Tariff Trouble

What the Court got right, wrong, and forgot altogether

Trump’s universal tariffs and additional country-specific tariffs have been struck down by the Supreme Court. These tariffs were projected to not only bring in $300-400 billion in revenue, but also protect and foster vital industry. Trump has used tariff authority to force trade deals with dozens of nations and fundamentally reorient American economic policy. Many economists, especially the ones at the Federal Reserve, have not come to terms with this fact. Tariffs don’t cause inflation. Inflation is an expansion of the money supply. They do, possibly, raise prices either because imports are more expensive or domestic producers which can’t compete at lower costs are brought into the competitive market. Since high interest rates are meant to control inflation in its true sense, the current rates are harmful. Low interest rates are crucial to any industrial policy which has the aim of rebuilding manufacturing capacity. Low rates allow firms to take out the loans required for massive investment into capital projects to build out the industrial base. The second crucial aspect of any enterprise to spur manufacturing is stable, long-lasting, protectionary tariffs and other industrial policies that shield domestic industry as it matures, until it can reach scale to be competitive. The federal reserve won’t play ball on interest rates, and congress won’t implement tariffs.

Conservatives will be getting some good news in this essay, but first they must take one piece of harsher wisdom: if industrial policy requires long-term planning it cannot be at the whim of a president or the federal reserve. The legislature, by passing law, is the only body fit for such a purpose. The obvious problem with Trump’s current tariff policy is that most companies were waiting for this moment. Why invest in manufacturing when the tariffs could be overturned? The main benefit ordinary Americans were getting from the tariffs was that foreign businesses and American multinationals were largely eating the cost of tariffs, essentially covering part of the giant fiscal deficit and keeping China in a deflationary spiral. It also forced China to divert trade to other markets, harming the industrial bases of our adversaries.

This essay, dealing with tariff authority, will not touch much more on the Federal Reserve, but their resistance and the problems associated with it are noted above. Accordingly, as I will argue, the Court’s majority was correct in their statutory interpretation, but they ruled on the wrong grounds, and without the requisite bravery to force substantive positive change. In ruling narrowly against Trump’s tariff authority, they destroyed the great benefits of Trump’s industrial policy while refusing to broaden their attack on legislative delegation. If they had attacked delegation broadly, and thereby invalidated many of the laws that underpin the administrative state, the loss of the tariffs would have been bearable. But the weaker justices refused to do so. Their narrow ruling on only the IEEPA language did have a silver lining, as it did not eliminate Trump’s authority to immediately implement a new 10% (now 15%) global tariff using a different trade act. If you don’t care about the law or the ruling, skip to the final subsection for a more abstract takeaway before closing the essay; just know you’re missing out.

The Ruling & It’s Flaws

I shall begin with the controlling opinion, written by Justice Roberts. The complaint levied by Roberts and the majority begins by stating that “Based on two words separated by 16 others in Section 1702(a)(1)(B) of IEEPA— ‘regulate’ and ‘importation’—the President asserts the independent power to impose tariffs on imports from any country, of any product, at any rate, for any amount of time. Those words cannot bear such weight.”¹ The line of attack is already clear, the Court will mostly be focused on the statute itself. Roberts convincingly argues the point that “The first Clause of that provision specifies that ‘The Congress shall have Power To lay and collect Taxes, Duties, Imposts and Excises.’”² It seems fairly obvious to all that Congress has the power to levy tariffs, a type of tax. Without going into legal detail, republican government is the opposite of rule by decree, it is rule by law. The anxiety any free person felt while being ruled by decree during the COVID-19 pandemic should make it clear that such a system is incompatible with the character of a free people.

This leads us, and Roberts, to two additional questions. (1) Does the statute delegate this sweeping power of Congress to the President? (2) Can Congress delegate this authority to the President? Taking up question one, Roberts relays that the IEEPA “authorizes the President to “investigate, block during the pendency of an investigation, regulate, direct and compel, nullify, void, prevent or prohibit . . . importation or exportation.” 50 U. S. C. §1702(a)(1)(B).”³ By omitting the power to lay tariffs, Congress did not authorize them in this statute, especially considering the other emergency statutes Trump can and will use explicitly did authorize tariffs. He states that “The power to “regulate . . . importation” does not fill that void. “Regulate,” as that term is ordinarily used, means to “fix, establish, or control; to adjust by rule, method, or established mode; to direct by rule or restriction; to subject to governing principles or laws.””⁴ On this much I believe Roberts is correct, but as I will demonstrate next that whether you believe this interpretation or the dissent’s is mostly irrelevant, as there is a far deeper and more important issue that is at stake. Particularly convincing is the argument that “A contrary reading would render IEEPA partly unconstitutional. IEEPA authorizes the President to “regulate . . . importation or exportation.” 50 U. S. C. §1702(a)(1)(B) (emphasis added). Taxing exports, however, is expressly forbidden by the Constitution. Art. I, §9, cl. 5.”⁵

