A Lot About Trump’s Tariffs Is Still Uncertain. How China, India, and a Court Decision Will Help Set Trade Policy.

It’s still unclear whether an additional 25% tariff on Indian products will go into effect Aug. 27. Above, cranes and shipping containers at a port in India. (Abeer Khan/Bloomberg)

President Donald Trump on Monday stressed his good relationship with China, allowed that the U.S.’s major geopolitical rival holds some cards in ongoing trade negotiations, and appeared to extend the timetable for when he might meet with Chinese leader Xi Jinping.

The U.S. recently extended the tariff deadline with China by 90 days, ratcheting back tensions after a tit-for-tat during which China restricted the sale of critical magnets and the U.S. retaliated, in part, by restricting the export of aerospace parts to China.

Much of the relief stems from expectations that a truce could hold until Trump is able to meet with Xi and pave the way to a bigger deal. The administration had guided to a possible fall meetup, possibly while on a trip to China with U.S. chief executives around the time of the annual meeting of the Asia-Pacific Economic Cooperation Forum, in November.

In a press briefing alongside South Korean President Lee Jae-myung, Trump said China wanted him to visit and added that he might do so, “probably this year—and if not, thereafter, we’ll go to China.”

The two geopolitical rivals are in the midst of a fragile truce, complicated by restrictions each have held over the other. Trump noted China has some cards, citing their hold on magnets, but said the U.S. had even bigger cards, though he doesn’t want to play them.

“They have to give us magnets. If not, we have to charge them 200% tariffs,” Trump said, adding that the U.S. is investing in its own magnets production and could have an ample supply in a year or so.

Trump stressed that the U.S. was going to “get on good with China,” adding that the U.S. would allow China’s students into the U.S. The more than 300,000 Chinese students at U.S. universities have been in a period of limbo after the State Department in late May said it would work with Homeland Security to “aggressively revoke” visas for Chinese students.

Analysts have put the U.S.-China relationship on the back burner in terms of market risk, on the expectation that the two countries will try to maintain their fragile truce for now. The bigger risk in the short term is the Federal Court of Appeals’ expected ruling on whether Trump can use the International Emergency Economic Powers Act for his sweeping tariffs.

Henrietta Treyz, head of economic policy at Veda Partners, says the court’s IEEPA decision could come this week. If the ruling goes against the administration, Treyz says the Supreme Court is likely to take the case, with expectations high for an “incredibly rapid” turnaround.

“The biggest question is whether they will allow the White House to keep collecting tariffs in the meantime,” Treyz says.

Analysts expect the White House to seek alternative parts of the trade law to keep tariffs in the mix, but there could be a messy period in the interim—possibly with a flurry of refunds—if the high court rules against the administration. Such a ruling would also throw into question the preliminary agreements the U.S. has struck with dozens of countries.

Also still in the air: Whether an additional 25% tariff on Indian products will go into effect Aug. 27 as a penalty for that country’s purchases of Russian oil. While India is a major purchaser of oil, China is an even bigger buyer. Although Trump mentioned possibly “bigger consequences” for Russia if there isn’t movement in the Russia-Ukraine conflict, he did not elaborate or mention China in that context.

Also still unclear: The scope of sectoral tariffs directed at pharmaceuticals and semiconductors. Trump has threatened tariffs on pharmaceuticals that could rise to 250% over the next year and a half. Such tariffs could be meaningful for both sectors, creating new sets of winners and losers within each.

Treyz is telling clients to monitor the administration’s moves on these sectoral tariffs—with new efforts directed at wind turbines and other parts—as well as new investigations authorized by Section 301 of the Trade Act of 1974, such as the one launched on Brazil, that pave the way for tariffs on national security grounds. An expansion of using these authorities for tariffs, she says, would suggest the White House is expecting courts to strip it of its IEEPA authority.

Write to Reshma Kapadia at reshma.kapadia@barrons.com