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EP33: The Tariff Toolbox · Rittener Reflections

• jeff (00:00) Welcome back to Written Reflections episode 33. Today I am flying solo and in between the last episode on the World Cup and the next episode where I will explore the upcoming 2026 NFL season. But today is August 8th, and I will take us into the incredibly important, complicated, and sometimes confusing. Topic of tariffs. Now, over the last several months, I've had the opportunity of attending a number of networking events and conferences where I've met a lot of people. And invariably the question I get asked is, so what do you do now? And I will say, Well, I'm a consultant, I have my own company, Ritner Trade Services, and you know, I advise on international trade. And they'll look at me kind of quizzically and say, okay. And I can tell they don't quite understand what exactly I do. So then I say, Well, maybe you're familiar with the idea of tariffs. And I say that word tariff, and immediately their eyes light up and they have this funny look on their face, like, I understand. Wow, you must be busy. So when it comes to tariffs, everybody today understands. What this is. But they don't understand how it really works. You know, it has been one of the hottest topics since January of 2025 when the Trump administration began. In fact, I dedicated several earlier episodes to this topic. Back last year in episode five, I provided the rationale for the president's tariff strategy. You know, as described by Robert Leidhyser, who was the former USTR and the author of the book No Trade is Free. And also from the writings in Project 25 by Peter Navarro. Then episode six, I looked at the practical realities of managing Liberation Day tariffs, with a good friend and colleague from Intel Brian White. And then this year. In episode 25, I discussed with Beth Pride and Evelyn Bernal of BPE the Supreme Court ruling on AIPA and what importers could expect from a tariff refund perspective. But today I want to return to tariffs and I want to look inside what I call the tariff toolbox. Now, let me say as always. many of the things I say today in this episode, which is being recorded on August 8th, 2026, are time sensitive and may have changed by the time you listen or download this episode. So let's go ahead and start with this idea of a toolbox. Now I'd like to ask you, how many of you have a toolbox? Or perhaps a tool shed? Or tool drawer? Or maybe no tools at all. What about a tool you bought for one job and never used it again? I hate when that happens. Or a tool you pulled out recently and realized it still works, but only for certain tasks. I have all of the above, but I have a special toolbox that's pictured on the website. And it's special because it was given to me by my grandfather. My grandfather was a handyman. He also was a painter by trade. And he had lots of tools. And later in his life he was cleaning things up and he decided to give me his toolbox. if you notice the picture, it's a sturdy, strong metal box. And when I got that, I was a young man. I really didn't do a whole lot of projects that required tools, but I found it fascinating to have my grandfather's toolbox and I would open it and look in there, and there were lots of tools in there. I had no idea what many of them were for. And over the years, as I got older and began to have to use more tools, I would go in there and I'd find some tools that were useful, but many of them I had no idea what they did. And over time I eventually replaced them with Tools that I used, the tools that were relevant to what I was trying to do. But I still have the toolbox and it still holds a very special place in my life. but you know let's let's think about the tools for a second. They're they're quite interesting because many tools sit unused for years. You forget what half of them do. Some only work for very specific jobs, and we keep them, you know, just in case. Some were designed for a world that no longer exists. Like with my EV, I no longer need the gasoline can in my shed, nor the jumper cables. And sometimes you need a tool you don't have. And for me, that seems like that happens more than sometimes. Like often. Now you know in the world of trade, it works in the same way. The US has a tariff toolbox. These are a set of legal authorities that presidents can use. Some tools are used all the time. Some tools sit untouched for decades. Some tools were designed for a world that no longer exists. And some tools only work for very specific jobs. Now many of these tariff authorities were written in the 1930s. The 1960s or even the 1970s, they were designed for a different era. Different industries, different geopolitical realities, different trade volumes, and different enforcement needs. For years, presidents didn't need them because they had AIPA, the International Emergency Economic Powers Act. This was the Swiss Army knife of trade