Chapter 1: What is the main topic discussed in this episode?
Big day for trade reporters, huh? Yes, one of many, but maybe this is the biggest one so far. Today, the Supreme Court ruled that the majority of President Trump's tariffs are illegal. Our colleague Gavin Bade has been following Trump's tariffs since the get-go.
He has used emergency economic authority under a novel use of an emergency law to institute most of his tariffs. And today, the Supreme Court said that he overstepped his bounds, that this should be a congressional authority, and that most of his tariffs were illegal. So, raises a lot of questions for both the administration and, you know, the law firms here in Washington. And for the U.S.
economy, quite frankly. Yes, absolutely. You know, there are many, many answers that still, you know, in the hours after this decision are still unknown. But what we know now is that he overstepped his bounds in instituting a lot of these levies and is going to have to go back to the drawing board on many of them.
Chapter 2: What did the Supreme Court decide about Trump's tariffs?
Trump has justified the bulk of his tariff policy using a 1977 law called the International Emergency Economic Powers Act, known as IEPA.
When you see him threatening tariffs at the drop of a hat, this is the legal authority he's using because it's the most flexible and it allows him to just instantaneously, with a presidential proclamation, change the tariff code. The Supreme Court today said, you can't do that. That is not an appropriate use of this law.
You're going to have to come up with another legal justification for these tariffs.
How big of a setback is this for Trump's economic agenda?
I think it's a big setback, so he's going to have to, you know, recalibrate his approach to economic diplomacy here.
Welcome to The Journal, our show about money, business, and power. I'm Ryan Knudson. It's Friday, February 20th. Coming up on the show, the Supreme Court says Trump's global tariffs are illegal, but Trump is not backing down.
We're a little over a year into Trump's second term and a little bit less than a year since Liberation Day last April when he really announced most of these sweeping tariffs. How have these tariffs actually performed? What impact have they had on the economy as far as we can tell so far?
Well, first and foremost, I think they've brought in a lot of money to the Treasury, right? At last count, you know, tariffs as a whole have brought in about $250 billion. Most of that has been through the IEPA tariffs. You've also forced up costs for a lot of American businesses, right? And for American consumers. A lot of factory owners saying, I used to get a widget that I use in my factory.
I used to get it for less money. Now I have to pass those costs on to consumers.
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Chapter 3: How did Trump justify his tariff policies?
You know, whether or not that is true in every case, tariffs are a hammer and every single international issue is a nail to Trump. He's used them for just about everything.
The law Trump used to justify most of his tariffs, AIPA, doesn't specifically mention the word tariff, but it gives the president broad power over foreign imports during emergencies. The Trump administration cited the trade deficit and the fentanyl epidemic as emergencies under the law.
And they said, well, if you read the IEPA statute, it allows you to regulate imports. It allows you to issue licensing fees. And so although it doesn't say tariff in particular, well, you know, it allows us to do all these other things that should allow us to use tariffs as well. The Supreme Court said not exactly correct.
In a 6-3 vote, the Supreme Court said that interpretation was wrong. There are plenty of laws that give the president explicit power to impose tariffs, but not this one.
You can regulate imports, you can put on licensing fees, you can even have an all-out blockade of certain imports and, you know, limit them completely, but it does not say tariff. And so that's, you know, the Supreme Court got hung up on that, you know, pretty important distinction there. And they said, you know, if it doesn't say that, we can't write it into the statute completely.
Chief Justice John Roberts also wrote in the majority opinion that the power to impose tariffs, a type of tax, rests squarely with Congress.
if Congress was going to give away that authority to the executive branch, it would have had to state it very explicitly. And they said, this is just not the case. They did not explicitly give away tariffing authority to the executive branch with this law. If they were to do that, it would have to be, you know, clear as day. It wouldn't be that they, oh, they...
Didn't write in tariff, but they meant tariff. It wouldn't be an oblique mention. And does that leave any of Trump's tariffs intact? Yes, absolutely. When you think about the tariffs on specific industries, the tariffs on steel and aluminum products, for instance, on cars and car parts, on trucks, on lumber. All of these things were promulgated under what's called Section 232.
It's a much more often used, much more durable and familiar statute. All of those are going to stay in place. So, you know, the tariffs on steel and aluminum and products made out of them, those are still in place. The ones on cars and trucks, still in place. Lumber, etc. And there are a number of other investigations that are still being worked through by the Trump administration under this law.
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Chapter 4: What are the economic implications of the Supreme Court ruling?
Kavanaugh wrote in his dissent that, quote, tariffs are a traditional and common tool to regulate importation, end quote. He said IEPA allows the president to impose tariffs more efficiently.
Basically, he has a more expansive view of what the executive branch should be able to do with economic power. So not entirely surprising that the justices who dissented decided to do that in this case.
A few hours after the court's ruling, Trump slammed the decision at a press conference.
The Supreme Court's ruling on tariffs is deeply disappointing. And I'm ashamed of certain members of the court, absolutely ashamed for not having the courage to do what's right for our country.
Then, Trump laid out his new plan for how to keep the tariffs in place. That's next. The Supreme Court has ruled that these tariffs are illegal. So what happens to all the tariff money that's already been collected? So this is a big open question.
The majority opinion does not explicitly address the issue of refunds, right? Typically, in a smaller tariff case, if the government takes some tariff money from a company and then it's ruled that it was improper to do so, there's a whole process that you go through with customs to get that tariff money back.
Those processes are probably not adequate for just this scale for hundreds of billions of dollars of tariff revenue that's come in.
Gavin says that a more likely scenario, though it's still unclear, is that the government could set up some kind of online portal where companies can submit a claim for a refund. By not addressing the question directly, the Supreme Court effectively punted the issue back to a lower court.
Is it possible that this lower court might just say, you know what, water under the bridge, we're not going to make anybody repay this stuff, but it's just illegal going forward?
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Chapter 5: How have Trump's tariffs affected American businesses and consumers?
They're going to reinstitute most of these tariffs. They want the revenue from it. They want to have the political symbolism of sticking up for U.S. manufacturers and U.S. workers. But I do think you'll find that they're not going to be quite as aggressive as they were before. And yeah, there may be a few more holes in this tariff regime as they try to reconstitute it.
Even if Trump is able to reimpose all of his tariffs, it's unlikely that his new justification will give him as much power as Aipa did.
Using IEPA for tariffs was really a silver bullet for the Trump administration. It allowed them to impose these things at a drop of a hat. It allowed them really unilateral authority over access to the U.S. market, which is just such a prized thing for every country in the world, right? And so I'm going to be very interested to see not just how they react economically, but
But how do they react to having their power constrained in a very big way? How do they react to an outside institution saying, you can't do that. Your power is actually constrained. I think it's going to be very interesting, and I don't think it will make them recede. I'll just be interested to see how they do that.
That's all for today. Friday, February 20th. The Journal is a co-production of Spotify and The Wall Street Journal. The show is made by... And me, Ryan Knudsen. Our engineers are Griffin Tanner, Nathan Singapak, and Peter Leonard. Our theme music is by So Wiley. Additional music this week from Peter Leonard, Billy Libby, Nathan Singapak, So Wiley, and Blue Dot Sessions.
Fact-checking this week by Mary Mathis. Thanks for listening. See you Monday.
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