Over time, Congress has delegated the authority to raise or lower tariff rates when certain conditions are met to the President. Until recently, most Presidents used this delegated authority sparingly.

However, under President Trump, tariffs are a cornerstone of his economic agenda, and he is making frequent use of this delegated authority. In fact, President Trump is promising to announce imposition of reciprocal tariffs against a wide swath of countries on April 2, a date the President calls "liberation day." While the White House is still deliberating on exactly how it will implement President Trump's April 2 tariff plans, they could be highly disruptive with wide ranging effects on the US and global economy.

What legal authority is used?

The administration asserts that a more reciprocal trade policy will help reduce the trade deficit, strengthen the US economy and enhance national security by addressing long-standing imbalances. However, this approach presents significant challenges, both legally and practically. Historically, tariff rates have been set among countries through multilateral negotiations under frameworks like the General Agreement on Tariffs and Trade (GATT) and later the World Trade Organization (WTO), or by negotiating preferential tariff rates with one or more of a small group of countries as was done under the US-Mexico-Canada Agreement (USMCA).

This will be the first time that any recent president unilaterally imposes reciprocal tariff rates on a broad range of countries. What delegated legal authority the president uses will be telling.

To date, the president has relied upon several key statutes to impose tariffs: the International Economic Powers Act (IEEPA); Section 232 of the Trade Expansion Act of 1962; and Section 301 of the Trade Act of 1974. All of these tariff authorities have been delegated to the president over time for different purposes.

IEEPA is a broad grant of authority that empowers President Trump to declare national emergencies and respond quickly by executive order through economic means, including import regulation. IEEPA is the authority that President Trump used in February to declare a national emergency related to illicit drugs and impose a 25% tariff (10% on energy products) on Canada (now exclusive of USMCA-compliant imports), a 25% tariff on Mexico (also exclusive of USMCA compliant imports) and an additional 10% (now 20%) on China.

If President Trump uses IEEPA authority to impose reciprocal tariffs it will signal rapid execution, while providing maximum flexibility to the president. Legal challenge would be likely, as this broad use of IEEPA authority is unprecedented.

It is unlikely that President Trump will use Section 232 to impose reciprocal tariffs, a statute which authorizes the president to adjust imports if, after an investigation, the Department of Commerce finds that certain products are imported into the US in such quantities or under such circumstances as to threaten to impact US national security. This is the statute President Trump used to impose 25% tariffs on imports of steel and aluminum into the United States.

Section 232 investigations are sector specific and thus may lack the flexibility needed to impose reciprocal tariffs on a wide range of countries. However, the president could use Section 232 to impose tariffs on products such as automobiles, pharmaceuticals or semiconductors alongside imposition of reciprocal tariffs under another statute.

Section 301 of the Trade Act of 1974 is a strong candidate for reciprocal tariffs. Section 301 authorizes the imposition of a broad range of actions, including tariffs, to respond to unfair trade practices. This is the authority that President Trump used during his first term to impose multiple tranches or tariffs on China, most of which are still in effect.

If the president uses Section 301 as the foundation of his reciprocal tariff plan, it most likely will signal that reciprocal tariffs are more likely to be focused on a narrower group of countries, rather than globally, as it would be administratively difficult, if not impossible, to simultaneous engage in 301 investigations against every nation in the world. Use of 301 would also signify a more formal legal process is underway, possibly providing greater legal durability, as well as the potential for the ability and time for targeted countries to negotiate.

Two other statutes could be candidates for President Trump's reciprocal tariff plan: Section 122 of the Tariff Act of 1974 or Section 338 of the Tariff Act of 1930. Section 122 permits the president to impose import measures, including an import surcharge up to 15% ad valorem for up to 150 days, to address balance of payment deficits between the United States and other countries. Section 122 is a strong possibility, as it can be applied globally, but also allows the president to focus on one or more other countries. If the president uses Section 122, it signals more focus on deficits than unfair trade practices, though it could potentially address both through country specific negotiations.

Section 338 permits the president to implement "new or additional duties" against imports originating from or imported on a vessel of any country that he finds either (1) imposes "any unreasonable charge, exaction, regulation or limitation" on US goods that are not equally applied to articles from other countries, or (2) otherwise discriminates against the commerce of the United States.

Section 338 has been rarely used, and its legal standing is untested. Thus, while it could be a good candidate for reciprocal tariffs, its use would likely be challenged in court. Use of Section 338 by President Trump as the foundation for reciprocal tariffs would demonstrate his further commitment to using every available tool to test the limits of congressionally granted authority.

How will Congress and the market react?

Given that Congress delegated the authority to impose tariffs to the President, how Congress reacts to the president's unprecedented use of delegated tariff authority will be key. To date, while some lawmakers have pushed for greater oversight, Congress' ability to block the tariffs is limited unless there is a strong bipartisan effort to change the law to reclaim its trade authority or limit its use. This seems unlikely.

Thus far, Congress' reaction to the tariffs and President Trump's proposal to impose reciprocal tariffs has been muted. While some Republicans and Democrats have raised concerns that higher tariffs will lead to inflation, others support the initiative as a way to protect American industries and reduce the trade deficit.

Markets have reflected with uncertainty as businesses brace for potential supply chain disruptions and higher costs. Many multinational corporations, especially in sectors like automobiles, consumer electronics and agriculture, fear that the tariffs will lead to retaliation from trading partners, making US exports more expensive and less competitive abroad.

Additionally, Wall Street analysts have expressed concerns about how the plan could lead to inflationary pressures, particularly if retaliatory tariffs affect imported raw materials used in US manufacturing. These concerns and the expected fallout from retaliatory actions exerts additional pressure on lawmakers. To date, however, the Trump Administration appears willing to tolerate potential negative market reaction in order to implement its strong tariff policy.

Prognosis: Buckle up and be prepared

The path forward following April 2 "liberation day" will be rocky and uncertain. How the tariffs are implemented and at what rate will provide clarity to this murky outlook. One thing is certain: Higher tariffs are coming. Businesses and stakeholders must prepare to navigate this increasingly complex and unpredictable trade landscape by proactively developing internal strategies to mitigate potential business impact. Either way, be ready for unexpected outcomes.