The bigger issue in this case is the status and use of the Major Questions Doctrine, henceforth referred to as the MQD. First, I will look at how Roberts applies the MQD in his opinion. Roberts lists the cases this doctrine has been used to overturn, including “In Biden v. Nebraska, 600 U. S. 477 (2023), for example, we declined to read authorization to ‘waive or modify’ statutory or regulatory provisions applicable to financial assistance programs as a delegation of power to cancel $430 billion in student loan debt.”⁶ In each major questions case “the Government claimed broad, expansive power on an uncertain statutory basis.”⁷ But the Court holds that “‘[B]oth separation of powers principles and a practical understanding of legislative intent’ suggested Congress would not have delegated ‘highly consequential power’ through ambiguous language.”⁸ Moving specifically to tariffs he states that “When Congress has delegated its tariff powers, it has done so in explicit terms, and subject to strict limits.”⁹ Citing examples of other tariff-related statutes, “It has capped the amount and duration of tariffs. See, e.g., §1338(d) (50% cap); §2132(a) (15% cap, 150-day time limit); §2253(e) (50% cap, phasedown requirement after one year). And it has conditioned exercise of the tariff power on demanding procedural prerequisites.”¹⁰

Herein lies the entire contest over the MQD. Roberts is not touching the delegation issue, he doesn’t ask if Congress can delegate this power, just whether they delegated it with such clarity, limits, and safeguards as to not make it trigger the MQD. As Justice Thomas rightly notes in his dissent, the MQD is being used as a canon of statutory interpretation in this context. It is asking whether the statute is so ambiguous and that the President’s interpretation of it is so sweeping that Congress would never have passed such a law if it knew it was going to be interpreted in such a manner. If so, it would be a transformative expansion of the President’s power. Roberts, and myself for that matter, are unconvinced by the attempts of the dissent to carve out an exception either based on emergency powers or a new exception that foreign trade is not a “core legislative power” and therefore can be delegated in such a manner, as Thomas argues in the dissent (This will be explored more in the next subsection).

Justice Thomas in his dissent states that:

The principal opinion bases its decision on the major questions doctrine. Ante, at 7–13 (opinion of ROBERTS, C. J.). In some cases, the Court has used the major questions doctrine as a canon of statutory interpretation because delegations of major powers are unlikely to be subtle. See, e.g., Whitman, 531 U. S., at 468; see ante, at 8 (opinion of ROBERTS, C. J.); see also Biden v. Nebraska, 600 U. S. 477, 501–503 (2023). In other cases, the Court has used it to avoid what would have been originally understood as an unconstitutional delegation of legislative power. See, e.g., West Virginia v. EPA, 597 U. S. 697, 723 (2022); ante, at 8 (opinion of ROBERTS, C. J.).¹¹

Further, Gorsuch accuses the majority of attempting to recast the MQD:

Though joining today’s principal opinion holding that “clear” statutory authority is required to sustain the exercise of an “extraordinary” power, ante, at 13, 20, JUSTICE BARRETT has suggested that the major questions doctrine might be reconceived. On her view, the doctrine need not be understood as a “substantive canon designed to enforce Article I’s Vesting Clause”—a “valu[e] external to a statute.” Nebraska, 600 U. S., at 508, 510 (concurring opinion). Instead, the doctrine might be thought of as a “commonsense principl[e] of communication” that counsels “skepticism” when executive officials claim extraordinary powers derived from Congress. Id., at 514, 516; see also post, at 1–4 (concurring opinion).¹²

I agree with Gorsuch that this doctrine should not be recast. The most catastrophic part of this opinion, as I hinted at in the intro, is the attempt to reorient the MQD solely as a canon of interpretation and not a substantive canon meant to enforce the nondelegation principle of the legislative power. There had been some hope that the MQD was developing into a tool to enforce the principle of nondelegation. By limiting Congress’ ability to delegate its legislative authority, many statutes are called into question, including the enabling statutes of the administrative state. If the Court had given a full throated defense of the MQD as upholding the nondelegation principle, they would have struck down the tariffs but also struck at the heart of the administrative state. The juice may have been worth the squeeze. By failing to do so, the Court not only hinders an important part of Trump’s agenda while gaining nothing in return, they actually do not resolve the fundamental tension at hand.