tools. AIPA gave presidents flexibility, speed, and broad authority. When AIPA tariffs were struck down by the Supreme Court, the administration had to go back into the shed and pull out tools that hadn't been touched in decades. Some of these tools were designed for problems that we no longer have. Some are narrow and some are clunky. And some are outdated. But they're what's in the toolbox, so they're being used. Now I believe that tariffs are here to stay and will continue to be used in some way as a trade tool. In the past year, courts have struck down two of the government's primary tariff tools, and the response both times wasn't to retreat, it was to use the next tool in the box. And that's not a policy that's going away anytime soon. So in this episode, we're gonna walk through the tariff toolbox. What's in it? What's being used? What's expired? And what might come next. So let's go ahead and open the toolbox. Historically, Congress filled this toolbox piece by piece over nearly a century. And each piece is narrower than the one-time blanket tariff power. This is by design since the Constitution assigns the tariff power to Congress, not the President. For example, Section 338 was an early, broad grant that Congress mostly walked back from using. Section 232 tied tariff authority to a specific finding, national security. Section 301 tied it to another unfair foreign trade practices backed by a formal investigatory record. Section 122 tied it to a third balance of payments emergencies with hard caps on size and duration. And then there's AIPA. Which was never intended for tariffs at all. It's an emergency sanctions law. So for most of the post war era, these tools were used sparingly and narrowly. Steel here, washing machines there, aimed at discrete, provable injuries. Now, today, the second Trump administration treats tariffs as the central instrument of both economic and foreign policy. The goal, according to Robert Leitheiser, former head of USDR, and the architect of the Trump won tariffs, is to acknowledge there is no free trade and rather to create a world of balanced trade. The primary method is to use tariffs in the broadest sense to move the trading world in this direction. This ambition needed the broadest, fastest authority available. Which is why AIPA was pressed into service for something it was never designed to do. Now, once the Supreme Court invalidated that approach, the pattern since has been consistent. Reach for the next broadest, next fastest tool, absorb the legal challenge, and pivot again as needed. Section 122 bought roughly five months. Section 301 is building the durable investigation-backed replacement. Section 232 keeps expanding product by product. And Section 338 shows a willingness to revive a tool nobody has used in nearly a century when fast leverage is needed. And there is no appetite to wait for an investigation. So let's start with IEPA, International Emergency Economic Powers Act. This was passed in 1977 to rein in the older Trading with the Enemy Act. It gave the president emergency power to regulate transactions with foreign adversaries during a declared unusual and extraordinary threat. This tool was used over decades for sanctions. We saw it with Iran, with Russia, North Korea. But it was never used for tariffs until Trump invoked it in 2025 for the fentanyl trafficking tariffs on Canada, Mexico, and China. And then later the Liberation Day reciprocal tariffs, where he levied a 10% baseline to virtually every US trading partner, with higher reciprocal rates layered on for roughly 60 countries. That the administration identified as running large trade surpluses with the US. Now, some of the rates were well above the baseline before later country by country negotiations brought several down. Now the goal, again, maximum leverage, maximum speed, minimum process. a single tool to pressure nearly every trading partner at once on trafficking, immigration, and trade imbalances without waiting for any investigation. The case that reached the Supreme Court, Learning Resources versus Trump, was actually a consolidation of challenges brought by importers, you know, even a small toy company among them, and a group of states arguing that AIPA's language never granted tariff power at all. It's a sanctions, an asset control statute. Well, the Supreme Court took the case and ruled 6-3 on February 20th, 2026, that AIPA doesn't Authorized tariffs under any reading of the Act which says regulate importation. So what happened next? Well, CBP formally stopped collecting AIPA duties on February 24th, 2026, which was four days after the ruling. And that's also the exact day that Section 122 took effect. So from an importer standpoint, there was no true tariff-free gap. Just an immediate swap to a different rate, although lower and flatter. Now AIPA is not just paused. It's off the table as a tariff authority entirely. Full stop. Unless Congress amends the statute