Less Dumb Investing

I was right, and that’s great. But only temporarily great.

Trump’s strategy of slapping sweeping tariffs on global trade partners using emergency economic powers just hit a major legal snag. A federal court ruled that the administration’s use of IEEPA—the International Emergency Economic Powers Act—to justify the tariffs was illegal. Sure, the appeals court is letting the tariffs stay in place for now, but the legal foundation is on shaky ground. So, what’s the move?

Plan B.

Behind the scenes, the administration is preparing a backup strategy. It’s basically a legal pivot—still aggressive, still protectionist, but less likely to get swatted down by the courts. The idea is to lean on different parts of the 1974 Trade Act, particularly Section 122 and Section 301. Section 122 allows for temporary tariffs—up to 15% for 150 days—if there’s a balance-of-payments issue. Section 301 is the old reliable for targeting unfair trade practices (like they used with China in Trump’s first term).

The plan is twofold:

1. Use Section 122 as a stopgap. Slap on quick tariffs across the board to maintain leverage and buy time.
2. Then roll out more targeted tariffs via Section 301. This approach takes longer due to the required comment and review process, but it’s on firmer legal ground.

Administration insiders say they haven’t finalized anything yet. They’re likely going to wait and see how the appeal over IEEPA plays out before jumping into a new framework.

So why didn’t they go this route to begin with? Because IEEPA gave them speed. They could hit almost every trading partner at once without waiting for comment periods or economic justifications. The trade-off? No one had ever used IEEPA for tariffs before, and now the courts are saying—yeah, that’s not what that law is for.

Switching to another law has its own risks. If they pivot away from IEEPA while the appeal is ongoing, it could look like they’re conceding defeat. But if they wait and the appeal fails, they lose time—and leverage—in ongoing trade negotiations.

Navarro and other Trump trade officials are keeping their cards close but aren’t hiding the backup plan entirely. Navarro even floated the idea of resurrecting a provision from the 1930 Smoot-Hawley Act, which lets the U.S. target countries that discriminate against American goods. The point is, they’re exploring every possible lever.

This all has real implications. If the courts force the administration to pull back on tariffs and there’s no backup ready, Trump loses a key tool in trade talks. That’s why the White House is scrambling to make sure they can reimpose tariffs quickly under some other legal justification if IEEPA gets tossed.

Of course, this mess creates some unexpected upside: the EU and other partners now see a path to resolving disputes. With the threat of blanket tariffs possibly off the table, talks could shift to more targeted issues like steel and autos—areas where national security was cited as the justification, not IEEPA, and thus not affected by the ruling.