Courts Say Trump's Tariffs Are Illegal
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The Federal Trade Court tosses most of Donald Trump's tariffs as a violation of the U.S. Constitution for exceeding his legal authority as president. What does this mean for the economy as well as for the rule of law? And how will President Trump respond? Welcome to Potomac Watch. I'm Paul Gigot.

here at the Opinion podcast of The Wall Street Journal. And I'm here with my colleagues, Alicia Finley and Kim Strassel. So big, big decision out of Washington with enormous implications, I think, for the economy and the rule of law. Three-judge panel of the U.S. Court of International Trade threw out the Liberation Day tariffs, the so-called reciprocal tariffs, including the 10% across the board tariff, the fentanyl tariff against China and those against Canada and Mexico.

All that's left now are the tariffs on steel and aluminum, cars and car parts, because those tariffs relied on different statutory authorities than the president did for the ones that have now been thrown out. The court said the president used the power under the International Economic Powers Act to declare a national emergency and then used tariffs to counter it.

But three-judge panel of nominees, one from the Reagan administration, one from Obama, and one from Donald Trump, said tariffs can't be justified under that law.

Alicia Bombshell. I expected this result. If you read the 1977 law, shorthand IEPA, it gives the president pretty broad powers, including to block transactions with foreign officials or foreigners, allows him to regulate the

importation of foreign property. And that's what President Trump hung his argument on, is that if the law allows the president to regulate importation, then therefore it must allow him to impose tariffs willy-nilly on any country at whatever rate he wants. And essentially what the three-judge panel said is, well, no, it doesn't give him that express authority. And the

No president has ever used this law to do what he has done. Nixon used a precursor to the law to impose tariffs in order to remedy the balance of payments crisis in the early 1970s. But that actually resulted in Congress seeking to cabin the president's authority, to provide a separate authority to essentially impose tariffs to remedy a trade deficit as President Trump claims to be doing right now.

So IEPA was an attempt to cabin the tariff authority. Right, cabin and emergency authorities generally. Right. Now, Kim, this is very significant, never mind the economic implications, but just on the legal ones, because a lot of presidents love the idea that you can use this emergency power, right? Ah, it's an emergency. So I can do whatever I want, right? And sometimes you have to declare an emergency. Right.

But the linkage to tariffs is a really troubling precedent if it had been allowed. And I would say, Kim, Democratic president in the future, if you wanted to declare an emergency on, say, climate,

you would say, aha, here's what I'm going to do. I'm going to put slap tariffs on countries that don't do what I want them to do on climate. So this kind of ruling closes that off for not just Trump, but for any president. And I think that's a very significant ruling. Yes, it is very significant, Paul. And it reminds us why we have laws. Because if you think about this, think about what Donald Trump was essentially saying about

under this emergency declaration that he made. He said, I am declaring an emergency and I therefore essentially get to run the economy, at least when it comes to setting all global trade around the world. I will decide where different companies

companies manufacture their products and I will bully and tell retailers how much they can charge for them. And I will make this country do that and this country do that, or else they will be hit with these levies. It was an extraordinary amount of power that he was, uh,

claiming for himself. And the courts have said no to this. Now, from a legal perspective, this is not going to sit well with the administration, but it's very important because, as you say, it goes to a lot of other questions.

We had a former Democratic president who was urged to, in fact, declare an emergency on the climate, but then to go farther by his party. He should have an emergency when it came to gun crime and use that to amp up gun regulations. There was an emergency on voting issues, and he should be able to use that to change the rules and say what the voting rules should be out in the states.

