Lordy be, now we have Trump attacking the conservative Supreme Court because it struck down the tariffs he imposed on nearly every country. I am delighted for two reasons. First, because I always said that if anybody is going to stop Trump, it wound have to be the courts, who have now demonstrated some rare unanimity against his nonsense. It heartens me that the Court, right-wing as it is, can still be rational. Second, I have also argued (along with all rational economists) that tariffs are never good, and in the end it is the consumers who suffer.
The 3 dissenters in the vote were Kavanaugh, Alito, and Thomas, with the last two predictable.
So now Trump is frothing at the mouth at the court he though he could count on. And it is the Court of Last Resort. Though he swears he will find a way to circumvent this ruling, I do not think he will. Click below to read, or find the article archived here.
At last, some happy political news. An excerpt, and note that the Chief Justice wrote the opinion, as he can reserve that right for himself:
A Supreme Court decision on Friday striking down President Trump’s sweeping global tariffs dealt a major blow to his economic agenda and brought new uncertainty to global markets struggling to adapt to his whipsawing trade policies.
The court, in a 6-3 decision written by Chief Justice John G. Roberts Jr., ruled that Mr. Trump had exceeded his authority when he imposed tariffs on nearly every U.S. trading partner last year. The ruling prompted a defiant response from the president: In a news conference at the White House, he vowed to restore tariffs using other authority and excoriated the justices who had ruled against him as “fools and lap dogs.”
The ruling threw into doubt a series of trade deals with countries around the world that the administration struck in recent months, and left unclear whether U.S. companies or consumers would be able to reclaim some of the more than $200 billion in fees the federal government has collected since the start of last year. Justice Brett M. Kavanaugh warned in a dissent that any refund process could be a substantial “mess.”
Mr. Trump was the first president to claim that the 1977 emergency statute, which does not mention the word “tariffs,” allowed him to unilaterally impose the duties without congressional approval. Writing for the majority, Chief Justice Roberts said that statute did not. The court’s ruling, backed by justices from across the ideological spectrum, was a rare and significant example of the Supreme Court pushing back on Mr. Trump’s agenda.
A small but vocal group of Republicans in Congress joined Democrats in celebrating the court’s ruling, reflecting frustration that their branch of government has ceded its authority over trade matters to the White House. Senator Mitch McConnell, the Kentucky Republican and former longtime party leader, said the ruling left “no room for doubt” that Mr. Trump’s circumventing of Congress was “illegal.”
Trump learned the bad news at a meeting in the White House, when an aide passed him a note as he was answering questions:
The ruling, Mr. Trump said, was a “disgrace.” Speaking to a crowd of governors, cabinet officials and White House aides, the president lashed out at the court but insisted that he had a contingency plan.
He took one more question from Gov. Josh Stein of North Carolina, a Democrat, about hurricane assistance, but then ended the meeting early. He wanted to work on his response to the ruling, he said.
For Mr. Trump, the Supreme Court decision was not just a political setback, but a personal one. He has promoted tariffs for decades, and has claimed that his sweeping levies resuscitated the economy and revived American manufacturing.
“Tariff is my favorite word in the whole dictionary,” he said Thursday at an event in Rome, Ga.
Data released on Thursday showed Mr. Trump’s tariffs were not having the effect he had promised they would. U.S. imports grew last year, and the trade deficit in goods hit a record high. U.S. manufacturers have also cut more than 80,000 jobs in the past year.
The administration does have other laws it can rely on to try to re-enact the tariffs, but those laws have procedural constraints and might not allow tariffs as expansive as those struck down by the court.
The emergency-economic law invoked by Trump “was designed to address national security concerns and so was designed for flexibility and speed,” said Everett Eissenstat, deputy director of the National Economic Council in Trump’s first term. “Other statutory authorities are not as flexible.”
The president could also seek explicit authorization from Congress to reimpose the sweeping tariffs, though that route appears politically unlikely.
Where is he gonna go now?
Tariffs can serve a purpose in protecting US industries from foreign government-subsidized products, but of course that’s not what Trump was doing.
