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Tariffs Defeated, DOGE Failure, Big Bill Endangered – What’s Trump Gonna Do?
Last night one of President Donald Trump central policies was defeated in court:
Trump’s ‘Liberation Day’ tariffs halted by Court of International Trade (archived) – Washington Post
Most of President Trump’s tariffs were halted late Wednesday by a US trade court in a sharp rebuke of the president’s signature trade war policy.
A specialized federal court in New York on Wednesday ruled that most of President Donald Trump’s tariffs — including those on Chinese goods — are illegal, …
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The trade court’s ruling that Trump exceeded his authority in imposing tariffs on all imported goods brought an immediate, albeit perhaps temporary, halt to his signature trade war policy.
“The challenged Tariff Orders will be vacated and their operation permanently enjoined,” a three-judge panel ruled.
This is the end to Trump's tariffs.
His administration will do the utmost to fight the court ruling. But the legal reasoning against it is strong and higher courts are likely to follow it. As The Economist explains (archived):
[Trump's] orders imposing the fentanyl tariffs and reciprocal levies had cited a 1977 law called the International Emergency Economic Powers Act (IEEPA). It has its roots in the Trading with the Enemy Act, passed after America joined the first world war in 1917, which gives the president leeway to interfere in international economic transactions during national emergencies.
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In recent years courts have argued that the executive branch cannot rely on ambiguous delegations of power to take actions of great consequence, a principle known as the “major-questions doctrine”. IEEPA does not mention tariffs, but does give the president the power to “regulate” imports. Relying on it to “authorise anything as unbounded” as global tariffs, the court said, was inconsistent with both the major-questions doctrine and the established idea that Congress cannot delegate its powers to the president wholesale.
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It seems likely that the disputes will find their way to the Supreme Court. At that point they would be presided over mostly by justices who have been strong proponents of the major-questions doctrine.
Yves Smith at Naked Capitalism cites a number of sources and is largely confirming that take.
Trump will have to rescind the tariffs he has imposed so far. He will be able to immediately reintroduce new tariffs under different legal provisions. But those tariffs will have to have time limits and are legally restricted in size.
The whole Trump 'victory day' strategy of using absurdly high tariffs to negotiate trade deals in favor of the U.S. is thus in shambles.
No foreign 'partner' will be willing to concede on major issues as Trump has lost the means to pressure them. Negotiations on further trade deals will slow down or come to a halt.
With vanishing tariffs the hoped for billions of additional government income through tariffs will also be lost. Trump's domestic economic strategy around the 'one big beautiful bill' has thereby lost its economic basis. Without the additional income through tariffs the Senate will be unwilling to risk the high deficits needed to pass it.
But Trump will not be willing to concede defeat in the core project of his administration.
More tariffs, on less stable legal ground, are likely to be imposed by him.
For the economy all this will bring more uncertainty:
[A]nalysts at Goldman Sachs, a bank, warn that trade uncertainty has increased, rather than decreased, as a consequence of the court’s decision. Unless Mr Trump has a light-bulb moment of his own, America’s importers will be doing business in the dark.
Another major project of the Trump administration was the to seek spending cuts by eliminating government agencies. But DOGE has failed to deliver:
NewsWire @NewsWire_US – 21:04 UTC · May 28, 2025
White House to seek just $9B in spending cuts from Congress out of $175B in claimed savings found by Musk’s DOGE — Bloomberg
Elon Musk has left the administration and is already starting to criticize it.
Trump's peace-in-24-hours project in Ukraine has also failed.
All these are major catastrophes for Trump.
My fear is that Trump will now seek a new 'project' to divert the attention from the rubble his previous ones have left behind him.
What is there, but war, that could give him an easy win?
The economist is full of wishful thinking these days. Courts spend a lot of time attempting to arrive at a predetermined outcome rather than the merits of the case. The law in question is still on the books. I believe USCOIT decided not to apply it because if they had it would have raised an immediate claim that the emergency economic powers act transcends trade and falls outside their jurisdiction. IE they applied the trade act exclusively because is the only one they can adjudicate. I don’t see why SCOTUS would necessarily side with USCOIT, maybe they will, but I don’t think it is the slam dunk portrayed by The Economist.
The assertion by USCOIT that congress cannot delegate this authority seems specious as the court would not interpreting law but dictating to congress which powers they are allowed to delegate with some being “overly broad” at the courts sole discretion. This by itself is a separation of powers issue and beyond the jurisdiction of a trade court.
As for the law itself US code clearly gives the president the ability to declare an emergency without specifying exact conditions for it. And, once an emergency is declared, the executive has the ultimate authority regarding foreign entities. Congress must only be consulted.
TITLE II—INTERNATIONAL EMERGENCY ECONOMIC POWERS:
SEC. 203. 5 (a)(1) At the times and to the extent specified in section 202, the President may, under such regulations as he may prescribe, by means of instructions, licenses, or otherwise—
(A) investigate, regulate, or prohibit—
(i) any transactions in foreign exchange,
(ii) transfer of credit or payments between, by, through, or to any banking institution, to the extent that such transfers or payments involve any interest of any foreign country or a national thereof,
(iii) the importing or exporting of currency or securities, 6 by any person, or with respect to any property, subject to the jurisdiction of the United States;
(B) investigate, block during the pendency of an investigation, 7 regulate, direct and compel, nullify, void, prevent or prohibit, any acquisition, holding, withholding, use, transfer, withdrawal, transportation, importation or exportation of, or dealing in, or exercising any right, power, or privilege with respect to, or transactions involving, any property in which any foreign country or a national thereof has any interest by any person, or with respect to any property, subject to the jurisdiction of the United States; and 8 .
(C) 9 when the United States is engaged in armed hostilities or has been attacked by a foreign country or foreign nationals, confiscate any property, subject to the jurisdiction of the United States, of any foreign person, foreign organization, or foreign country that he determines has planned, authorized, aided, or engaged in such hostilities or attacks against the United States; and all right, title, and interest in any property so confiscated shall vest, when, as, and upon the terms directed by the President, in such agency or person as the President may designate from time to time, and upon such terms and conditions as the President may prescribe, such interest, or property shall be held, used, administered, liquidated, sold, or otherwise dealt with in the interest of and for the benefit of the United States, and such designated agency or person may perform any and all acts incident to the accomplishment or furtherance of these purposes.
See:
https://www.govinfo.gov/content/pkg/COMPS-1079/pdf/COMPS-1079.pdf
The law is quite explicit. The president has the authority, granted to him by congress no less, to do practically whatever he wants regarding foreign entities in an emergency. The act goes far beyond tariffs. There are some exceptions involving things of no value, donated foodstuff, and informational materials, but this isn’t what The Economist was referencing.
Also, there are other possible responses outside of appeal. By calling these tariffs the administration put itself under the jurisdiction of the trade court. Instead the countries and business could simply be sanctioned. Sanctioned entities have little prospect of success in US courts as they would need permission from the US in order to sue.
See:
https://www.law.cornell.edu/wex/Sovereign_immunity
I think this is far from settled.
Posted by: port | May 29 2025 19:00 utc | 53
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