What the Supreme Court’s decision to strike down tariffs means for L.A.’s trade-dependent economy

The Supreme Court’s decision Friday to reverse the majority of tariffs imposed by President Trump could provide some relief to Los Angeles’ trade-dependent economy, but only if they are not reimposed by other means.

The court’s 6-3 ruling that Trump did not have the authority to impose tariffs under the International Emergency Economic Powers Act struck down the levies that upended international trade.

“We have seen that the tariffs are having a significant impact on our supply chain, on our manufacturers and particularly on our port and trade logistics sector,” said Stephen Cheung, chief executive officer of the nonprofit Los Angeles County Economic Development Corp.

“I think this decision will have a significant impact on the economy of Los Angeles. However, it will take a long time to put into place, so we will see concretely how everything will unfold,” he said.

The tariffs dealt a blow to a large number of businesses in Southern California and across the state, including farmers, automakers, home builders, technology companies and clothing retailers.

MGA Entertainment, the maker of Chatsworth’s Bratz dolls, said a little more than half of its products are made in China, while hardware and wood seller Anawalt in Malibu said the majority of its wood comes from Canada and almost all of its steel products are made in China.

At a news conference Friday after the ruling, Trump said that under other legal authorities, he would impose an overall 10% tariff and apply additional levies, including a possible 30% duty on foreign cars. Later in the day, he signed an executive order imposing the 10% tax, which takes effect on February 24.

“The Supreme Court’s decision on the tariffs is deeply disappointing, and I am ashamed on the part of some members of the Court, absolutely ashamed,” Trump said. “They are very unpatriotic and disloyal to our Constitution.”

Friday’s high court ruling affects up to $170 billion in tariffs collected under the International Emergency Economic Powers Act of 1977, including duties and penalties of 10 to 50 percent on China, Canada and Mexico.

It is up to a lower court to decide whether importers who paid the tax can seek a refund. It is estimated that some $100 billion in tariffs were unaffected by the decision.

The ports of Los Angeles and Long Beach — which handle nearly a third of the nation’s containerized cargo and serve as the main commercial gateway to Asia — saw a surge in traffic in the first half of last year as importers sought to get ahead of tariffs, largely imposed in April.

However, traffic slowed in the second half, with the Port of Los Angeles expecting a single-digit volume decline this year before Friday’s decision.

The twin facilities form the largest port complex in North America, supporting more than 200,000 jobs and contributing $28 billion to the regional economy in 2022, according to a report from the California Center for Jobs & the Economy.

The uncertainty surrounding the tariffs stems from the complexity of the tariffs themselves — as well as the other legal options Trump has for imposing them again.

Mike Jacob, president of the Pacific Merchant Shipping Assn., which represents ocean carriers, marine terminal operators and others in the industry, said the trend is to view rates as uniform.

“There were different rates for different countries. Added to that were different rates for different products. And a lot of changes happened with specific products,” he said. “So it’s almost impossible to take the big picture and say, here’s what we expect — except to say it’s still a pretty volatile space.”

By imposing a 10% global tariff, Trump would rely on a provision of the Trade Act of 1974, while his ability to demand additional levies would rely on another law.

Economist Jock O’Connell, an international trade adviser at Beacon Economics in Los Angeles, said Trump could have the power to impose global tariffs of 10%, but additional levies would involve trade authorities.

“It would be a tedious process. Tariffs need to be defined more specifically and investigated,” he said.

Trade agreements that the United States has negotiated with foreign countries based on tariffs also complicate the process. O’Connell expects they will seek to renegotiate them.

“They’ll probably come back to the table and say, ‘Well, you don’t have the authority to impose these measures,'” he said.

Gene Seroka, executive director of the Port of Los Angeles, said importers are currently facing difficult decisions, given that any shipping carrier leaving an Asian port today would not be subject to the tariffs that were rolled back.

“This executive asks: ‘Are my products now exempt from this tariff?’ If the answer is yes, “Can I buy more of this product and have it shipped while there are no customs duties?” “, he said.

Those decisions would revolve around factors such as the availability of space on the ship and local warehouses, as well as trucking services, he said.

Mark Zandi, chief economist at Moody’s Analytics, said the move should be good news for the U.S. economy as a whole and for companies on the “front lines” of trade wars, such as transportation, distribution, agriculture and retail.

“If the president lets the Supreme Court decision stand and doesn’t try to replace the tariffs, that’s a plus for the economy, but that’s not what’s going to happen,” he said.