Q&A – What’s the Deal w/Tariffs After Court Rulings? - Driven By Braman Motorcars
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Today’s Entry: @brianmuddradio What’s the difference with the tariffs the court left in place vs. the ones they ruled against? It seems like more selective judicial interference.
Bottom Line: Certainly President Trump, who immediately appealed Wednesdays ruling by the U.S. Court of International Trade striking down most of his imposed tariffs, would agree with your sentiment. Also, as we saw yesterday, the U.S. Court of Appeals for the Federal Circuit at least temporarily agreed with the president’s position as well in the temporary stay of the lower court’s ruling allowing for the tariffs to remain in place while the case is heard. At issue is the question as to if the president is allowed to unilaterally impose tariffs with the use of the International Emergency Economic Powers Act.
The law, passed by a Democrat-controlled congress in 1977, and signed into law by Jimmy Carter, provided the president with broad authority to self-regulate economic transactions following a declaration of national emergency. The context for the timing of the law was the 1970’s energy crisis which resulted in gas shortages throughout the country that also coincided with the Cold War with Russia. The idea was that the U.S. needed to become nimbler during times of adversity and this law fast-tracked a way for that to happen. The flip side of that law...it became especially tempting for presidents to declare emergencies to unilaterally implement economic policies.
Prior to President Trump’s current administration over 100 national emergencies invoking the International Emergency Economic Powers Act had taken place. Or an average of over two declared national emergencies per year. Starting with Jimmy Carter, every president has invoked the act to declare national emergencies allowing for unilateral economic policies. The most prolific user was Bill Clinton, who invoked it over 30 times expanding the usage to all matters of foreign policy around the world. In fact, 39 previously declared national emergencies were still in place on Inauguration Day this year. So, about this...
President Trump successfully used the IEEPA to declare a national emergency ten times during his first term as president with three establishing economic restrictions with foreign governments that would be most similar to efforts attempted with his Liberation Day tariffs announced April 2nd:
- Iranian sanctions after withdrawing from the Iran nuclear deal
- The freezing of Venezuelan government property due to political repression
- Limiting the access of Chinese apps for data collection (TikTok and WeChat)
All of those cleared legal scrutiny. So, what has theoretically changed now, after all didn’t Trump impose tariffs during his first term without a problem? And the answer is that he did...however he went about it differently.
The tariffs President Trump imposed during his first term came without a declared national emergency but rather through the use of the Trade Act of 1974 that allows the president to negotiate trade deals, tariff rates and to address unfair trade practices. Without getting overly wonky, it had already been legally determined that China was a currency manipulator and had engaged in unfair trade practices (also through market manipulations). That’s what’s different this time.
President Trump has sought to expand the reach of IEEPA authority to impose tariffs at will. That’s not happened before. In the decision written by the Court of International Trade they stated: The Worldwide and Retaliatory Tariff Orders exceed any authority granted to the President by IEEPA to regulate importation by means of tariffs.
In a separate order for targeted tariffs issued against Canada, Mexico and China in which President Trump’s order declared a drug trafficking emergency as the catalyst for the imposed tariffs, the judges stated that the administration's orders “Fail because they do not deal with the threats set forth in those orders”. In other words, there’s nothing inherent about the tariffs on those three countries to target drug trafficking.
You may agree or disagree with the decision but what has been attempted by the Trump administration is unprecedented territory and it’s clear that the International Trade Court was uncomfortable with further expansion of the IEEPA for use of unilateral Presidential economic policy.
So, as it currently stands... the tariffs that Trump already had in place are the ones that remain in place. To be continued...