Trump’s Next Steps, Dissent’s Caesarism, & the Path Forward

Due to the fact that the Court failed to resolve this tension, Trump can easily invoke other statutes with extraordinary grants of delegated legislative power with ease. Since the opinion used the MQD as a statutory canon and ruled only against the fact that “regulate…importation” cannot be used to justify tariffs specifically, the door is still wide open. Some Examples: Section 122 of the Trade Act of 1974 “authorizes the president to address ‘large and serious’ balance-of-payments deficits by imposing tariffs of up to 15%” for 150 days.¹³ Trump used this to immediately establish a new 15% global tariff. Section 232 of the Trade Expansion Act of 1962 has not been struck down and authorized industry specific tariffs to protect the undefined “national security” and gives broad powers to the President. Section 301 of the Trade Act of 1974 further authorizes the President to respond to unfair foreign trade practices that are “unreasonable or discriminatory” without defining such practices.¹⁴ Half of Trump’s tariffs are still in effect because these statutes were not at question. Finally, the still uninvoked Section 338 of the Tariff Act of 1930 states that the President may

“impose tariffs of up to 50 percent of a good’s value on imports from countries that unreasonably discriminate against U.S. trade through tariffs, regulations, or other measures. The statute allows action whenever the president ‘finds as a fact’ that such discrimination exists, suggesting that a formal investigation may not be required.”¹⁵

Fact-finding has always been a valid executive function, but how does one determine a fact relating to such a broad and indeterminate statute? It is impossible. If we are going to have a republic, congress must be forced to write laws with far less delegation of legislative power.

And therein lies the problem. The Court didn’t meaningfully limit the President’s ability to enact tariffs and they didn’t correctly apply the nondelegation principle, as Thomas and Gorsuch point out. The nondelegation principle is core to republican government. The Court could have made a big step by beginning serious enforcement of that doctrine and by extension force Congress to actual legislate again. They could have seriously undermined the enabling doctrines of the administrative state. This is necessary to restore both constitutional governance and competent administration to the Federal government. This would mean a reduction in the discretion of the administration in the executive branch, but an increase in its competence and effectiveness. But Congress must set the core policies by law and leave only the competent implementation to the executive. For example, how is ‘national security’ any more defined than ‘regulate… importation’? It isn’t. The major question has not been answered. It was avoided via a narrow ruling. Trump’s continued use of various other powers will force this confrontation eventually, hopefully. The Court may yet be forced in the future to give the executive broader powers or finally reign in the reckless delegation of Congress’ legislative power.

Speaking of broad delegation of legislative power to the executive, we must quickly examine Justice Thomas’ dissent. Suffice to say I disagree with the idea that the major questions doctrine doesn’t apply either in an emergency or as it relates to foreign commerce. The former is contradicted by Biden v. Nebraska, and the latter is bordering on the absurd. It nonetheless represents an interesting path forward, if indeed we resign ourselves to stay in the post-constitutional world of the administrative state and its accompanying vestigial Congress. Justice Thomas states that the Constitution’s separation of powers only forbids Congress from delegating “core” legislative power to the President, which is the power to make “substantive rules setting the conditions for deprivations of life, liberty, or property.”¹⁶ Thomas first lists powers that can’t be delegated, like regulation of commerce and internal taxation. Then explains his intepretation:

Congress also has many powers that are not subject to the nondelegation doctrine. “We now think of the powers listed in Article I, Section 8 as quintessentially legislative powers, but many of them were actual, former, or asserted powers of the Crown, which the drafters decided to allocate to the legislative branch.” M. McConnell, The President Who Would Not Be King 274 (2020) (McConnell); accord, Zivotofsky v. Kerry, 576 U. S. 1, 36 (2015) (THOMAS, J., concurring in judgment in part and dissenting in part). These include the powers to raise and support armies, to fix the standards of weights and measures, to grant copyrights, to dispose of federal property, and, as discussed below, to regulate foreign commerce. Art. I, §8; Art. IV, §3. None of these powers involves setting the rules for the deprivation of core private rights.

