federal Circuit case.

We should not be surprised at the Supreme Court's likely decision. Recall that the majority on the Court led by Chief Justice John Roberts has forged new law repeatedly not anchored in the Constitution or precedent. The Roberts Court has found that the president is immune from any criminal liability for any action taken in the course of conducting the business of government; it has found that any amount of cash contribution to a political campaign is an expression of free speech by corporations and unions as it is for individuals; it has found that anyone can as a constitutional right possess an arsenal of assault rifles; it has found that the right to privacy does not extend to questions of pregnancy; and it has found that Federal agencies are not due deference on interpretation of their legislative mandates. In short, precedents have not counted as much as, what critics would say are, policy judgments made by the justices.

The Congress

The Democrats will likely take control of the House in January 2027 (and at some point, the Senate). They will have been elected on a platform of rejecting indiscriminate tariffing as a presidential prerogative. The Congress will reassert itself as the branch of government under the Constitution to regulate commerce. The Democrats will be joined in this process by the remains of the centrist Main Street Republicans moving toward less protection.

There will not be a complete and early reversion to a very low US tariff, as established by past trade negotiations. The Congress and any new president will more likely than not leave the newly negotiated bilateral agreements in place, perhaps at a phased down tariff rate. To do otherwise would again abruptly change the rules governing trade and upset some domestic constituencies. Maintaining at least some of the status quo is in line with Biden leaving Trump's first term tariffs in place on imports from China. Even though tariffs will have become a major Federal budget revenue item, the Congress may well repeal or ameliorate the unilaterally imposed blanket tariff of 10 or 15 percent on those exporting countries without negotiated agreements but leave open the possibility of its selective reinstatement by country and by product sector, depending on presidential findings of foreign unfair trade practices. A margin of discrimination against Chinese imports is likely to be maintained until more convergence in policy is achieved with that country.

The Congress thought it had limited in the 1970s the president's discretion to impose tariffs. It had repealed peacetime use of the Trading with the Enemy Act (the authority for Nixon's temporary 10 percent import surcharge), regulated the duration of national emergencies, and provided a means to end national emergencies under the National Emergencies Act of 1976. It created more limited authority in the International Emergency Economic Powers Act of 1977 (IEEPA). It has been more careful to spell out the use of other delegated tariff authorities, such as balance of payments authority (section 122 of the Trade Act of 1974), trade retaliatory authority (section 301), and national security measures (section 232 of the Trade Expansion Act of 1962), although these statutes need further congressional review. Its restrictions on grants of delegated authority to the president will eventually be clarified.

The Congress may well restore the essence of the Reciprocal Trade Agreements Act of 1934 and prior trade promotion authorities, giving an expedited means for the president to reduce tariffs in return for trading partners not resuming or abandoning engaging in what are deemed unfair or otherwise harmful trading practices.

Trade negotiations

The last two rounds of multilateral negotiations under the General Agreement on Tariffs and Trade (GATT) yielded the trading system as we know it today, administered by the World Trade Organization (WTO). The Tokyo Round, 1973–79, began to come to grips with the reduction of nontariff barriers (NTBs). The Uruguay Round, 1986–94, addressed, among other things, agricultural trade, trade in services, and intellectual property protection, and created the WTO. These two most recent completed rounds of negotiations were both stimulated by US leadership and aggressive US trade policies. The Tokyo Round stemmed from the United States demanding unilateral trade liberalization from its trading partners following a short period during which the Nixon 10 percent import surcharge was in place (August 15 to December 18, 1971). The Uruguay Round was motivated, to a substantial degree, by America's trading partners seeking to curb US unilateralism in the form of US use and threats of trade retaliatory measures under section 301 of the Trade Act of 1974. These GATT negotiating rounds were the capstones of an era of American leadership in trade liberalization that began post WWII in 1948 and continued through the trade frictions of the 1980s and early 1990s, largely with Japan and the European Union.

It will not take 50 to 80 years to bring the tariffs down toward zero again, as it did during the GATT era. It should not take longer than 10 to 20 years to achieve this objective. America's trading partners will not have raised their bound tariff rates. The only question will be what it will take for the United States to reduce the height of its newly acquired tariff wall. Negotiations likely will also address adding more robust disciplines on other forms of trade distortion. These areas should, and likely will, include industrial policy measures and subsidies, as well as achieving disciplines on artificial intelligence (AI), opening markets to digital trade, and dealing with other challenges in which trade must play a role, such as climate change and pandemics.

Trust will be rebuilt in the new trading system, allowing a return to the certainty of contractual commitments and trade liberalization. The path back will be joined in by all, even China. The way forward will have been blazed by the Comprehensive and Progressive Agreement for Trans-Pacific Partnership–EU entente joined in by many others and ultimately the United States. This will be the landing zone for international economic cooperation. The GATT and the WTO will not in the end prove to have been aberrations, but end points dictated by the economic and political truths that provide the foundation for international cooperation.

Data Disclosure

This publication does not include a replication package.