This is the opportunity for endless mischief. So I think this, as you say, this court ruling goes well beyond tariffs, but to presidential powers in general and what those limits are, at least to a certain extent. All right. Let's listen to Kevin Hassett, who is the White House head of the National Economic Council Committee.

respond to the court decision. This trade negotiation season has been really, really effective for the American people. And it's unfortunate that people would attack it as the journalists did or the way the judges just did. You know, these activist judges are trying to slow down something right in the middle of really important negotiations. And the idea

that the fentanyl crisis in America is not an emergency is so appalling to me that I'm sure that when we appeal, that this decision will be overturned. Well, I like Kevin Hassett. I've known him for years. I think he's a decent free market economist. But in the Trump White House, there are certain rules. And one is that you have to say nice things about tariffs. Now, let's talk about a couple of elements of what he said. Number one,

The court wasn't trying to do this amid negotiations to scuttle negotiations. This is just the calendar that came up. They had a couple of lawsuits to consider. They've got to consider it. And the plaintiffs in those kinds of cases, they need to be heard to get their day in court with some dispatch. OK, right. That's number one. Number two, this wasn't a fly by night decision. I mean, if you read it and you have and I have.

It's a very considered, very careful decision. Right. So the plaintiffs sought a temporary restraining order against the tariffs. They did not get it. So there wasn't like a nationwide injunction, right, on an emergency basis. And as you point out, the 52-page opinion goes in depth into the history of the U.S. tariff regime and tariffs.

the laws, the 1977 IEPA, as well as its precursor and how presidents have used tariff authority in the past and the different other kinds of tariff authorities that are available to the president, including Section 122, which was passed in 1974 that would allow the president to impose tariffs to address trade deficits. It seems to suggest that this would have been a

better use of the tear-off authority than President Trump could have used this instead, but essentially he didn't end run around Congress. And the court suggests that this would violate the major questions doctrine and potentially the non-delegation doctrine, which means that Congress can't give or delegate broad powers to the president without any kind of intelligible limiting principle.

All right. We are going to take a break. And when we come back, we'll talk about the other statutory authorities that Donald Trump might use to impose tariffs to make up for the ones that were just declared illegal when we come back.

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Welcome back. I'm Paul Gigot here on Potomac Watch with my colleagues Kim Strassel and Alicia Finley. The major questions doctrine is, of course, the doctrine that has been posited by this current Supreme Court, which says that on issues of major consequence that have major effect on the economy—

Congress must speak. The executive and the regulating agencies cannot simply intuit what it is that Congress meant to say. It actually has to have a justification for it. And that includes the Trump appointees on the court. Neil Gorsuch in particular has been, I think, eloquent on the subject in concurring opinions.

So the inclusion of that major questions doctrine, Kim, and this opinion by the court suggests to me that they understood, these judges, that this is going to be appealed. The administration has already signaled it would appeal. And the next step is for the U.S. Court of Appeals for the Federal Circuit to

to hear this, but that ultimately, if this could go to the Supreme Court. But my own interpretation of reading of this opinion is that Trump loses at the Supreme Court. Well, right, especially on that major questions doctrine. And this is a really important point, Paul, which is that

We have given presidents some latitude in trade. And by the way, I think we should talk a little bit. Congress has given the president a lot of other powers when it comes to trade. The president very specifically chose not to exercise some of those for the reasons that Alicia laid out, which is that he figured it would be a lot easier, a lot faster, and a lot more sweeping for him to go to this emergency declaration.

Most of the other provisions that he has been given, powers that he has been given, require him to go through certain processes. It takes him out of time. You have to prove that there has been a discrimination against the United States when it comes to trade. There are limits on how the level of the tariffs that you can impose. So he went this way instead. And this is a classic case where the Supreme Court, under the major questions doctrine, is going to say, way ho, you have a

other ways to do this that Congress has already laid out for you.

And in choosing to do that and then not give Congress any say in this to go another route and to cut them out of this process, I think many people would find to be sort of doubly problematic from a legal perspective. And that would be one of the arguments that I would imagine the court will go to and that this one did as well, too, the point that this seemed to be an obvious power grab by the president in a way that completely shut out

Yeah, this is a very significant point about Congress's delegation to the president of authority on trade. It has given, as Kim says, and as you mentioned, much power over trade. The Constitution says Congress has that power.