This is a somewhat shocking paragraph, to say the least. It is no mistake, and in fact it is a necessity, that Thomas must reference former powers of the Crown in order to justify such an interpretation. It is outside our constitutional conception that a President has the total right to regulate foreign commerce or raise an army as long as the power is delegated, despite his somewhat dubious examples to the contrary (some of them delegated due to deference to George Washington, and none nearly as expansive as what he is claiming). The Revolution was partly fought so that armies could not be raised and quartered without the consent of the legislature. The nation’s civil war almost came 30 years early over the use of tariffs by Congress (Nullification Crisis). These are simply not powers that can be delegated to the executive in a republic, or arguably in any free regime. However, Thomas may have decided to lean into Caesarism if he believes that Congress is simply so dysfunctional and dead that it cannot be revived. That, or it is simply an effort to make an exception for Trump on tariffs– and Thomas is usually loath to make exceptions to what he sees as justice. Either way, it is not sound constitutional interpretation, despite Thomas bringing his considerable intellectual prowess to bear in the attempt to make it so. This is an interesting thought, but we must leave it at that for now.

So what now?

In the long term we must continue to be cognizant of the fact that large-scale industrial policy needs to be enacted by actual law before corporate America will seriously invest in domestic manufacturing; as the great philosophers say, law must be stable and well known. However, in the short-term Trump will likely use the heretofore unused Section 122 powers to bridge the gap for 150 days. During this time he will initiate more investigations which are required to authorize additional Section 232 and Section 301 tariffs. These investigations take time, sometimes up to half a year. I will note, whatever you think of the SCOTUS decision, Trump relied too heavily on a single dubious statute to carry out his agenda. He has known for months that this was the likely outcome and so the decision not to initiate the investigations sooner will be a painful lapse of judgement for his administration– compounding the unnecessary loss already taken. I had even thought in the early days of the administration that the plan all along was to rely on IEEPA as a likely unconstitutional gap-filler, which would give time for numerous Section 232 and 301 investigations. Then the new fully legal tariffs would have been used to backfill the eventual loss of IEEPA authority.

The fact this didn’t happen hints at a continued lack of state capacity and a dearth of mid-level executive officials in conservative circles who are competent enough to do these things, but that is an entirely separate article (or a book, maybe even five volumes). We need a far deeper administrative bench. Trump’s second admin is far better than his first, but it is still seriously lacking. This very much reminds me of the unforced first-term errors that got Trump’s “Muslim Ban” overturned on technicalities. Finally, if Section 338 is invoked to establish new country-specific tariffs, such policy is likely to see a new Supreme Court challenge. But this time the statute is clear, and the nondelegation question may be forced.

Conservative media has been ablaze with angry reactions about the ruling– mostly because Patriots like the tariffs. To be clear, Position & Decision likes the tariffs too, and I like the tariffs myself. But there are real structural and incentive problems with a non-standard tariff regime slapped together by the executive. Those problems could be alleviated by congressional action, and the Republicans’ federal trifecta should be taking action. The fact that congress is not acting, though, is not really the fault of the Republican Party per se, although it’s true that the very narrow majority is not helping (a result of significant gerrymandering, another sign of the ill-health of small-r republicanism in America). The larger structural problem is that almost all serious rulemaking authority was given away by congress nearly a century ago. The enormous bloat of the administrative state and its own bureaucratic rulemaking capacity have drained congress from the incentive, the will, and even the institutional knowledge or sufficient virtues of statecraft to make that possible. We see Thomas in his dissent carving out a future that simply gives up on the old republican forms of this country. We cannot much longer live in a country where the legislature does not legislate, the weathering and cracks are more severe than they once were. Ultimately the Presidency will capture these powers in an attempt to do battle with the administrative state, and Red Caesar will attempt to save the nation by killing the republic, or the court will simply end the charade of insulated delegation to begin the long and surely troubled revival of a tenderfoot republican legislature.

1. SCOTUS Majority Opinion, pg. 5 (https://www.supremecourt.gov/opinions/25pdf/24-1287_4gcj.pdf)

2. SCOTUS, pg. 5

3. SCOTUS, pg. 14

4. SCOTUS, pg. 14

5. SCOTUS, pg.15

6. SCOTUS, pg. 7

7. SCOTUS, pg. 8

8. SCOTUS, pg. 8

9. SCOTUS, pg. 8

10. SCOTUS, pg. 9

11. SCOTUS, Thomas Dissent, pg. 18

12. SCOTUS, Gorsuch Conc., pg. 18

13. https://www.cfr.org/articles/how-trumps-tariffs-could-survive-the-supreme-court-ruling

14. CFR 2

15. CFR 3

16. SCOTUS, Thomas Dissent, pg. 2