Trump Warns US May Need to Reverse Trade Deals if Tariff Case Fails

Implications of Tariff Case on Trade Agreements

By Jeff Mason and Andrea Shalal

WASHINGTON (Reuters) -President Donald Trump said on Wednesday the U.S. might have to "unwind" trade deals it reached with the European Union, Japan and South Korea, among others, if it loses a Supreme Court tariffs case, and warned that a loss would cause the U.S. "to suffer so greatly."

Trump, speaking to reporters at the White House, said his administration will ask the Supreme Court to reverse a U.S. appeals court ruling last week that found many of his tariffs were illegal. Trump, however, said he thought his administration would prevail in the case.

Trump's Comments on Trade Deals

"We made a deal with the European Union where they're paying us almost a trillion dollars. And you know what? They're happy. It's done. These deals are all done," he said. "I guess we'd have to unwind them."

Economic Impact of Rescinding Tariffs

The comments were Trump's first specifically suggesting the trade deals reached with major trading partners - which were negotiated separately, outside of the tariffs - could be invalidated if the Supreme Court lets Friday's ruling stand.

Legal Perspectives on the Supreme Court Case

Trump said rescinding the tariffs would be costly, although trade experts note that the duties are paid by importers in the United States, not companies in the countries of origin. Economists have warned that tariffs are likely to fuel inflation in the United States.

"Our country has a chance to be unbelievably rich again. It could also be unbelievably poor again. If we don't win that case, our country is going to suffer so greatly, so greatly," Trump said.

The appeals court ruling addressed the legality of what Trump calls "reciprocal" tariffs first imposed as part of a trade war in April, as well as a separate set of tariffs imposed in February against China, Canada and Mexico. The decision does not impact tariffs issued under other legal authority, such as those on steel and aluminum imports.

Trade experts said his comments on the cost of rescinding the tariffs were intended to convince the Supreme Court that removing the tariffs would unleash major economic chaos.

Ryan Majerus, a former senior U.S. trade official who is now a partner with law firm King & Spalding, said it had been clear from the start that the trade deals with the EU and other trading partners were framework agreements that were subject to change, not fully fledged trade agreements.

"The president’s announcement today that the deals could be unwound reflects an effort to maximize leverage on the U.S. side," he said.

Legal and trade experts say the Supreme Court's 6-3 majority of Republican-appointed justices may slightly improve Trump's odds of keeping in place at least some of the tariffs after the appeals court ruled 7-4 last week that they are illegal.

But they say it is difficult to predict exactly what the court will do, given rulings in past cases and the unprecedented nature of the challenge.

Senator Ron Wyden, the top Democrat on the Senate Finance Committee, said Trump's comments sowed more confusion.

“The Trump administration can’t get its story straight about whether its trade deals will hold any water if the tariffs are struck down," he said.

(Reporting by Jeff Mason and Andrea Shalal; editing by Rami Ayyub and Leslie Adler)