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On Wednesday, the Supreme Court heard oral arguments in V.O.S. Selectinons, Inc. v. Trump, a case that contests the legality of President Trump’s “Liberation Day” tariffs. The hearing did not go well for the administration.
Across two-and-a-half hours, Justices from both the liberal minority and conservative majority peppered Trump’s Solicitor General with skeptical questions about the scope of the tariffs, the lack of Congressional approval for any of these measures, and the tax these policies are imposing on Americans. The oral arguments were undoubtedly gratifying to experts on both the left and the right who have spent most of the year asking the same questions, arguing that Trump’s tariffs are plainly illegal on one hand, and wildly counterproductive on the other.
I’ll offer a different perspective today. Reading the law, I think Trump’s tariffs may well be legal and consistent with the statute he cites for authority, and following the news for the past seven months, I think there’s good evidence that Trump’s use of tariffs has been appropriate and effective.
First, the case. The Court’s holding will turn on the interpretation of a 1977 law called the International Emergency Economic Powers Act (IEEPA), which the Trump Administration invoked to impose a global regime of tariffs. In August, the Court of Appeals for the Federal Circuit held that IEEPA does not grant sweeping authority to the executive branch to unilaterally reshape the global economy. That sort of power is typically reserved to Congress.
The legal question is very much live and unresolved, at least for a few more weeks. Prior to April, no President had ever invoked IEEPA to impose tariffs on a hundred countries at once. While the Constitution grants Congress the power to “lay and collect Taxes, Duties, Imposts and Excises” and to “regulate Commerce with foreign Nations,” the text of the statute at issue grants the President authority to “deal with any unusual and extraordinary threat, which has its source in whole or substantial part outside the United States, to the national security, foreign policy, or economy of the United States, if the President declares a national emergency with respect to such threat.” Upon declaring such an emergency, under IEEPA, the President has the authority to “investigate, regulate, or prohibit” any transactions in foreign exchange.
The language in that law is adapted from a 1917 law—the Trading With the Enemy Act (TWEA)—that was expanded in 1933 to account for national emergencies besides war, and expanded again in 1941, one week after Pearl Harbor, to explicitly grant the President authority to regulate the importation or exportation of goods. TWEA’s scope was narrowed by Congress in 1977 and limited to wartime scenarios, but simultaneously, Congress passed IEEPA, which, the Supreme Court previously found, granted “essentially the same” set of TWEA authorities to the President, while added a peacetime procedural requirement that the President report to Congress on his efforts (“The authorities granted to the President by § 203 of IEEPA are essentially the same as those in § 5(b) of TWEA, but the conditions and procedures for their exercise are different.”).
Lest I spend this entire article retracing legislative history, all of the above is noted only to say that the case before the Supreme Court this month presents a genuinely close question. I won’t speculate on what the Court will hold, but the administration’s arguments have merit. And even beyond the text of the law, its history, and whether the power to “regulate” foreign trade includes the power to broadly impose tariffs in exigent circumstances—all of which will determine the outcome at the Supreme Court—the tension at issue here is actually more fundamental. As clearly as the Constitution delegates to Congress the power to regulate commerce and impose duties, the Executive Branch likewise enjoys broad Constitutional authority to manage foreign affairs. Tariffs, particularly under the current administration, obviously implicate both foreign affairs and commerce.
How Trump Has Used Tariffs
Trump is such a radioactive figure that it’s difficult to analyze anything that implicates him or his administration in any kind of dispassionate way. Nevertheless, I’ll try.
If the Liberation Day tariffs are understood strictly as an instrument to address the trade imbalances that President Trump cited as a national emergency (thus invoking IEEPA), there are a variety of valid objections to the plan. The claimed “emergency” is a trade deficit that has been the American status quo for multiple decades. Moreover, the claimed solution to that emergency has seen the trade deficit widen, not narrow, since tariffs were imposed in April. Finally, if the broader goal is to reindustrialize in America, then to that end, too, tariffs may be counter-productive in the short and medium term, as they’ll impose higher costs on wide swaths of American industry still reliant on inputs from all over the world (and particularly China).