But over the years and particularly since the Smoot-Hawley tariff debacle of 1930, Congress has slowly granted the president the ability to impose tariffs in certain circumstances. Basically what happened at Smoot-Hawley was Congress just piled in its wisdom. Every industrial sector in America just piled tariffs on. And basically Congress said, stop us before we kill again.

So they ceded to the president authority to strike trade deals but also to impose protectionist provisions in some cases. So you mentioned Section 122. There's another one, Section 338. This is going to be a numerical – confusing a numerical soup for listeners. But there's one, Section 338, which says president can impose tariffs –

On countries which have discriminated against U.S. trade, I suspect this is where the administration will go. It will use that. It has to have a finding that there was discrimination. Then it has to wait 30 days. Tariffs cannot exceed 50 percent of product value, but there is no formal investigation required for this one. So the president probably will do it.

One caveat, the president, no president has ever imposed tariffs under Section 338.

There was some talk about it in the 1930s against France, Japan and others, but not since. Would you guess, Alicia, this is where Trump goes? Yeah, that's what my sources say. This is most likely because there are the fewest restrictions. All the other authorities require much more detailed investigations, include some limits like the Section 122. He can only use it for 150 days before Congress has to approve of it and has a limited rate of 15 percent. Whereas this one, you could go up all the way to 100%.

50%. 50%. That's right. So I guess the question is now, as we turn, Kim, to the prospects for trade deals and the impact on the economy, Kevin Hassett made the point that, oh, this is interfering with our negotiations.

I do think that this court ruling does send a message to trading partners that, hey, maybe the administration has a little less leverage than we thought. And, you know, maybe Kevin Hassett and Treasury Secretary Scott Besson want deals fast.

You know, maybe these countries like the European Union and others can strike deals that aren't as onerous as they expected. Yeah, you can look at this at a couple of ways. I mean, this does certainly in theory, if our trading partners really wanted to double down, this could throw a real monkey wrench in all of the current negotiations. Right. And it throws into doubt even to a certain extent the UK trade deal that was recently inked in the China agreement that was made as well, too.

And they could take the perspective, well, you guys have been told no. That means we all start at zero to a certain extent. And we're not going to budge. And let's see what you bring next. Section 338, are you going to go through that process? I agree with you, Paul. I think the more likely prospect is

is that the Trump administration, as Alicia says, maybe starts and makes the motions to go down the 338 road to say that, well, we've still got tools and to exert a bit of its own pressure, but that all sides maybe see the smarter path.

of saying, let's figure out a way to get to yes here in a way that makes everybody happy and makes us go away. And look, my view is that that has been in recent weeks very much more so the Trump inclination we've seen in terms of him stepping back on some of these. He certainly is getting a cheer for that approach from the stock market today, which liked this tariff

Yes, he sure did.

saying, OK, well, we're not going to get 90 deals in 90 days. We might come up with some regional agreements, you know, one tariff rate for all of Africa, one tariff rate for all of Central America. They understand that. But in the core deals that they're looking at, which is 12 to 18 countries, there might be more momentum here for them to come to quick agreement. On timing, the 90-day reprieve,

that the president imposed after the market reaction to his reciprocal tariff announcement on April 2nd. That expires on July 9th. I think that date is now blown up because these reciprocal tariffs are gone.

That date goes away. There's another date of some kind of some urgency, depending on how you interpret it, which is Trump going to the G7 meeting where all of the people he wants to tariff will be, you know, maybe they can get some negotiations done before that so they can claim a triumph or we'll see what happens at the G7 and whether or not there'll be something after that. That's in June. I forget the exact date.

But it does, I think, suggest that Trump has an exit path here if he wants or a modification path here if he wants. Just one other quick point I want to make, Alicia. Peter Navarro, the advisor on trades to the president who was really the main author of the reciprocal tariff idea.

