Op-Ed: Trump tariffs illegal but SCOTUS will probably support them. There’s a problem with that.

Donald Trump threatened to hit imports of pharmaceuticals and microchips with tariffs – Copyright AFP Darko DURIDANSKI

The Trump administration’s tariffs are universally unpopular worldwide. American importers have to pay the extra costs, which are passed on to consumers. The increased costs inevitably mean fewer goods are sold. Countries are targeted individually with weaponized tariffs. Global trade is an appalling mess.

These tariffs are raised under the International Emergency Economic Powers Act (IEEPA). The US Court of Appeals for the Federal Circuit in Washington, DC, held in a 7-4 ruling that the statute does not empower imposing tariffs. IN fact, the Act makes no mention of tariffs.

Meaning that many of the controversial tariffs now imposed also exceed the authority granted by the Act. Therefore, they’re illegal. It’s expected that the administration will appeal to the Supreme Court, and that the Supreme Court will uphold the tariffs.

In the meantime, the administration maintains that the tariffs are legal. It’s a Yes or No situation. If only it were that simple.

But –

The problem with these tariffs and their legalities or lack of legalities is that the US isn’t the only party involved. US importers can fairly say that if the statutory basis of the tariffs is illegal, they shouldn’t have to pay those billions in extra costs. Industry lobbies are likely to put a lot of pressure on the administration as the effects of tariffs become clearer.

That issue’s not likely to go away. The administration has nailed itself to tariffs as an instrument of international economic policy. There’s even a level of “prestige” in sticking to tariffs as the only way to do business. If the tariffs go, the whole house of cards goes with them.

The Supreme Court is in a particularly thankless position. If the Appeals Court is correct in that tariffs are not specifically empowered by the Act, any and all tariffs could be challenged in individual court actions.

Here’s the twist. The Supreme Court would have to make a blanket ruling that all tariffs stand to support the administration. That would lock in added costs for importers and consumers.  There would be a lot of pushbacks from the various economic sectors and other countries. Any negotiation with any other country would have to start with trade.  

Alternatively, any decision that the tariffs are not empowered by the Act effectively demolishes the entire tariff structure. That means that tariffs as a nominal source of revenue to pay for the ideologically sacred tax cuts would also be scuttled as a budgetary option.

In practice, of course, it’s much worse.  A brief overview of the last 200 years of tariffs is hardly encouraging. Tariffs just don’t work. The current range of tariffs are already seen as a major threat to prices. Tariffs are the antithesis of free trade, the supposed basis of modern capitalism.

Nothing can move fast on this subject. As expected by just about everyone, the inherent constipation of the tariffs dogma will prevent movement.

“Sic transit ingloria”. So goes the inglorious.