Economic hot topic Q&A | Why are US tariffs plagued by lawsuits
The US government has been sued again.
On August 3rd, 25 states in the United States filed a joint lawsuit with the United States International Trade Court, requesting a ruling that the tariffs imposed by the US government on 60 countries and regions on the grounds of so-called "forced labor" are illegal and should be abolished. Previously, several American companies have filed lawsuits against this new tariff measure, requesting the court to set aside or revoke the relevant measures.
The new tariff measure proposed by the United States on July 23 is based on Section 301 of the 1974 Trade Act and is considered by analysts to be an alternative measure to expired global import tariffs. The global import tariffs themselves are also an "alternative solution" introduced by the US Supreme Court after ruling that the US government's large-scale imposition of tariffs under the International Emergency Economic Powers Act is illegal.
The United States has been embroiled in lawsuits due to excessive tariffs. Has the US government exceeded its authority? Why do state governments and businesses insist on litigation? Can US domestic law override international law?
Has the US government exceeded its authority
The main controversy surrounding the US government's new tariff measures is whether the government has abused Section 301.
Section 301 allows the US government to impose tariffs on so-called 'unfair trade practices'. The terms stipulate that when the Office of the United States Trade Representative determines that a trading partner has engaged in activities such as restricting US market access or infringing intellectual property rights, it may initiate an investigation and take retaliatory measures.
Many American companies and state governments believe that the US government and president have not been authorized to expand legal tools targeting specific trade practices into universal taxation of global trading partners, and cannot allow bill provisions used for "case handling" to have "global coverage".
The US Constitution stipulates that the power to impose tariffs belongs to Congress. Congress can authorize the President to formulate and implement trade policies through legislation. The relevant provisions in laws such as the 1974 Trade Act and the International Emergency Economic Powers Act belong to this category.
Related companies and state governments believe that the US government is using these laws to achieve policy goals beyond the scope authorized by Congress. Analysts say that if the president uses trade laws to implement widespread taxation, it would mean gaining near unrestricted taxation power and changing the trade power distribution structure established by the US Constitution.
Multiple state attorneys general have stated that the Office of the United States Trade Representative has repeatedly sought new evidence for tariff policies that have been denied by the Supreme Court under the guise of "forced labor" and conducting "false investigations".
Why do companies and state governments sue
US companies and state governments suing the US government is not just a legal dispute, but also has practical economic considerations.
Nobel laureate in economics and American economist Joseph Stiglitz recently published an article on the World Press Syndicate website, pointing out that the US government's attempt to seize more value in the global supply chain will ultimately harm the US economy. This' distorted tax 'comes at the cost of sacrificing the interests of American consumers and weakening American competitiveness.
Multiple studies have shown that for American companies that rely on imported raw materials, components, and consumer goods, high tariffs mean higher costs. The US business community has repeatedly warned that excessive tariffs will ultimately be passed on to consumers, exacerbating inflationary pressures. The National Retail Federation and other organizations in the United States have estimated that the imposition of tariffs could bring tens of billions of dollars in burden to consumers and businesses.
Not only enterprises, but also state governments in the United States are facing increasingly high operating costs, from public procurement to infrastructure construction, from government operations to local development. At the same time, many Americans are concerned that the government's frequent imposition of tariffs will continue to weaken the credibility of the United States in the global trading system.
Attempting to override international law
A country may enact its own laws, but it cannot override international rules with domestic laws. The frequent use of domestic laws by the US government to impose tariffs is not only questioned in the domestic legal system, but also completely violates its own recognized and participated international trade rules system.
Taking the controversial "301 clause" as an example, the European Union had already requested consultations with the World Trade Organization (WTO) regarding this clause as early as 1998. The EU stated at the time that the "301 clause" grants the United States the power to unilaterally impose trade sanctions, which violates the obligation of WTO members to handle trade disputes through multilateral dispute settlement mechanisms.
The WTO has established an expert group to review this case. The US government has promised during the review that it is willing to use multilateral dispute settlement mechanisms in matters related to the WTO and will not unilaterally retaliate until it obtains WTO approval. At that time, the expert group explicitly warned that if the United States violated or withdrew its commitments, it would directly constitute a violation of WTO rules and would be held responsible. However, the WTO Appellate Body came to a halt in December 2019 due to the United States' continued obstruction of the selection of judges.
Some economists point out that the United States is attempting to strengthen its own interests through unilateral tariffs, but this approach is driving other economies to seek more diverse trading partners, more stable supply chain systems, and more balanced international economic and trade rules.