SMU Community Chat: Tariffs disrupt US 'business as usual'

Legal challenges 

Leibowitz explained that the Federal Appeals Court is scrutinizing whether US President Donald Trump’s unilateral imposition of tariffs, citing the International Emergency Economic Powers Act (IEEPA), is legal.  

The president instituted the Section 232 tariffs shortly after taking office.

“Well, of course, many people in the [steel] industry and in my industry are waiting for a decision from the Court of Appeals for the Federal Circuit. It’s a very interesting and rare situation because the Court of Appeals assigned all 11 active judges to hear this case,” said Leibowitz.  

The concern about the tariffs being struck down after they have gone into effect would result in a complicated repayment system, Leibowitz highlighted.  

Assuming that the court does decide the president has the executive privilege to exercise his authority in this way, Leibowitz explained the way that businesses will likely begin to evolve.  

New business 

Because the monetary value of merchandise coming to the US from abroad will undergo more thorough examination, the process for reporting imports, collecting tariffs, and enforcing restrictions will require rethinking and restructuring.  

Anyone importing steel or steel-adjacent products will be financially better served by expanding business operations to manage this detail-heavy and potentially costly new element of doing business. Businesses have to shift to understanding how they are in compliance with the new tariff terms.  

“There’s a lot of pressure to keep reducing prices. I think there is going to be some customs enforcement, to the extent that customs can detect, like undervaluation and changing country of origin… . Those are the things domestic suppliers worry about,” Leibowitz said.  

He added, “I think it’s overblown, but it is something to discuss.” 

As tariff prices, in some cases, zoom up from 2% to 50% the possibility of more importers attempting to evade paying tariffs also increases. The financial incentives of evasion may outweigh the risks to some merchants.  

This would then lead to the need for increased numbers of trained enforcement officials.  

Because the value of the imported merchandise has increased exponentially, due to tariffs, the need for customs bonding is increasing. This adds an additional consideration for manufacturers, importers, and other businesses across the supply chain.  

“The ins and outs, the details of these tariffs, there’s many, many questions that have not been answered yet about how exactly they work, how you report them, and so on. Customs bonds have gone through the roof. You know, that used to be a fairly minor expense but now it’s a major expense,” he said.  

Downstream implications

The analysis offered by Leibowitz aligned to many of the arguments manufacturing trade organizations have voiced publicly. For example, earlier this year, Manufacturers Alliance survey data found that shifting tariffs was a top concern among the industry.

“Tariffs, as far as they affect the steel industry, they affect downstream products. The steel industry’s customers are generally manufacturers that make things in the United States, and they compete with imports, too,” Leibowitz said.

He said, “And all of the anti-dumping and countervailing duty cases and so on, don’t take account of the downstream effects. The economic impact on downstream users is still going to be heavy.”

If you’re an SMU subscriber and you missed the Community Chat with Lewis Leibowitz, you can access a replay here on our website. While you’re there, check out our extensive library of past Community Chats!