In invoking IEEPA, the president argued that “a lack of reciprocity in our bilateral trade relationships, . . . as indicated by large and persistent annual U.S. goods trade deficits, constitute an unusual and extraordinary threat to the national security and economy of the United States.” Economists retort that the half-century-old trade deficit, or the gradual slide in the share of U.S. employment in manufacturing over many decades, doesn’t constitute a national emergency. Tariffs were hiked against countries with which the U.S. has a trade surplus, and against countries with which the U.S. already has reciprocal free-trade agreements.
For all that, there is ample precedent against the court’s questioning an emergency declaration. IEEPA was used to declare national emergencies 69 times before President Trump’s second term. No court has ruled any emergency under IEEPA unwarranted. Congress delegated to the president the determination of what an emergency is, so a degree of deference to his judgment is in order.
Thus the main question before the court is whether blanket tariffs are a legitimate remedy under IEEPA. How strong is the legal case against the tariffs?
IEEPA makes no mention of tariffs. The intention of the act seems to have been to address national-security threats from unfriendly and hostile nations with sanctions or embargoes, not to “regulate” imports to address imbalanced or nonreciprocal trade. The phrase “regulate trade” is somewhat ambiguous, but Congress could have used the word tariff and didn’t. Moreover, the Trump tariffs are against all imports from every source. From a statute that doesn’t even mention tariffs, that seems a pretty large leap.
The central question is whether Congress delegated unlimited and unchecked authority over tariffs simply by the president’s declaring a national emergency. A look at the statutes dealing with trade clearly demonstrates that Congress has been careful in its grants of tariff authority to the executive branch. The president has often been granted authority to reduce tariffs pursuant to trade negotiations, but these grants—known as Trade Promotion Authority—were always temporary, and the last one expired in 2021. No legislation enacted since 1988 included any power to raise tariffs.
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In enacting IEEPA, did Congress intend this massive usurpation of its own authority over foreign commerce? Or is IEEPA a practical way to safeguard the nation’s interests consistent with the intent of the framers of our founding document? It’s one of the most important questions ever to come before the court.
Jacob Sullum – quoting from an economists’ amicus brief submitted in the case against Trump’s “Liberation Day” tariffs – is correct: “Trump’s economic fallacies are legally relevant in his tariff case”. (DBx: I’m among the economists who signed this amicus brief.) Two slices from Sullum’s essay:
Trade deficits “have existed consistently over the past fifty years in the United States, for extended periods in the United States in the nineteenth century, and in most countries in most years in recent decades,” the economists note. “They are thus not ‘unusual and extraordinary,’ but rather ordinary and commonplace.”
The brief adds that there is nothing inherently problematic about aggregate or bilateral trade deficits, such that they would constitute a “threat” to the United States. Even the term deficit is misleading in this context, the economists note, since the situation that Trump bemoans necessarily corresponds to a “foreign investment surplus.”
When a country “imports more than it exports,” the brief explains, that means it “receives more foreign investment than it invests abroad.” That is why “the leading explanations of the U.S. trade deficit view it as a sign of U.S. strength, not weakness.”
Trump seems to view foreign investment as a good thing. Yet “absent offsetting adjustments elsewhere,” the brief says, “these investments will increase the U.S. trade deficit.”
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It is therefore “odd to economists, to say the least, for the United States government to attempt to rebalance trade on a country-by-country basis,” the brief says. And contrary to Trump’s presumption of unfairness, “foreign tariff rates on US exports do not correlate positively with the size of US trade deficits.”
Also pointing out fatal flaws in the Trump administration’s arguments in support of its tariffs is Reason‘s Jack Nicastro. Here’s his conclusion:
The Supreme Court has a chance to strike down one of the most damaging policies of the second Trump administration. The weakness of the Trump administration’s arguments seems to bode well for the American consumers and business owners who have been harmed by the president’s IEEPA tariffs. Still, there’s always a chance that the Court sides with the president. If that happens, Trump will possess nearly unlimited tariff power on imported goods, and the separation of powers will continue to erode.
