By Brooke Thomson
President and CEO

Companies attempting to formulate a strategy to deal with President Trump’s tariffs on imports suffered a severe case of whiplash during the past two weeks.

On May 28, a federal court in New York ruled that the administration does not have the authority to levy the tariffs under the 1977 International Emergency Economic Powers Act (IEEPA). The U.S. Court of International Trade, ruling in separate cases brought by five small businesses and a coalition of 12 states, found that federal law did not grant the administration “unbounded authority” to impose tariffs.

Less than a day later, the U.S. Court of Appeals for the Federal Circuit issued an order staying the trade court’s ruling while it considers motions from both sides. The administrative stay did not rule on the merits of the litigation. It ordered the plaintiffs in the case to file a response by June 5, and the government to reply by today.

Just in case, the administration is exploring other legal avenues to impose tariffs, including a provision of the Federal Trade Act that may allow levies up to 15 percent to 150 days to address trade imbalances with other nations.

The whipsaw continued last week when the president signed an executive order doubling tariffs on the imported steel and aluminum used by many Massachusetts manufactures on everything from auto parts to medical devices. Imports of both metals now face a 50 percent tax.

What does this mean for hundreds of AIM members affected by the tariffs that have either been imposed or put on hold during the past several months? It’s impossible to tell – and that’s why the watchword for now is caution.

The background: President Trump on April 2 imposed so-called reciprocal tariffs of up to 50% on countries with which the United States runs a trade deficit and 10% baseline tariffs on almost everybody else. He later suspended the reciprocal tariffs for 90 days to give countries time to agree to reduce barriers to U.S. exports. But he kept the baseline tariffs in place. Claiming extraordinary power to act without congressional approval, he justified the taxes under IEEPA by declaring the United States’ longstanding trade deficits “a national emergency.”

The administration says the tariffs are critical to re-industrializing the country and to providing leverage for ongoing trade negotiations with individual countries.  Government lawyers in the Court of International Trade case argued that an adverse ruling could weaken the administration’s negotiating position and imperil ongoing talks.

But the levies also roiled financial markets, disrupted supply chains and drove a wedge through many long-standing relationships between AIM members and overseas markets.

America’s trading partners reacted carefully to both court decisions. Don Farrell, Australia’s trade minister told The New York Times that his country would “study this ruling” while noting that “they may be subject to further legal processes.” In Britain, a government spokesman said that the court ruling was a domestic issue for the United States and noted that this was only the first stage of legal proceedings.

The most important question now confronting AIM members at this juncture is whether the  Appeals Court or Supreme Court will ultimately overturn the Court of International Trade decision on the merits.

All that uncertainty underscores the need for companies to proceed with caution. Some companies may reassess the way they run their supply chains, perhaps speeding up shipments to the United States to offset the risk that the tariffs will be confirmed on appeal and re-imposed after 90 days. But the on-again-off-again pattern that has characterized the rollout of tariffs to this point is likely to continue through this next chapter.

In the meantime, experts urge companies to continue to foster relationships with international partners.

“Long term relationships are what matters. Continuing to work on these is actually very important,” says Nada R. Sanders, Distinguished Professor of Supply Chain Management at Northeastern University and a member of the AIM Board of Economic Advisors.

AIM will keep members updated as developments warrant.