If the reciprocal tariffs are overturned, UBS states not to expect the tariffs to disappear, as 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 Wall Street Insight, the federal appeals court had previously ruled that Trump's implementation of multiple reciprocal tariff measures exceeded the president's emergency powers, and this Supreme Court review is an appeal against the lower court's ruling.
On November 14, according to news from the Chase Trading Desk, UBS stated in its latest report that even if the U.S. Supreme Court rules that the current &#34;reciprocal tariffs&#34; imposed under the International Emergency Economic Powers Act (IEEPA) are illegal, the government is prepared with a &#34;Plan B&#34; toolbox that can quickly rebuild most tariff barriers.
The report states that if the IEEPA tariffs are overturned, the U.S. weighted average tariff rate (WATR) will plummet from 13.6% to 7.2%. However, this is only a temporary phenomenon. By activating alternative authorizations under Sections 122 and 301 of the Trade Act of 1974, it is expected that the tariff rate can quickly return to a level of 11.8%-12.6%, which is not much different from the current rate.
<h2>Erosion of Tariff Foundations: IEEPA Authorization Faces Supreme Court Challenge</h2>
One of the cornerstones of the current U.S. government tariff policy—the International Emergency Economic Powers Act (IEEPA)—is facing judicial review by the Supreme Court. UBS states that a majority of the court's justices are skeptical about the legality of using this act to impose tariffs.
If the court makes an unfavorable ruling for the government in early 2026, a series of questions will follow: Which tariffs will be eliminated? How will paid tariffs be refunded? More importantly, what will replace them?
According to the report's estimates, the tariffs under the IEEPA authorization cover fentanyl-related tariffs targeting specific entities, border tariffs against Canada and Mexico, universal tariffs, and &#34;reciprocal tariff&#34; agreements.
Once these tariffs are abolished, the U.S. weighted average tariff rate (WATR) will be halved from the current 13.6% to 7.2%.
Theoretically, a significant reduction in tariffs would stimulate GDP growth and alleviate inflationary pressures, but the report emphasizes that this low-tariff state is &#34;unlikely to be sustained.&#34;
<h2>Plan B is in place: Alternative solutions in the tariff &#34;toolbox&#34;</h2>
According to CCTV News, before the Supreme Court hearing, Trump himself stated that if he loses the case, the impact will be &#34;extremely destructive.&#34; After the hearing, Treasury Secretary Becerra expressed that even if they lose, the U.S. government will turn to other legal authorizations. In contrast to the current government's tough stance, American public opinion is &#34;pessimistic.&#34; Several U.S. media outlets analyzed that regardless of how the Supreme Court rules, Trump's tariffs will not easily disappear.
UBS's report also stated that the Trump administration has clearly anticipated this potential risk and has prepared a Plan B.
The report pointed out that Secretary Becerra's views have also been echoed in the judiciary. During the Supreme Court hearing, Justice Alito hinted that other legal authorizations could be used to impose &#34;all or nearly all&#34; of the existing tariffs.
This indicates that policymakers have a rich &#34;toolbox&#34; to respond to the situation where IEEPA authorization becomes ineffective, and a complete cancellation of tariffs is not a high-probability event.
UBS's report detailed the legal tools that the Trump administration might use to rebuild its tariff structure:
1. Short-term emergency bridge: Section 122 of the Trade Act of 1974
This provision authorizes the president to impose an additional import tax of up to 15% to address international balance of payments deficits, for a maximum period of 150 days, and can be implemented almost immediately. This could serve as a perfect short-term transitional solution.
<img src="https://imageproxy.pbkrs.com/https://wpimg-wscn.awtmt.com/ef3204e2-4881-4e4a-9ee1-3f44475c0e2f.png?x-oss-process=image/auto-orient,1/interlace,1/resize,w_1440,h_1440/quality,q_95/format,jpg" alt="" original-src="https://imageproxy.pbkrs.com/https://wpimg-wscn.awtmt.com/ef3204e2-4881-4e4a-9ee1-3f44475c0e2f.png"/>
For example, if the court rules in early January, the government could immediately activate this provision, maintaining the tariff structure until around June. At the same time, the report pointed out that the tariff rates of many &#34;reciprocal&#34; tariff agreements reached with the EU, Japan, and South Korea happen to be 15%, which may not be a coincidence.
By doing so, combined with the imposition of a 15% universal tariff on other trading partners, WATR could be restored to 12.6%, just slightly below the current level.
2. Long-term core tool: Section 301 of the Trade Act of 1974
From a medium to long-term perspective, Section 301 is the core of rebuilding the tariff system. This provision aims to combat &#34;unfair trade practices.&#34;
The report noted that previous investigations and tariff impositions regarding technology transfer issues were based on this provision. Although initiating a new Section 301 investigation process takes about seven months (including announcements, comment periods, and hearings), the government can replicate existing tariffs against the top ten trading partners (some of which already have &#34;agreements&#34;)
Through this method, combined with existing survey results, WATR can reach 11.8%. If the scope is expanded to the top 20 trading partners in the future, the tax rate can be further increased to 12.8%.
3. Supplement and Strengthen: Other Sectoral Tools
Section 232 of the Trade Expansion Act of 1962: Based on national security considerations, this provision can be used to impose sectoral tariffs, and is not affected by IEEPA rulings.
Currently, tariffs on sectors such as steel, aluminum, and copper are as high as 50%. The report estimates that several ongoing new Section 232 investigations may cover imported goods valued at up to $466 billion, which is sufficient to fill any tariff gap.
Section 338 of the Tariff Act of 1930: This provision authorizes the president to impose tariffs of up to 50% on countries that discriminate against U.S. industries, but its legal threshold is higher and implementation is more challenging, thus it is considered a less likely option

UBS stated that if the U.S. Supreme Court overturns the "reciprocal tariffs" imposed by Trump under the International Emergency Economic Powers Act, the U.S. weighted average tariff rate will drop from 13.6% to 7.2%. However, Trump has prepared a Plan B: to impose a 15% tariff in the short term under Section 122 of the Trade Act of 1974 as a transition, and then initiate Section 301 to address "unfair trade," supplemented by Section 232 national security tariffs, which could quickly restore the tariff rate to 11.8%-12.6%, not much different from the current level

- UBS reports that even if the U.S. Supreme Court rules against the legality of tariffs imposed under the International Emergency Economic Powers Act (IEEPA), the government has a "B plan" ready to reinstate tariffs quickly.  
- The report indicates that if IEEPA tariffs are overturned, the weighted average tariff rate (WATR) could temporarily drop from 13.6% to 7.2%, but is expected to rebound to 11.8%-12.6% through alternative legal measures.  
- The Supreme Court's skepticism regarding IEEPA's use for tariffs raises questions about which tariffs might be eliminated and the potential economic implications, but a comprehensive removal of tariffs is deemed unlikely.

What is Trump's Plan B if "reciprocal tariffs" are overturned?