The Tariffs Are Dead, Long Live the Tariffs
The Supreme Court may have struck down President Trump’s tariffs on Friday, but hours later, he had reimplemented them under other authority.
When the Supreme Court struck down President Donald Trump’s tariffs on Friday, the president promised that he would quickly find another way to save the cornerstone of his foreign policy and economic agenda.
A few hours later, he set that plan in motion.
When the Court’s 6-3 majority ruled that Trump lacked tariff authority under the International Emergency Economic Powers Act (IEEPA), he was severely annoyed, calling it a “ridiculous, poorly written, and extraordinarily anti-American decision.” He was also undeterred. “The good news,” Trump told reporters, “is that there are methods, practices, statutes, and authorities, as recognized by the entire court in this terrible decision, and also as recognized by Congress, which they refer to, that are even stronger than the IEEPA tariffs available to me as president of the United States.”
Why didn’t he and his team think of those other methods sooner? He “didn’t want to do anything that would affect the decision of the Court.”
The possible foreign policy fallout is a major consideration for the administration. Yet as for all the trade deals predicated on Trump’s tariffs, U.S. Trade Representative Jamieson Greer said those are still on. “We expect our partners to stand by them,” Greer said. “And I haven’t heard anyone yet come to me and say, ‘the deal’s off.’ They want to see how this plays out.”
To that end, also on Friday, Trump reimposed a 10% global tariff, this time under Section 122 of the Trade Act of 1974. On Saturday, he raised the rate to 15%. That law allows the president to impose tariffs up to 15% for 150 days pending a congressional extension, though those tariffs must apply universally to all imports (hence the global rate). The tariffs take effect on Tuesday.
Section 301 of the same law gives Trump a bit more flexibility to target specific countries, such as China, for unfair trade practices. Section 232 gives Trump authority for sector-specific tariffs to address national security. Both sections require full and formal investigations before any determination can be made.
The White House published a fact sheet laying out the rationale. “By taking this action,” it says, “the United States can stem the outflow of its dollars to foreign producers and incentivize the return of domestic production. By increasing its domestic production, the United States can correct its balance-of-payments deficit, while also creating good paying jobs, and lowering costs for consumers.”
Much of the fact sheet details what Team Trump views as a crisis-level problem of the U.S. export/import imbalance. Trump has harped on that for decades; this isn’t something he suddenly concocted upon retaking office. He wants Americans to make stuff here, and he hates seeing run-down industrial ghost towns dotting the nation’s landscape. Too many Americans are sitting on the sidelines after losing out to cheap foreign labor and other nations that subsidize industry.
Tariffs may be a blunt instrument, and the truth is that American consumers — not foreign countries — pay those tariffs, but Trump has identified a legitimate problem.
That doesn’t mean Section 122 is the best vehicle for addressing it, any more than the IEEPA was. National Review’s Andrew McCarthy explains the problem by pointing to Trump’s specific rationale:
In Section 122, Congress endowed the president with narrow, temporary authority to impose tariffs “to deal with large and serious United States balance-of-payments deficits” (emphasis added). What Trump is complaining about — something he insists is a crisis but is not — is the balance of trade, not of payments. The United States does not have an overall balance of payments deficit, much less a large and serious one.
It seems Trump’s White House is equating trade with payments. However, that isn’t exactly how things work. McCarthy writes:
The balance of payments is a broader concept than the balance of trade. It accounts for all the economic transactions that take place between the United States and the rest of the world. Even without getting into every kind of transaction that entails, suffice it to say that foreign investment in the United States, coupled with the advantages our nation accrues because the dollar is the world’s reserve currency, more than make up for the longstanding trade deficit in goods.
Our overall payments are in balance. There is no crisis.
President Trump’s objectives are understandable, and his desire to restore American greatness is incredibly admirable.
As with both of his immediate Democrat predecessors, however, he is overusing the “crisis” method of government, grasping at tenuous, post-hoc legal justifications for the thing he wanted to do but couldn’t get Congress to pass. He hasn’t even really tried to get Congress on board, though I seriously doubt a razor-thin Republican majority is keen to raise taxes in an election year.
That’s doubly true when tariffs have not demonstrably reduced the federal deficit or closed the trade deficit. Neither have they increased American manufacturing yet. Trump may simply need more than a few months for his policies to work as intended, and it’s obvious he won’t give up fighting.