Tariffs, however, are a good litmus test for who’s paying attention to what the Trump Administration is doing, as opposed to what they’re saying. To wit: On the other hand, a Washington Post report in early August cited leaked State Department documents indicating that “[a]dministration officials saw trade talks as an opportunity to achieve objectives that went far beyond Trump’s oft-stated goal of reducing the chronic U.S. trade deficit.” U.S. requests of trade partners included “requiring Israel to eliminate a Chinese company’s control of a key port and insisting that South Korea publicly support deploying U.S. troops to deter China as well as Seoul’s traditional rival, North Korea.” This is one of maybe a dozen such reports since April, all indicating that when the U.S. is talking to trade partners, the conversations are not limited to bilateral trade.
Another example was last week’s trade deal with Malaysia, which includes language clearly related to China:
If the United States imposes a customs duty, quota, prohibition, fee, charge, or other import restriction on a good or service of a third country and considers that such measure is relevant to protecting the economic or national security of the United States, the United States intends to notify such measure to Malaysia for the purpose of economic and national security alignment. Upon receiving such notification from the United States, Malaysia shall adopt or maintain a measure with equivalent restrictive effect…
That language is designed to prevent China from evading high U.S. tariffs by rerouting goods through Malaysia, or even setting up factories in Malaysia. The Trump Administration is finalizing with several other countries in Southeast Asia that contain similar language, each of which was negotiated using access to the American consumer as leverage for the U.S. side. The Administration has not yet clarified specific elements of its transshipment policies or how these clauses will be enforced, but the framework has been put in place with almost every trade partner in Asia.
All of this begs an obvious follow-up: is the “national emergency” giving rise to these tariffs actually an escalating cold war with China? And rather than merely an instrument to correct global trade imbalances, are tariffs also being used as a tool to coerce more substantive cooperation from American allies in a bid to weaken China’s export-driven system and erect trade barriers to protect North American supply chains? If those questions are answered in the affirmative, it complicates any resounding rejection of the tariffs, in large part because the strategy appears to be working.
The point here is not that Trump definitely has legal authority to impose these tariffs or that any of these tariffs will help the United States re-industrialize. Rather, the past six months have shown that what was widely derided in April as suboptimal trade policy has nevertheless proven to be effective statecraft. Bilateral relationships in Europe and Asia that were on life support after Liberation Day have substantially improved since, and the U.S. has used the leverage of high tariff threats to sign favorable trade deals with almost every major ally it has, generating meaningful revenue for the American government and substantially reducing tariffs on allies in exchange for promised cooperation on a variety of geopolitical fronts. (Speaking of effective statecraft: if cold war thinking is a big part of the administration’s calculus in deploying its trade policies, it would be counterproductive to publicly announce that to the world, and particularly China, for obvious reasons.)
Considering the Alternative
After Wednesday’s hearing, I found myself thinking about Europe. Forgive the long excerpt, but here is Noah Barkin from the German Marshall Fund, writing his excellent Watching China in Europe Newsletter:
One year ago, EU member states agreed to impose tariffs on electric vehicle (EV) imports from China in a landmark trade case that was hailed (including on these pages) as a victory for the bloc and its efforts to shield the European car industry from unfair Chinese competition. But only 12 months later, the anti-subsidy case has come to be seen in Brussels and other capitals as a cautionary tale rather than a triumph of European trade policy. The EV saga dragged on for a full year, left the EU divided, and ended up penalizing European carmakers as much as it did their Chinese competitors. The tariffs that the Commission imposed are unlikely to prevent Chinese EV producers such as BYD from profitably exporting cars to the EU. Despite that, they triggered a robust response from Beijing, which launched a series of retaliatory trade cases targeting European cognac, pork, and dairy.
