Chapter 1: What did the Supreme Court rule about President Trump's tariffs?
Late last week, the Supreme Court ruled that President Trump's tariffs are unconstitutional. Court said when he implemented them, he exceeded his authority. Last night, in his State of the Union, the president had a chance to defend himself.
One of the primary reasons for our country's stunning economic turnaround, the biggest in history where the Dow Jones broke 50,000 four years ahead of schedule. The Dow, the Dow right now. And the S&P hit 7,000, where it wasn't supposed to do it for many years, were tariffs.
I used these tariffs, took in hundreds of billions of dollars to make great deals for our country, both economically and on a national security basis. Everything was working well.
Everything wasn't working well, but USA did learn some important lessons from the tariffs. And the story of those and of some of the people who took Trump to court and won is coming up on Today Explained.
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I got in the water in the very early morning before the sun had risen, and the water was pitch black. I started swimming, and I felt the water hollowing out around me and felt like something really big was swimming below.
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Chapter 2: How did the tariffs impact the toy industry and small businesses?
will expect to pay back the tariffs if the Supreme Court ruled in our favor. And so we're going to let the process play out. But we know one thing. It was not difficult for them to take the money. And so we expect they should be able to turn the tubes around and send it right back to us.
What does the future look like for your company now?
We're moving forward after the ruling. The government reimposed tariffs over the weekend under a different statute, 10 percent on Friday and then increased it to 15 percent on Saturday. So we didn't expect or anticipate that after the ruling, tariffs would go away.
our general perspective on this is if this is a revenue raising exercise they should go to congress as the supreme court suggested they had to for the tariffs that were overturned over last friday and have congress vote in daylight and allow people in the US to see the decision they have made to raise taxes on Americans.
And if it's really a national security concern, they should focus in on the products that are most vital to national security, whether it be chips or cars or whatever it might be. But don't take down toys in the process.
Steven Woldenberg, he's the SVP at Learning Resources. Coming up, what did the tariffs do to the American economy? The data's in.
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Chapter 3: What led to the lawsuit against the Trump administration?
Six or even seven bills. And I said, let's make it one big, beautiful bill, my friend. that bill had a lot of stimulus in it at the first couple years. And so for a middle-class family, the extra taxes you were paying in tariffs was roughly offset by the extra tax benefit you were getting from the one big, beautiful bill.
The third lesson I think we learned was that the expected response from our trading partners isn't always what we think. And so
If I had told a bunch of economists at the beginning of 2025 that the tariff rate was gonna shoot up as much as it did, I think we would have expected that our trading partners in Europe and in Asia and elsewhere around the world would react by putting in place additional tariffs on US exports, maybe putting in place quotas, other trade restrictions.
That's exactly the opposite of what we saw outside of China. We saw a lot of our trading partners racing to put together these trade frameworks rather than putting in place punitive measures against us. So lots of surprises all around.
Why was there not the retaliation we expected?
So I think we'll learn more after a few years. I think that our trading partners, like domestic economists, were caught off guard by the size of the increases, and they didn't really have plans in place to go ahead and put in place punitive measures. Donald, they point out that even though you're a very smart guy, this is a very dumb thing to do.
Indeed, one of the great strengths of this nation is our ability to keep a cool head.
We don't intend to give up. We're Australian. Also, the United States has a massive export market, and this is something that President Trump, I think, recognized from the outset. And we do have a fair amount of leverage over our trading partners. And so it just takes time for them to put in place alternatives to trading with the United States.
I think that when 2026 closes and if we get into 2027, we'll probably see more punitive measures and more shifts in trading patterns away from the United States if these tariffs stay in place.
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Chapter 4: What was the family's reaction to winning the lawsuit?
I think there are two big takeaways that I have from surveys of American consumers. The first is, and this is no surprise, that people really hate inflation. And I learned this lesson during the Biden administration when I was serving as chief economist of the Treasury Department, where we had the unemployment rate at 3.5%. It was a record low.
but people were still really frustrated with the economy because prices were higher. And that's, I think, true today where President Trump ran on a platform of lowering prices and inflation has stayed around 3% or a little bit less. But the second thing is also really interesting where if you look at surveys of both Democrats and Republicans where they're asked, why do we have higher prices?
Really high percentages of Democrats and even high percentages of Republicans attribute the higher prices to those tariffs. which is economically correct. Tariffs definitely raise the price of goods. So, I think that American consumers are fairly astute, and they're also really frustrated with this policy.
One of the pieces of credit that we might give President Trump is that his chaotic nature sometimes illuminates things that we were unaware of. So in his first term, he puts tariffs on China and people say, actually, China in some some segments of the economy was proving to be a problem for the United States.
And so the Biden administration actually leaves those tariffs on and everybody gets a little bit of a lesson about, hey, you know, the last 20 years were not entirely what we thought there were. Come on, man. Did we learn any lessons about the American economy from the Liberation Day tariffs, the past 12 months of tariffs, RIP?
I think we learned one big lesson about the American economy and one lesson about trade. So the big lesson about the American economy that we learned, or at least I learned, was that we are the largest economy in the world. We're a well-diversified economy. It takes more than a temporary change in our trading policy to throw us into a recession.
We just have so much diversification, so many assets, so much wealth that it takes something like a once-in-100-year pandemic or the bursting of a financial bubble like we saw in 2008 to throw us into a recession.
And what I learned about trade policy, and I want to be fair to President Trump, is that we do have these legal trade authorities that he used in the first term, which sometimes can be beneficial for... global trade and for penalizing our trading partners like we saw with China when they're not acting in a fair manner.
What happens next now that the tariffs are lifted? Should people expect that prices go down?
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Chapter 5: How much did the company pay in tariffs before the ruling?
And so roughly $160 billion in tariffs have been illegally collected. Will those get rebated back to the multitude of companies that have gone ahead and filed for rebates? will get rebated to states. Governor Pritzker in Illinois requested roughly $9 billion rebated to the citizens of his state. That's what he should do.
He won't do it because he actually doesn't care about working families, and he thinks he's right. So the major takeaway is the Supreme Court did the president a favor and limited his authority on tariffs. Tariffs, outside of a few select circumstances, are unequivocally bad for American consumers, and they're unequivocally bad for U.S. businesses. So the Supreme Court ruling was good news.
The American economy continues to truck along at a slow rate. But in general, I think that we should not expect a recession in the near term, and we should rest assured that we have a great number of resources and will continue to grow at a moderate rate.
Ben Harris of the Brookings Institution, formerly the Assistant Treasury Secretary for Economic Policy, if you can believe that. Kelly Wessinger and Ariana Espudu produced today. Amin El-Sadi edited. Patrick Boyden, David Tadishore engineered. And Andrea Lopez-Cruzado checked the facts. It's Today Explained. I'm Noelle King.