Goldman, Morgan Stanley Say Trump Can Deploy Other Tariff Tools

Two of Wall Street’s top investment banks cautioned that the impact of a court ruling striking down many of President Donald Trump’s tariff measures may prove limited, given that the administration has other avenues to impose import duties.

“The tariff levels that we had yesterday are probably going to be the tariff levels that we have tomorrow, because there are so many different authorities the administration can reach into to put it back together,” Michael Zezas, Morgan Stanley’s global head of fixed income and thematic research, said on Bloomberg TV Thursday.

Goldman Sachs Group Inc.’s Alec Phillips wrote in a note to clients late Wednesday that “this ruling represents a setback for the administration’s tariff plans and increases uncertainty but might not change the final outcome for most major US trading partners.” 

The judgment by the US Court of International Trade halts 6.7 percentage points of levies announced this year and the White House could use other tariff tools to make up for that, wrote Phillips, Goldman’s chief US political economist. “For now, we expect the Trump administration will find other ways to impose tariffs.”

Zezas had a similar assessment.

Trump’s power to “raise and escalate — it might be a little bit slower moving, but it is still there.” Talks with countries such as Japan were always likely to take time, he said. And while they proceed, the administration would be able to “stitch together that authority on the other tariffs that went away — so all the same leverage is effectively there during the negotiation.”

For now, the White House is signaling it’s not planning to proceed with other tools.

“There are different approaches that would take a couple of months” to put in place, Kevin Hassett, director of the National Economic Council, said on Fox Business Thursday.

Hassett said those would include “procedures that have been approved in the past or approved in the last administration. But we’re not planning to pursue those right now because we’re very, very confident that this really is incorrect.”

Alternatives include the use of Section 232 levies, referring to the charges on steel, aluminum and auto imports on national security grounds. If all the pending investigations result in 25% tariffs and are added to current levies under the section, that would add 7.6 percentage points alone, according to Goldman.

The trade court in Manhattan, siding with a group of small businesses and Democratic-led states, ruled on Wednesday that Trump wrongfully used an emergency law to impose tariffs on global trading partners. A panel of three judges gave Trump’s team 10 days to halt tariff collection in a decision that the White House has already appealed.

Trump has other options at his disposal to impose levies. He could apply Section 122 tariffs of up to 15% for 150 days or initiate investigations under Section 301, though those would take longer to implement.

Goldman’s Phillips said he doesn’t expect the court’s decision to have a major impact on the fiscal package in Congress, “as tariff revenue was never counted toward offsetting the cost of the package, and most lawmakers never made a clear link between the two issues.”

However, he said the tariffs the court struck down were likely to raise almost $200 billion on an annual basis, approximately the amount the fiscal package would increase the deficit next year and more than the impact in following years. “For now, we expect the Trump administration will find other ways to impose tariffs, so we still expect most of this revenue to materialize.”

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