Had the European Commission’s EV case collapsed in the face of pressure from Beijing and Berlin, the damage would have been far worse. Still, it is hard to argue today that the benefits from this hard-fought case have outweighed the costs. Instead, the saga exposed the flaws in Europe’s approach to trade defense. In a world where China and the United States are moving fast and hitting hard, the EU has been too slow, too timid, and too wedded to a rulebook the others have torn up. “We have developed a lot of instruments that are very narrow, very technical and that take a long time to deploy,” a senior European diplomat told me. “Going forward, we will need to go much harder in Brussels.” The view is shared by people at the top of the Commission who worked on the EV case. “It has been a huge lesson for us,” a senior EU official said. “We have been operating within the rules, and it hasn’t made a dent. There is no benefit to our measured approach, to being a slightly kinder version of the United States.”
This realization is dawning at a time when the alarm bells over Chinese overcapacities are reaching fever pitch. … The EU’s policy of de-risking, which dates to a March 2023 speech by European Commission President Ursula von der Leyen, has yielded few, if any, results. In terms of trade, the EU is more dependent on China now than it was when the speech was given two and a half years ago.
China’s exports to the U.S. have declined for six straight months, and while China’s exports to the rest of the world have continued to rise, those exports are going to markets less lucrative than the United States. One such destination is Europe. Markets throughout the continent are inundated with Chinese exports that threaten domestic industries. It’s a problem that’s getting worse, not better, and one that coincides with a war in Ukraine that has been openly enabled by Chinese trade and Chinese military components.
The EU Commission, to its credit, wants to take actions to respond to these realities. There have been mooted tariffs on steel, and recent debates on tariffs to ensure the continued flow of rare earths. The problem the EU has is an obsession with process, and a process that requires wrangling 27 member states, all of whom have different relationships with China and different points of vulnerability animating their calculus in trade. That dynamic has netted out to lots of fiery rhetoric from EU politicians, and very little tangible action to alter the bilateral relationship with China. As Barkin notes above, it took the EU more than a year to impose modest, narrow and ineffective tariffs to address the excess capacity of state-subsidized Chinese automakers that present genuine security concerns and have ravaged the continent’s domestic players. (In the UK, meanwhile, despite years of espionage incidents and interference campaigns, the government recently withdrew a case against a parliament staffer charged with spying for China, because the Labour Party refused to proffer a Government witness who would deem China a national security threat.)
Lest any Americans feel superior reading about Europe’s flailing attempts at self-defense, consider a scenario in which the power to impose tariffs and regulate foreign commerce were reserved exclusively to Congress. In that reality, foreign countries and globalized companies would be gifted with far more surface area to lobby for watered down policies that never achieve their intended purposes. Taking any action at all would require building a filibuster-proof majority from a bloc of members from different parts of the country and with wildly divergent interests, all of whom are subject to regular elections and therefore sensitive to rising prices that may accompany any shift in trade policy that prioritizes long term strategic interests over short term consumer welfare.
The EU’s current reality—lots of rhetoric, little action, slowly boiled alive while free market interests continually prevail over national interests and industrial capacity and security steadily erodes—is not that far off from America’s baseline for the past 20 years. Trump’s six-month IEEPA adventure has been a brief departure from that norm, and if the Supreme Court intervenes to restrain those efforts, the future becomes more uncertain.
Executive Function
For the past 25 years, the American government has seen the executive branch steadily expand its authority while Congress becomes more sclerotic with each passing term. I’ve always lamented this shift, for obvious reasons. The separation of powers is a generally useful check on reckless decision making, and if we’re sticking with the tariff example, Congressional action creates a far more predictable framework than Presidential whims. The certainty of fully ratified law that’s difficult to repeal is better for businesses and trade partners, and more likely to yield durable shifts. The same is true for any number of Executive Branch initiatives that can alter industries overnight, only to be reversed the moment a new party takes office. At some point, it would be nice to return to an era where America ends the cycle of legal whiplash the entire country experiences every four to eight years.
Anyone reckoning with this shift honestly, though, should also wonder whether Congress can still act quickly enough to address the problems that are arising all over the world. It was the Biden Administration, for example, that conducted a 301 investigation and imposed 100 percent tariffs on Chinese EVs. Trump’s first term imposed a wide variety of tariffs on China using that same authority, and Biden kept those tariffs in place. Elsewhere, the Biden Administration responded to the Ukraine War by imposing a raft of financial sanctions on Russia after its invasion of Ukraine. Two weeks ago, Trump escalated the U.S. response to the ongoing war by sanctioning Russia’s largest oil companies.
