The Supreme Court’s Invisible Power in U.S.-China Relations

The United States’ trade war with China first erupted in July 2018 when former President Donald Trump began imposing tariffs on Chinese imports, inciting reciprocal tariffs by China. During his 2016 campaign, Trump said China had committed “the greatest theft in the history of the world,” accusing China of manipulating its currency, stealing intellectual property, manufacturing jobs, and forcing technology transfers. He blamed China for America’s trade deficit of $346 billion in 2016.

In 2019, Trump raised tariffs on Chinese imports multiple times after trade negotiations failed. Aiming to hurt Huawei’s business, Trump also prohibited U.S. corporations from using foreign-made telecommunication systems. In retaliation, China increased tariffs on American goods. Although an initial trade agreement was reached in 2020, which involved easing U.S. tariffs, holding China to buying $200 billion worth of American goods, and requiring that China implement intellectual property rights, most tariffs continued. For the remainder of his presidency, the Trump administration persisted under the assumption that China was a threat. For instance, the Commerce Department added various Chinese companies to the trade blacklist, and the White House used an executive order to ban investments in Chinese companies connected to the People’s Liberation Army. 

Even though President Biden widely opposed Trump’s harsh trade policy while campaigning, the Biden administration has kept Trump’s tariffs in place indefinitely. Such bipartisan support insinuates that the U.S. government considers China a growing threat that demands additional supervision and control; imposed tariffs on Chinese goods provide the necessary leverage to the U.S. in negotiations with its economic rival.

America’s prolonged trade war has also seen contention within U.S. borders for its toll on American consumers and businesses. Tariffs lead to inflation and minorly decrease corporate profits, raising prices for customers. In addition, thousands of U.S. companies have sued the U.S. government for escalating unbounded tariffs on Chinese imports, “impacting billions of dollars in goods imported.” In 2020, Tesla filed a lawsuit in the U.S. Court of International Trade over the Trump administration’s tariffs on its electric car parts manufactured in China. Tesla hopes the court rules against the government’s List 3 and 4 tariffs issued in 2018 and 2019 — its second two sets of tariffs — refunding Tesla its payments. Various other large corporations, such as Target, Home Depot, and Peleton, have sued for similar reasons. While it is rare that a lawsuit succeeds against the federal government, the large volume of companies suing — in the thousands —  may bolster the lawsuit’s slim chance of success.

From a legal standpoint, do these companies have a fair point? Did Trump’s enactment of the List 3 and 4 tariffs comply with U.S. trade laws? This question has been at the center of debates. The U.S. Constitution declares that the power to impose tariffs primarily lies with Congress; however, the legislature has since passed the Trade Expansion Act of 1962, the Trade Act of 1974, and the International Emergency Economic Powers Act of 1977, authorizing the president to act in situations when timely trade decisions are necessary, such as during war or in response to security threats. Section 301 of the Trade Act of 1974 permits the executive branch to “[impose] trade sanctions on foreign countries that violate U.S. trade agreements or engage in acts that are ‘unjustifiable’ or ‘unreasonable’ and burden U.S. commerce.” Despite the fact that Trump’s initial tariffs responded to China’s unfair market practices, which hurt U.S. jobs, many argue that his List 3 and 4 tariffs were illegal; suing companies such as Disney and Walmart suggest that Trump’s later tariffs were, rather, “a response to China’s retaliatory trade actions and other policies.” They argue that the Trade Act did not permit Trump to expand his initial tariffs into a full-fledged war with China. I agree.

The Office of the U.S. Trade Representative’s 2018 ruling declared that the “acts, policies, and practices of the Chinese government related to technology transfer, intellectual property, and innovation are unreasonable or discriminatory and burden or restrict U.S. commerce.” In turn, I argue that Trump’s 2019 List 1 and List 2 tariffs, on $50 billion in Chinese goods, were in accordance with Section 301 of the Trade Act, as Trump preached himself. However, the nature of Trump’s next set of tariffs was more questionable. Directly after China imposed retaliatory tariffs on U.S. imports, Trump added additional List 3 and List 4 tariffs on China, using Section 301 as a defense. He escalated tariffs to cover an additional $320 billion additional dollars of Chinese goods, prompting a myriad of companies to justifiably sue. In essence, if China had not retaliated, Trump likely would not have exponentially increased U.S. tariffs. 

Due to the plethora of companies that have sued on similar grounds, the Supreme Court will likely have the final say in the future of the U.S. trade war with China, even though its power is widely unnoticed in this ongoing debate. In response to thousands of lawsuits, the U.S. Court of International Trade established a panel to address the suits and find a “lead case” or craft a “master case” that incorporates overlapping claims. Given the thousands of players and the large sum of money involved, it is likely that the CIT’s ruling will ultimately be appealed to the Supreme Court. Finally, the Supreme Court will decide how expansive the executive branch’s trade authority is, setting the precedent for future U.S. tariffs and, possibly, requiring the Biden administration to amend its trade policy.