or a future court revisits the question. The only live thread left is really retrospective. Sorting out refunds for all the duties that were collected under. A law, the court says, never authorized them. Now keep in mind it was the broadest and fastest tool available. No investigation, no findings requirement, just a declared emergency. That absence of any statutory limit on scope or magnitude is exactly why the court rejected it. Now I like to call this tool the sledgehammer. It is broad, blunt, And fast with no precision required. It made maximum impact, it caused pervasive damage both relationally and financially, it created panic around the world, including the markets, and ultimately gathered in more than $165 billion in duties that now must be refunded to importers. Now, as of today, about 60% of the $165 billion has been refunded. Most of it so far has gone to companies, most notably the larger tech companies. For example, Apple has reported receiving $2.2 billion in refunds, and Amazon $600 million. Now, in order to buy time, keep tariff revenue and negotiating pressure flowing in the gap between AIPA's collapse and the slower investigation backed tools, you know, the 301s and 232s, which we'll get into in a minute, the administration pulled out another tool called Section 122. Now, this tool was enacted in 1974. To let the president impose a temporary import surcharge, which was capped at 15% and capped at 150 days. And this was to address a fundamental international payment problem. Essentially, balance of payments safety valve. However, it sat unused for over 50 years before this year. This was the bridge tool. Trump invoked it within hours of the AIPA ruling on February 24th, and he imposed a 10% flat global tariff to replace the struck down country-specific AIPA rates. Now it hit its statutory 150-day wall and expired just a few weeks ago, July 24th, 2026. Interestingly, it was replaced at the same moment by the new Section 301. Now to me, this tool is like the pressure valve. A temporary release with a built-in shutoff, not a permanent fix. It was literally designed as a temporary release mechanism for a balance of payments problem, not a permanent fix. In this case, it did its job, hit its limit, and shut itself off on schedule. Now let's move to Section 301. This grew out of the Trade Act of 1974, and it gave USTR authority to investigate and retaliate against unjustifiable or unreasonable foreign trade practices. Now, after the WTO's creation in 1995, it was used mainly to build cases for WTO dispute settlement. Now, Trump revived it aggressively in his first term for the China IP and Technology Transfer Tariffs, and those tariffs never really went away even under the Biden administration. But today, the Trump administration is seeking to rebuild AIPA's broad country-level coverage on much firmer legal footing, using real investigations to justify tariffs that can survive judicial review. in a way that AIPA couldn't. So we saw the USTR open new investigations within days of the February 2026 Supreme Court ruling and on an accelerated timeline. So first a forced labor investigation which examined whether trading partners adequately enforce bans on importing goods made with forced labor. The determination was issued on June 2nd, the hearing was held on July 7th, and it produced a two-tier tariff. 10% on countries with inadequate enforcement, 12.5% on countries with no import ban at all. And this covers roughly 60 economies, and it became effective on July 24th, 2026. In perfect timing to close the gap. Left by the expiration of Section 122. Now the second is an excess industrial capacity investigation. And this is looking at whether foreign governments, China above all, though not exclusively, are subsidizing their own industries into massive overproduction. The rationale is when countries flood global markets with certain items, they undercut US producers on price. The tool requires a genuine investigative process before the tariffs can be imposed. You know, a public notice, a comment period, hearings, an administrative record. As of today, it is still an open investigation, so there are no tariffs yet, but it's moving fast and we can expect it soon. However, you know this is likely to become the bigger and longer lasting action of the two. Because your government is subsidizing over capacity is a structural finding that justifies broad sustained tariffs. Whereas the forced labor tariff is more of a compliance check that could in principle go away if enforcement improves. Now I liken this tool to a scalpel. It requires a diagnosis before it cuts, a formal investigation and administrative record, which makes it slower to deploy than the sledgehammer, but the precision is exactly what gives the incision staying power in court. Now, this is where the administration is putting its long-term weight. The forced labor tariff is already live. Excess capacity is the one to watch