Clark Packard busts the myth that IEEPA tariffs are an essential tool for conduction foreign policy. A slice:
The administration’s argument that an ability to impose tariffs under IEEPA is needed to effectively manage the country’s foreign affairs is belied by historical experience. For nearly 80 years, the United States—first through the General Agreement on Tariffs and Trade and later via its successor, the World Trade Organization—has responsibly stewarded the rules-based international trading system. IEEPA tariffs played no role in the formation and flourishing of this system, nor did they contribute to other major foreign policy successes since the IEEPA’s 1977 enactment.
In briefs before the Supreme Court, small businesses have similarly argued that this case is “no different” from ones in which the Supreme Court blocked Biden-era policies due to a lack of clear congressional authority.
Notwithstanding Somin’s blogging, Trump’s tariff scheme appeared to be on a collision course with the Supreme Court.
Rick Woldenberg, who runs two educational toy businesses near Chicago, hired Akin Gump to pursue a separate case that earned victories in two lower courts. A group of Democratic-led states also brought a case and will share time with the private businesses during Wednesday’s arguments.
Still, Schwab said Somin’s initial post a couple weeks into the new Trump administration proved decisive in getting litigation started.
Benn Steil reveals who pays Trump’s tariffs. (HT Scott Lincicome)
Jeremiah Johnson argues that America needs a free-trade party. Two slices:
If Republicans are now the party of high tariffs and trade skepticism, Democrats can’t just be the party of “tariffs, but smarter.” America needs at least one of our major parties to stand up, loudly and clearly, for free trade.
The situation is ripe for Democrats to unapologetically champion trade because the damage being done by Trump’s tariffs is real and hitting so many sectors of the economy simultaneously.
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Trump is attempting to build an “imperial presidency” in his second term, where he can bypass Congress and rule via executive orders and decrees straight from the White House. Republicans in Congress seem perfectly content to let Trump rule that way. This is evident in his approach to immigration enforcement, his “efficiency” drive with DOGE, and in countless other areas. But it’s perhaps most true when it comes to trade policy. Article I, Section 8 of the Constitution gives Congress the sole power to “collect Taxes, Duties, Imposts and Excises” on foreign countries. Over the years, Congress has passed laws delegating this power to the president in certain circumstances. But Trump has taken a tool meant for emergency measures and illegally used it to pass sweeping tariffs on every country in the world.
In short, whatever you think about the decision to put together the final six components—of a pencil or a Sharpie—in America, Read’s points still hold. The most relevant for our purposes is this: No person or no nation is smart enough, knowledgeable enough, or skilled enough to do it alone efficiently. The “invisible hand” is just another term for price signals. Diverse decision-makers look to prices as a way to allocate resources efficiently and profitably.
Bizarrely, Griswold claims that [Newell Brands CEO Chris] Peterson figured out how to onshore Sharpies without reference to “price signals.” This is ridiculous. If he didn’t pay attention to price signals, why make the tip in Japan? Why buy affordable robots instead of unaffordable ones? Any CEO who ignores price signals will not be a CEO for very long.
Like Mr. Trump, however, Mr. DeSantis seems eager to play to the stereotype. Their attacks on H-1B visas, which are often used to hire scientists and engineers, suggest an animus toward foreign workers regardless of their legal status.
Mr. DeSantis says the crackdown on H-1B hiring is necessary to protect jobs for Americans, but the jobless rate in Florida is below 4%. According to the National Foundation for American Policy, data from August show that the national unemployment rate is 3% in computer and math occupations and just 1.4% in architecture and engineering. Hiring foreign nationals isn’t necessarily a money-saver for employers, as opponents claim it is. An academic analysis of immigrant pay published in 2021 concluded that “in computer and mathematical sciences, temporary work visa holders on average make about 14% more than their U.S.-born counterparts.”
Banning foreign nationals from positions in academia makes as much sense as banning them from filling spots on the Florida Panthers. Most of the hockey team wasn’t born in the U.S. Does the governor have a problem with that? Should the Panthers be forced to reserve spots for players born in Florida or the U.S., or would that put the team at a competitive disadvantage against opponents who field the best players, regardless of national origin?
Kimberlee Josephson distinguishes genuine sources of economic growth from imaginary sources.
