US Economy

Five tools that would let Trump follow through on his tariff threats

Trump's tariff threats

The U.S. Constitution gives Congress the power to regulate commerce and impose taxes, but if companies think Donald Trump won't have the power to impose tariffs on his own, they should think again.

The president-elect has repeatedly said he could impose tariffs or other taxes on imports into the United States, and on Sunday he again warned U.S. companies about repercussions they'll face for shipping jobs or operations overseas.

TWEET: The U.S. is going to substantially reduce taxes and regulations on businesses, but any business that leaves our country for another country,

TWEET: fires its employees, builds a new factory or plant in the other country, and then thinks it will sell its product back into the U.S. ......

TWEET: without retribution or consequence, is WRONG! There will be a tax on our soon to be strong border of 35% for these companies ......

TWEET: wanting to sell their product, cars, A.C. units etc., back across the border. This tax will make leaving financially difficult, but.....

TWEET: these companies are able to move between all 50 states, with no tax or tariff being charged. Please be forewarned prior to making a very ...


Many have dismissed the president-elect's remarks as hollow rhetoric, but President Trump will have legal means to follow through on his threats, often with only weak checks from the courts.

Retaliation against 'unreasonable' practices

The first three tools at his disposal lie in one section of the Trade Expansion Act of 1962 and two sections the Trade Act of 1974, the Peterson Institute said in a September report.

Section 232(b) of the Trade Expansion Act of 1962 allows the executive branch to raise tariffs or regulate imports to fortify national security following an investigation. "Conceivably a President Trump could instruct his officials to investigate the national security implications for the US industrial heartland resulting from thousands of Chinese and Mexican imports. Without exception, the courts defer to executive branch determinations of national security. Hence, following such an investigation, it is conceivable that President Trump could impose high tariffs on wide swaths of imported merchandise," the report said.

A large part of Trump's economic platform revolves around bringing back manufacturing jobs that have gone to other countries, as well as doing away with what he has called "unfair" trade deals, such as NAFTA, a trading accord reached between the U.S., Mexico and Canada in 1994.

Section 301 of the Trade Act of 1974 lets the president impose retaliatory tariffs if the U.S. Trade Representative determines a country is "denying the United States its rights under a trade agreement or is carrying out practices that are unjustifiable, unreasonable, or discriminatory and burden or restrict US commerce," according to Peterson.

Separately, section 122 of the same law gives the president the power to impose a tariff as high as 15 percent for up to 150 days without an investigation.

There are two other pieces of legislation available to Trump: the Trading with the Enemy Act of 1917 and the International Emergency Economic Powers Act of 1977.

The former grants the president the authority to seize and freeze foreign assets "during the time of war," while the latter is meant to be exercised during an "unusual and extraordinary threat."

"But the courts have never questioned presidential declarations of a 'national emergency,' so precedent seemingly gives President Trump a free hand," the report said.

Trump's rhetoric around tariffs has raised questions about the possibility of a trade war brewing between the U.S. and some of its largest trading partners, particularly China. As of the end of 2015, the U.S. trade deficit with China totaled more than $367 billion and nearly $61 billion with Mexico, according to data from the U.S. Census Bureau.

"If the Trump administration decides to play by the rules of the [World Trade Organization], then we will avoid a trade war. If the administration decides not to play within the rules, then that is much more dangerous," said Edward Alden, senior fellow at the Council of Foreign Relations. "We'll have to see what happens."

The Trump transition team did not immediately respond to a CNBC request for comment.