Bad timing wins the bad timing prize for the week. With an op-ed in The Hill this morning, the newspaper saying that the revenues from the tariffs that Trump is imposing would yield $2.3 trillion or $3.3 trillion over 10 years. I think he's going to need to adjust that estimate. That's in tax revenue.

Right. I don't think that it would come anywhere close to that. You're looking at maybe $100 billion this year in additional revenue beyond what the U.S. government already rakes in from tariffs. Now, I think he's trying to make that argument to egg Trump on to continue to appeal the Supreme Court on this case and look for other means to impose tariffs by saying, well, look how much revenue we're going to be giving up if we don't do this.

That op-ed may have been in the works long before that. Yeah, I'm sure it was. It was not in response to this announcement.

We are going to take another break. And when we come back, we'll talk about the political response we're likely to see from this trade ruling, both from the president and from the Republican Party when we come back. Isn't home where we all want to be? Reba here for Realtor.com, the pro's number one most trusted app. Finding a home is like dating. You're searching for the one. With over 500,000 new listings every month, you can find the one today.

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From the opinion pages of The Wall Street Journal, this is Potomac Watch. Welcome back. I'm Paul Gigo here on Potomac Watch, the daily podcast of The Wall Street Journal opinion pages. And I'm here with Kim Strassel and Alicia Finley.

So where does this leave him thinking about the whole political context of this? Where do you think this leaves the president and how he'll pursue this and then the Republican Party and how they think about these tariffs? Because you and I both know from our private conversations that there is a whole lot of resistance slash concern on Capitol Hill about the tariff agenda, particularly Republicans worried about the midterm impact.

The tariffs aren't popular in the polling. They were going to raise prices. We know that. Inflation is the number one or two issue on the minds of the American public. They're very concerned. And I think that a lot of people on Capitol Hill are going, thank you, International Trade Court. This is great. And then, you know, maybe we'll try to persuade the president. All right. Drop your appeal on this one.

OK, you need to have a few other sectoral tariffs and so on. OK, we understand that. But let's let's ease back. Is that a possibility here? If Trump is smart, he views this as the gift it is. OK. And honestly, that's what it is. It's a political gift.

He got all whipped up by a certain faction of his advisers. Go tariffs, go. Well beyond anything he did in his first term. Rolled this out. It hit like a lead balloon. The markets hated it. The markets and investors got incredibly nervous. Republicans were very concerned.

The people, voters, you could see those polls that came through. They were very, very distraught about the notion that these tariffs were going to further increase inflation. They'd hired this president essentially to deal with that problem. And it looked like he was going in the wrong direction. This court has just now given him an out. He can say, OK, the court did this.

We're going to turn to 338 and kind of put that in motion. But in the meantime, he uses it to cut some deals, get it done and get it out of the way. I can promise you Republicans are like down on their knees thanking the happy court gods for this decision because they are hoping that he will go that route and that attention can then be focused on the things that they know they're doing that are going to help the economy in terms of the tax bill and tax certainty that they're putting in.

some of the cuts of federal government and some of these reforms and changes, while not as aggressive as I might like them to be, to certain entitlement programs, et cetera, with their reconciliation bill. I wouldn't be surprised to have some super Trump loyalists out there rapping like Kevin Hassett just did on activist judges, et cetera. But I promise you, Paul, 90% of the party is happy to have seen what just happened here. Activist judges. I mean, you know, one Trump nominee...

Okay. One Reagan appointee, one Obama appointee. I know. I mean, it's very hard to make that case. This is a court, by the way, that also tends to be overall fairly protectionist. And in this case, I think they just ran right up against the statute and said, I mean, there's some kind of plain language you just can't

overcome. You just have to look at it in the face and say, yeah, it doesn't say you can impose tariffs here. Okay. So you can't, Mr. President, unless Congress gives you that authority in this emergency case. Well, we'll see what happens. It is, I think, a major, major event, both economically and legally. We'll be back to talk more about it every day on Potomac Watch as we are. Thank you, Kim. And thank you, Alicia. And thank you all for listening.

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