Whither Tariffs?

Stating the obvious, the Supreme Court has declared the tariffs levied by President Donald Trump’s under the International Emergency Economic Powers Act (IEEPA) illegal. Nonetheless, despite the Court’s clarity, the future of U.S. trade policy—for the immediate future, at least—remains uncertain.

His protectionist appetite unsatiated, Trump announced a new 10 percent duty on all imports. “The White House’s tariff Plan B looks copied from President Biden’s playbook when the court overruled his student-loan forgiveness scheme in 2023 and Mr. Biden began statute shopping for anything to back it,” as The Wall Street Journal’s editorial board wrote. The White House’s chosen statutory provision is Section 122 of the Trade Act of 1974, which authorizes the President to impose duties for 150 days to ameliorate balance-of-payments deficits. However, the United States at present has no such deficit, rendering Trump’s newest imposition illegal, facially and flagrantly. Litigation has already commenced: challenges have been leveled by a coalition of states and by the Liberty Justice Center, the latter working on behalf of two American businesses.

On Wednesday, moreover, the U.S. Trade Representative (USTR), Jamieson Greer, announced new investigations of 16 of America’s trading partners—including such allies as the European Union (EU) and Japan. They will be carried out under Section 301(b) of the Trade Act of 1974, a provision delegating to the president powers to resist “unfair” foreign practices that disadvantage American firms. According to the USTR, the suspected crimes of these nations is the very act of producing for exportation. “Across numerous sectors, many U.S. trading partners are producing more goods than they can consume domestically,” Greer said. “This overproduction displaces existing U.S. domestic production or prevents investment and expansion in U.S. manufacturing production that otherwise would have been brought online.” This notion might surprise American farmers, for whom the Trump administration has labored to secure markets for exportation.

Further, many on the investigation list—including, inter alia, the EU, India, Mexico, and Singapore—have signed trade deals or provisional agreements with Washington. Indeed, “the majority of the countries under target in this investigation already have at least a ‘napkin deal’ for trade already in place, meaning bilateral trade deals struck with the US after President Trump unilaterally imposed ‘reciprocal tariffs’ worldwide from 2 April last year,” reports Deborah Elms, the head of trade policy at the Hinrich Foundation. What’s more, it seems dubious that the Trump administration is, in fact, pursuing free and fair trade. For example, the U.S.-Singapore Free Trade Agreement, which has been in force for two decades, eliminated all Singaporean duties on American goods. According to Elms, the USTR may have predicated these investigations upon faulty information. “Eagle-eyed readers of the Federal Register announcement on this latest Section 301 case have already spotted mathematics and recitations of trade flow data that are not backed up by other data issued elsewhere by the US government,” she writes.

The damage of these vacillations—this cycle of mercurial and unlawful taxation, litigation, and judicial injunctions—is incurred by American businesses. Already, following the Supreme Court’s ruling, the federal government must repay roughly $175 billion collected from 330,000 importers under IEEPA. The administration, seemingly determined to keep its illegally gotten tariff revenues, has attempted to delay this restitution, but the Court of Appeals for the Federal Circuit dispensed with that attempt. Besides the taxpayer dollars to be frittered away in the Trump administration’s quixotic attempt to avoid repaying tariff revenues, delays will cost taxpayers as interest accrues. “Conservatively…we calculate…that $700 million in interest is added to the final bill every month that the government delays tariff refunds, or around $23 million per day,” write analysts at the Cato Institute. Thus, the damage done to American industry is to be compounded by fiscal incontinence, all in service of the President’s lawless unilateral protectionism.

“Taxation is theft,” libertarians are wont to say. This is incorrect in the view of American founding, which maintained that taxation imposed without representation constitutes theft. However, the administration’s efforts to avoid repaying moneys unlawfully collected—confiscated from Americans without rightful authority—resemble the activities of the proverbial stationary bandits, which some political scientists hypothesize to be the origin of government.

As Kenny Rogers sang, you’ve got to know when to fold ‘em. The White House has played its hand, and the Supreme Court called its bluff. To cut its losses—not to mention the losses incurred by American businesses—President Trump ought to throw in his cards.