I was surprised to discover that foreign imports of goods make up only ten percent of the economy, whereas services comprise 75 percent, so Trump’s tariffs do cause some damage but not disastrously. The greater damage is from the uncertainty, which will continue. There is no predicting what insanity he will engage in next. Invading Iran, it seems.
The MAGA crowd at the WSJ has abandoned the comment section, leaving thousands of anti-tariff comments.
Some pointed out that this will help the economy, saving Trump from himself. Unless, of course, he finds a way around it.
The Free Press jumps in with advice on how to get around the ruling.
https://www.thefp.com/p/trumps-tariffs-are-downbut-not-out
Trump today: “Absolutely ashamed, for not having the courage to do what’s right for our country. I’d like to thank and congratulate justices Thomas, Alito, and Kavanaugh for their strength and wisdom and love of our country, which is right now very proud of those justices…The Democrats on the court are thrilled, but they will automatically vote no. They also are a, frankly, disgrace to our nation, those justices. They’re an automatic no matter how good a case you have. It said no. They’re very unpatriotic and disloyal to our Constitution.”
He and Vance, who also trashed the Supremes, are dangerous.
The market seems to like the news, but much remains unanswered. Will the administration need to return the illegally gotten gains to consumers? To importers? To the transport companies that brought the goods from the ports of entry to the distribution centers? To the companies that delivered the goods from distribution centers to stores or to homes?
If required to pay back the loot, how would they even unwind the tangle of transactions? Many will have their hands out claiming that they need to be made whole. My guess is that it would be a waste of time and money for plaintiffs to try to recover the funds. The cost of litigation might very well exceed the value of the stolen money. We know that President Trump will not release that money without a fight. And what about the U.S. trade deficit? Will the country’s balance sheet needs to be revised?
Oy gevalt! This is not over.
I would expect there to be class action suits. But yes, it will be a mess.
I’m not sure that you can sue the U.S. Government for this sort of thing. AI suggests maybe but the government typically claims sovereign immunity.
Complicating the accounting would be three knock-on effects:
1) News reports describing the failure of inflation to skyrocket as expected quoted some importers as saying they had been able to get their foreign suppliers to give them price breaks to maintain sales volume, suggesting that the foreign supplier had been extracting some rent in its pricing. Those foreign exporters then did bear (some of) the cost of tariffs, just as President Trump said they would. Reimbursing the importers would be a unearned windfall for them, unless they out of the goodness of their hearts refunded the money back to their foreign suppliers, which they wouldn’t. An extra benefit is that the American importer now knows what (lower) price the foreign supplier is willing to sell for, and can be expected to demand that lower price even with the tariffs removed.
2) To the extent that Americans avoided the tariffs altogether by switching to domestic goods (possibly more expensive but possibly only just not exactly what the customer wanted, such as California sparkling instead of champagne), the tariffs couldn’t be refunded to them. No one knows who those tariff avoiders are, since they have no receipts of having paid any tariffs to the US Treasury.
3) Domestic currency tends to appreciate against foreign currencies when a country imposes tariffs, all else being equal (which it never is, of course.) A higher US dollar makes it easier for Americans to afford the tariffed imports and a lower foreign currency makes it easier for the exporter to sell abroad. Both effects go a considerable way to attenuating the impact of the tariffs on retail customers. This is the fundamental economic argument against the utility of tariffs as a way to encourage domestic production.
I can’t see the U.S. Treasury allowing $200 billion to just walk out the door, either. And it would have to be made up with higher taxes or more borrowing, so the taxpayer pays anyway.
“Where is he gonna go now?”
Jed Rubenfeld has his usual balanced and informative take on things. Check out his piece at the FP :
https://www.thefp.com/p/trumps-tariffs-are-downbut-not-out
Jed’s one of the reasons I subscribe to the FP. Nellie & Niall Ferguson are two more.
As an Antipodean I was outraged by the tariffs levied that have devastated the economies of the Heard and Macdonald Islands.
Anyhow, what’s the tax on Russian and North Korean imports this time round?