next, and litigation is likely eventually, but the investigatory record gives Section three hundred one sturdier legal footing than AIPA ever has. The next tool in the toolbox is called Section 232 and comes from the Trade Expansion Act of 1962. This was created to let the president restrict imports found to threaten national security, and based on a Commerce Department investigation. Now, this could lock in tariff protection for industries that are considered strategic, vital, like steel, autos, semiconductors. And through a national security process, courts have historically been reluctant to second guess. And this insulates these tariffs from the kind of challenges that killed Aipa. Rarely used for decades, you know, oil in the 70s and 80s, Trump revived it in his first term for steel and aluminum in 2018. Now today it is actively expanding. Steel, aluminum, copper at 50%, autos and auto parts, lumber and timber, medium and heavy duty trucks, and semiconductors, 25%. These are all now covered under Section 232. This is applied product category. globally with negotiated country carve-outs. For example, the European Union's 15% all-inclusive ceiling. It does require a Commerce Department investigation and a national security finding. This is a real process, but one courts have been deferential toward. And unfortunately, duties are not eligible for drawback, unlike in section three one Now I call this tool the chisel because it's precise and deliberate. It doesn't hit everything at once. It carves out one product category at a time. Steel, then aluminum, then copper, then autos, then chips, each requiring its own national security finding. It's slow, methodical, but it's durable. Each cut stays. Now since Explicitly unaffected by the AIPA ruling and one of the two pillars alongside Section 301, the administration is leaning on it to rebuild the tariff coverage. And the legal exposure is materially lower than AIPA's was, so we can expect continued product list expansion over time. Just a few weeks ago, the president reached deep into the toolbox, and he found another capable tool. The Section 338 of the Tariff Act of 1930. This was a Smoot Hawley era provision back in the 30s, and it allowed tariffs up to 50% on countries found to discriminate against US commerce. It lay essentially dormant. for the better part of a century, Never invoked until now. On July 20th, 2026, President Trump signed three proclamations. The first ever use of Section 338, imposing an additional 50% tariff on Canadian motor vehicles, alcoholic beverages, and dairy products, covering roughly 20 billion in goods. Across 554 tariff lines. And this turns out to be about 5% of total US imports from Canada. Now why? Well, the stated basis, Canada's retaliatory 25% auto surtax on US origin vehicles, provincial liquor board restrictions limiting US product access, and Canada's dairy supply management quota system. So the tariffs will take effect on August 19th and they will apply regardless of USMCA qualifying origin. This is a real departure from Section 122 and the original AIPO tariffs, both of which carved out USMCA compliant goods. So, what is the administration trying to accomplish with this ancient tool? Well, two things at once come to my mind. First, let's punish Canada specifically. The administration has repeatedly singled out Canada alongside China as one of the only two partners that retaliated rather than negotiate. Second, and more immediate, use the tariff as leverage inside the USMCA's six-year review, where talks with Mexico were already several rounds in, while talks with Canada had not formally started. What is unique about this tool? Is that there is no procedural requirement at all. Unlike Section 301, Section 338 requires nothing but a presidential proclamation, which is exactly why it was reached for after AIPA fell. It also carries an escalation clause. There's a section 338.b that allows the president to go further, up to a full import ban. If he finds a country maintains or increases the discrimination, this basically reserves leverage behind the leverage. Now, there's also an interesting USMCA angle to this. Now, the USMCA's treaty has a mandatory joint review requirement after six years, and this opened on July 1st, 2026. And USTR had already stated it would not renew the agreement in its current form. The 338 proclamations landed three weeks into that review window. USTR Ambassador Greer put it plainly. Sometimes you take an action that leads to a better negotiation. Canadian Prime Minister Carney called the announcement itself part of a negotiation. And the two sides agreed to intensify talks the day after the proclamations were signed. The mandatory 30-day gap between signing and effect. Functions as a negotiating clock rather than a formality. And some trade law observers expect the administration to roll the deadline forward in short extensions rather than let the tariffs actually bite, keeping