If "reciprocal tariffs" are overturned, what is Trump's Plan B?

If reciprocal tariffs are overturned, UBS says don’t expect tariffs to disappear—Trump’s Plan B is ready. According to CCTV News, on November 5 local time, the U.S. Supreme Court reviewed the legality of Trump’s comprehensive tariff policy and heard oral arguments. According to an article from Wallstreetcn, previously, the Federal Court of Appeals had ruled that Trump’s implementation of multiple reciprocal tariff measures exceeded the scope of presidential emergency powers. This Supreme Court review is an appeal against the lower court’s ruling. On November 14, according to Wind Trading Desk, UBS stated in its latest report that even if the U.S. Supreme Court rules that the current “reciprocal tariffs” levied under the International Emergency Economic Powers Act (IEEPA) are illegal, the government is already prepared with a “Plan B” toolbox, capable of quickly rebuilding most tariff barriers. The report said that if IEEPA tariffs are overturned, the U.S. weighted average tariff rate (WATR) will drop sharply from 13.6% to 7.2%. However, this is only a temporary phenomenon. By activating backup authorizations such as Sections 122 and 301 of the Trade Act of 1974, the tariff rate can quickly be restored to the 11.8%-12.6% range, almost the same as current levels. Tariff foundations shaken: IEEPA authorization faces Supreme Court challenge One of the cornerstones of the current U.S. government’s tariff policy—the International Emergency Economic Powers Act (IEEPA)—is facing judicial review in the Supreme Court. UBS notes the majority of justices are skeptical about the legality of using this act to impose tariffs. If the court issues a ruling unfavorable to the government in early 2026, a series of questions will follow: Which tariffs will be lifted? How will previously paid tariffs be refunded? More importantly, what will replace them? According to the report’s estimates, tariffs under IEEPA cover targeted tariffs related to fentanyl, border tariffs against Canada and Mexico, universal tariffs, and “reciprocal tariffs” agreements. If these tariffs are abolished, the U.S. weighted average tariff rate (WATR) would be cut in half from the current 13.6% to 7.2%. In theory, a steep reduction in tariffs would stimulate GDP growth and ease inflationary pressure, but the report stresses that such a low-tariff situation “is unlikely to last.” Plan B is in place: Alternative solutions within the tariff “toolbox” According to CCTV reports, prior to the Supreme Court hearings, Trump himself said if the case was lost, the impact would be “extremely destructive.” After the hearing, Treasury Secretary Besant stated that even in the event of a defeat, the government would turn to other legal authorizations. In contrast to the government’s tough stance is the “pessimism” of U.S. public opinion. Numerous media analyses in the U.S. say, no matter how the Supreme Court rules, Trump’s tariffs will not disappear easily. The UBS report also says that the Trump administration has clearly anticipated this potential risk and prepared a Plan B. UBS notes that Treasury Secretary Besant’s viewpoint has also found echoes in the judiciary. At the Supreme Court hearing, Justice Alito suggested that other legal authorizations could be used to impose “all or nearly all” of existing tariffs. This demonstrates that policy makers possess a rich “toolbox” to respond to the invalidation of IEEPA authority, and a comprehensive cancellation of tariffs is not probable. In its report, UBS analyzes in detail the possible legal tools the Trump administration might employ to rebuild its tariff structure: 1. Short-term emergency bridge: Section 122 of the Trade Act of 1974 This provision authorizes the president to respond to international balance-of-payment deficits with an additional import tax of up to 15% for up to 150 days, and can be implemented almost immediately. This is a perfect short-term transition solution. For example, if the court rules in early January, the government could immediately activate this provision to maintain the tariff structure until around June. The report also notes that the tariff rates for many “reciprocal” agreements with the EU, Japan, and South Korea are precisely 15%, which may not be a coincidence. Through this option, combined with imposing a 15% universal tariff on other trade partners, the WATR can be restored to 12.6%, only slightly lower than current levels. 2. Long-term core tool: Section 301 of the Trade Act of 1974 In the medium and long term, Section 301 is the core for rebuilding the tariff system. This provision is aimed at countering “unfair trade practices.” The report indicates that prior investigations and tariff impositions regarding technology transfers were based on this provision. Although launching a new 301 investigation takes about seven months (including notice, comment period, and hearings), the government can copy current tariffs for the top ten trading partners (some of which already have “agreements”). In this way, combined with existing investigation results, WATR can reach 11.8%. If the scope expands to the top 20 trading partners, the rate can further rise to 12.8%. 3. Supplementary and strengthening tools: Other sectoral options Trade Expansion Act of 1962, Section 232: For national security purposes, this provision can be used to impose sectoral tariffs, unaffected by the IEEPA ruling. Currently, tariffs in steel, aluminum, and copper can reach as high as 50%. The report estimates that ongoing new Section 232 investigations could cover imports worth up to $466 billion, enough to fill any tariff gap. Tariff Act of 1930, Section 338: This provision authorizes the president to impose up to 50% tariffs against countries discriminating against U.S. industries, but its legal threshold is higher and is more challenging to implement, making it a less likely option. ~~~~~~~~~~~~~~~~~~~~~~~~ The above excellent content is from Wind Trading Desk. For more detailed interpretation, including real-time analysis and frontline research, please join [Wind Trading Desk ▪ Annual Membership] Risk Reminder and Disclaimer Markets carry risks; investments require caution. This article does not constitute personal investment advice and has not taken into account the special investment objectives, financial situation, or needs of individual users. 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