If the Supreme Court rules against Trump later this year, the Administration will have options to reinstate many of the policies that are scuttled. Section 122 of the 1974 Trade Act allows the administration to impose a 15 percent global tariff for 150 days, while the aforementioned Section 301 of that same law allows the president to conduct a months-long investigation through the USTR and issue broad tariffs in response to unfair trading practices. There is also Section 232 of the Trade Expansion Act of 1962, which allows the president to impose tariffs on national security grounds, in this case after conducting an investigation through the Commerce Department.
Each of those laws vests the President with clear authority to impose tariffs that are likely to survive legal challenges. The downside for the Administration is that the 301 and 232 tariffs require a more cumbersome implementation process and afford less flexibility, whereas Trump’s negotiations with trade partners this year have been aided by the ease with which he could ratchet tariffs up or down depending on the cooperation of foreign counterparts. That would have been impossible if every Truth Social post required a months-long investigation or a vote in Congress.
I’m not defending those Truth Social posts, by the way: the bombastic and campy way Trump conducts business alienates lots of reasonable people, and certainly contributes to the bipartisan loathing of his tariff policy. By now, however, critics need to admit that Trump has accomplished more than they expected while incurring less damage than they feared, even if the U.S.’s position relative to China may be relatively unchanged. Indeed, the entire tariff episode should be a clarifying window into American power and how it’s exercised in the modern era: which tools are most powerful, the extent of authority that Americans are vesting in a President with every election, and the areas in which deference to the separation of powers can look anachronistic. Are these changes healthy? And if not, what do the alternatives really look like?’
Define a National Emergency
It was only a few weeks ago that China threatened to institute an expansive export control regime surrounding rare earths, potentially shutting off the supply of critical industrial elements and related components to the U.S. and its allies. Trump addressed the Chinese rare earth measures immediately, and did so by threatening to impose an additional 100% tariff on Chinese goods coming to the U.S., a move that would have severely hamstrung China’s economy at an already-sensitive time. He made that threat on Truth Social, using authority he’s claimed under IEEPA, and last week China relented, deferring the implementation of their export control regime for one year. Critics this week, including Supreme Court Justices, are arguing Trump’s tariffs are illegal expansions of IEEPA powers, but can anyone argue that a Chinese ban on rare earth exports wouldn’t be a national emergency?
IEEPA authorizes the President to “regulate” foreign exchange to “deal with any unusual and extraordinary threat, which has its source in whole or substantial part outside the United States, to the national security, foreign policy, or economy of the United States, if the President declares a national emergency with respect to such threat.” Which is precisely what happened. It’s hard to imagine a clearer example of the concept that trade policy and economic security are now deeply intertwined with foreign affairs and national security—and this was an episode resolved literally last week.
And, stepping back, to the extent that Trump’s policies are about simultaneously weakening a foreign adversary and reducing our dependence on that same country—which again, just last month threatened to take our industrial supply chain hostage—aren’t they clearly addressing not just a national security issue, but the national security issue? What does national security even mean if we can’t produce fighter jets, cars, or chips because an adversary said no? Or, faced with the general problems posed by Chinese trade practices, how effective would any American response be if the President did not have the power to impose trade policies of his own in negotiations with not only China, but potential transshipment hubs in Malaysia, Vietnam, Cambodia and Thailand?
That rare earth sequence, to be clear, is not dispositive of the legal questions under consideration this month; nor is it a defense of every strategic decision that Trump has made in prosecuting his trade war over the past nine months. What the rare earths episode should do, though, is remind everyone that confining an analysis of Trump’s tariffs to macroeconomics or Constitutional Law 1 is probably too simplistic. In fact, the more I’ve read about tariffs and the reactions they inspire, I think the only takes on these questions that I find to be truly terrible are the ones expressed without any reservations or doubt. In the modern environment, that kind of confidence betrays a lack of diligence.
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