the threat alive as pressure rather than resolving it either way. So to me, this tool is the crowbar. Blunt? Forceful and built for prying something open rather than for careful work. No diagnosis required, just leverage. You know, it sat in the back of the shed for 96 years because it's the kind of tool you reach for when you want something to move now, not because it's the right tool for delicate work. Now the future use of this tool is genuinely uncertain. And the outcome matters beyond Canada. Because if the tariffs take effect and survive a legal challenge, Section 338 becomes a template, a low friction, high-seiling tool usable against any partner, treaty or no treaty, without the investigatory guardrails. That Congress built into the other tools 301 232. Some trade lawyers argue the 1962 Trade Expansion Act implicitly superseded 338 for this kind of use, but that theory is untested in court. And a successful challenge is seen by some observers as an uphill fight given the statute's broad deferential language. So watch the August 19th deadline. as the near term marker and watch whether the administration lets the tariffs bite, extends them, or reaches a deal that makes the whole exercise moot. Okay, one more tool from our tariff toolbox. Section 201 from the Trade Act of 1974. This tool provides a standing option in reserve for industry specific injury claims. It is narrower and slower than the other tools and can be useful case by case rather than as a broad policy lever. Now there is a safeguard provision, and this allows tariffs when a product is imported in quantities causing serious injury to a domestic industry, regardless of any unfair trade finding. It has been used for washing machines and solar panels in Trump's first term and even for steel and aluminum under the Bush administration before that. Now this is not a headline tool at the moment. But it is one of the live post IEPA authorities that is worth watching. It does require an International Trade Commission injury investigation and is explicitly product specific and country neutral. It targets import surges, not bad actors, What kind of tool is this one? I call it the tourniquet. It's injury-triggered, not actor-triggered. Unlike 301, 232, 338, which target a country's behavior, Section 201 doesn't care who's at fault. It just asks: Is a surge of imports from anywhere causing serious injury to a domestic industry right now? That's the purpose of a tourniquet. Stop the bleeding first, sort out the cause later. It's a temporary measure, typically up to four years with a possible extension to eight, and is supposed to give the industry time to adjust. Not permanent protection. A tourniquet is meant to come off once the bleeding is under control, not stay on forever. It's product specific and country neutral, applied narrowly to the injured industry rather than broadly across an economy. Precise in a different way than the chisel. The chisel carves out a strategic category deliberately. The tourniquet gets applied whenever there is an active wound, regardless of category. This will likely remain a secondary tool rather than a primary pillar, but could resurface If a specific industry brings a strong import surge injury claim. So that's our tariff toolbox. AIPA was the sledgehammer, broad, blunt, and the fastest tool ever used for tariffs until the Supreme Court took it away. Section 122 was the pressure valve, a capped 150-day bridge tariff that did its job and shut off right on schedule. Section 301 is the scalpel, slower because it needs a diagnosis first. That's exactly what the administration is now building for the long haul. Section 232 is the chisel, precise, deliberate, carving out one strategic product category at a time. Section 338 is the crowbar. Dormant for 96 years, but now being used as leverage against Canada with no process required at all. And Section 201 is the tourniquet. It doesn't ask who's at fault. It just stops the bleeding for an injured industry and will it will come off at some point. Six tools, six different shapes, but every time one gets blunted by a court, another is already in hand. That's the toolbox. Now what does it mean for you and I? First, the landed cost of the same product has changed several times in under a year, often with days of notice. A good imported under AIPA in January, Section 222 in March, and Section 301 in August could have carried three different duty rates in eight months, with no change to the product itself. That volatility alone breaks static costing and pricing models. Tariffs now stack. A product can be subject to Section 232 and Section 301 simultaneously, and Section 338 duties apply on top of whatever else is already owed. The headline rate on any one authority understates the real landed cost impact if a company isn't tracking the combination. Third, USMCA is no longer a reliable shield. Section 338 applies to Canadian goods regardless of USMCA qualifying