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The U.S. Treasury last year swelled with revenue from President Donald Trump's double-digit taxes on imports from almost every country on earth.
But the money dried up after the Supreme Court struck down the biggest and boldest of Trump's tariffs in February.
The question now is: Can the president's trade team make good on its promise to replace the lost revenue?
A deadline is approaching rapidly.
After the Supreme Court setback, the president turned first to Section 122 of the Trade Act of 1974 to impose 10% tariffs globally. But Section 122 only authorizes tariffs for 150 days. Trump's expire on July 24. Congress would have to extend those tariffs -- something lawmakers are unlikely to do as the Nov. 3 midterm elections approach amid voter discontent over the high cost of living.
But the administration has more durable options: Section 301 of the same 1974 trade law permits the president to impose tariffs and other sanctions against countries found to engage in "unjustifiable," "unreasonable" or "discriminatory" trade practices. Trump used Section 301 to impose big tariffs on China in his first term and is rolling them out again -- as recently as late Wednesday when he announced 25% tariffs on some Brazilian imports, charging the world's 11th-biggest economy with a host of unfair trade practices.
Trade attorneys and analysts are confident the tariff-happy Trump administration will manage to beat the clock and swap out Section 122 tariffs with bigger Section 301 tariffs by the July 24 deadline. "They're going to raise the tariff wall again,'' said trade lawyer Ryan Majerus, a partner at King & Spalding and a trade official in Trump's first administration and in President Joe Biden's.
Trump last year tested -- and exceeded -- the limits of his authority to impose import taxes, a power the U.S. Constitution gives Congress. He invoked the 1977 International Emergency Economic Powers Act (IEEPA) to slap big tariffs on most of the world's countries.
He justified the levies, which marked a stunning reversal of decades of U.S. policy in favor of lower tariffs and freer trade, by labeling America's longstanding trade deficits a national emergency.
The Supreme Court didn't buy it, ruling in February that the president couldn't use the emergency powers law to impose tariffs at all. The legal defeat meant the administration had to send refunds to importers that had paid the levies.
As a result, tariffs have at least temporarily gone from a windfall to a drain on the Treasury.
Revenue from import taxes peaked at more than $31.4 billion last October. Then, after the Supreme Court ruling, it started dwindling -- to $22 billion in both March and April. As refund checks went out faster than revenue from the Section 122 and other tariffs came in, the number turned negative: A small ($42 million) shortfall in May was followed by a whopping $25.6 billion loss in June.
Trump and Treasury Secretary Scott Bessent have vowed to use other legal authorities to recoup the lost income.
Enter Section 301, which gives the president power to impose -- and adjust -- tariffs in response to other countries' trade practices. But the administration must first check procedural boxes -- collecting comments and holding hearings. There are no limits on Section 301 tariffs. They expire after four years but can be renewed.
So the president has flexibility in how he uses the Section 301 tariffs. Trump can still change them -- after clearing procedural hurdles -- but he can't impose or move them up or down on a whim as he often did with the IEEPA tariffs. Uncertainty over Trump's tariff policy has vexed businesses, leaving them hesitant to make investments and decisions because they don't know what the trade rules are going to be.
A switch to rule-bound 301 tariffs would mean "there's less uncertainty but not no uncertainty,'' said Sarah Bianchi, a former U.S. trade official who is now chief strategist of international political affairs at the investment research firm Evercore ISI.