origin. The first time a broad US tariff action has ignored that carve out. Companies that built sourcing strategies around USMCA compliance as a hedge need to know that hedge doesn't cover every scenario anymore. Four, there's real money sitting in refund claims. The AIPA tariffs were ruled unlawful, and Section 122 has a live adverse ruling on appeal. Companies that paid those duties may be entitled to money back, but only if they preserved the right to claim it. And finally, the pattern itself is the risk. Five major authority changes in under a year signals this isn't settling down. A company that built compliance around today's rate. rather than today's process for handling change is going to keep getting surprised. here are five things I encourage companies to do right now. Number one, map full exposure by HTS code and origin, not by headline rate. Know which of your products sit under 301, 232, 338, or some stack of the three, and recalculate landed cost accordingly. Most of the surprise costs that companies are eating right now. Come from not realizing that duties compound. Two, preserve refund rights before the deadlines pass. For AEPA duties that were paid in 25 and 26, and potentially for duties under section 122, depending on how the appeal resolves, make sure that your protests are filed and claims are documented now. Don't wait for the mechanics to be finalized to start the paperwork. Number three, stress test contracts for tariff risk, especially with your Canadian counterparties. Review price adjustment, cost paths through, and force majeure language against the possibility of a 50% duty landing within 30 days notice, and also no USMCA relief. This is the clause most companies haven't yet updated. Four, hold off on drastic resourcing decisions until the legal picture firms up. But have your analysis ready. You know, given how much of this toolbox is still being litigated, a company that reflexively reshores or resources based on this month's rate risks whipsawing again in six months. Better to know your alternative sourcing options cold and be ready to move to the than to move now on a rate that might not survive the next court ruling. And finally, number five, build a standing monitoring process, not a one-time compliance check. The administration has changed its primary tariff tool five times in a year. Companies need someone, whether it's internal or an advisor, whose job is to track these shifts in real time. Because by the time a chain shows up in a customs broker's rate table, it's often already cost you money. Now finally I'd like to conclude where I started. I said tariffs are here to stay. Why do I say this? Well, five different primary authorities in under 12 months. AIPA, Section 1 in 22, the Expanded 301, the Expanded 232, and now Section 338. Each one picked up the baton the moment the last one got knocked down by a court. That's not a policy, that's a demonstrated persistence across whatever vehicle is available. Every court loss so far has been about mechanism, not goal. The Supreme Court didn't say tariffs were bad policy. It said this statute didn't authorize them. Same with the CIT and Section 122. The administration has treated every one of those rulings as a routing problem, not a stop sign. Three, Section three hundred thirty eight removes the last major shield. If USMCA qualified goods aren't safe from tariffs anymore, there's no longer an obvious safe category left for companies to hide behind, which is itself evidence the direction is structural, not episodic. For Section 301's forced labor and excess capacity investigations are built to outlast any single administration action. These aren't emergency orders. They're investigation-backed findings, the kind of legal architecture that's designed to survive court review and persist past any one court fight. And finally, tariff revenue has become fiscally significant. It briefly exceeded corporate tax revenue in Q4 of 2025. You know, once a revenue stream reaches that scale, walking away from it gets politically harder, regardless of which party is in office next. So to conclude, over the last year we've watched the president reach for five different tariff tools. Some as old as 1930, some in 1974. And when a court took one away, another was already in hand. That's not a phase, that's the new normal, and tariffs are here to stay. The tools may be decades old, but the world they're regulating is not. So it's on Congress to modernize the tariff tools that are in the toolbox. And on every company listening here to plan for predictability, not for the illusion that this will settle down or eventually go away. So thank you for listening. Written Reflections is a forum for exploring the dynamic, complex, and essential nature of cross-border trade. And a space to reflect on the deeper questions that shape how we live, lead, and move through uncertainty. NFL 2026 season preview drops 9-2. Talk again soon.