President Trump started his second term eager to hammer out trade deals with dozens of other nations. He forgot to negotiate with his own judiciary first. Trump's plan to reshape worldwide trade through aggressive use of tariffs is a mess following rulings by two federal courts invalidating the rationale for many of the tariffs Trump has imposed this year.
Trump has claimed numerous times that a "national emergency," in the form of large and persistent US trade deficits, gives him the authority to impose virtually any tariff he wants. Several businesses and other groups sued to block those tariffs, claiming that Trump's use of a 1977 law to justify the tariffs is invalid. On May 28, a body known as the Court of International Trade agreed.
The three-judge panel unanimously blocked all the tariffs Trump has imposed on an emergency basis, which is most of them. The next day, another federal judge hearing a different case basically found the same thing. The Trump administration quickly appealed, and on May 29 a federal appeals court agreed to hear the case, while also saying the Trump tariffs should remain in place until something changes.
The Supreme Court is likely to be the ultimate decider, with legal analysts placing roughly 50-50 odds on whether the high court will allow or overturn the emergency tariffs. If the Supreme Court knocks them down, Trump still has several other ways of imposing tariffs. Read more: What Trump's tariffs mean for the economy and your wallet Even so, Trump has clearly bungled his effort to strong-arm other nations into making trade concessions while weakening his own future leverage to strike deals.
"The damage has been done," James Lucier of Capital Alpha Partners explained in a May 29 analysis. "No trade deals are likely with any country as long as an authoritative court has held not only that the basic policy is unlawful but that its implementation must be terminated immediately. Trump's credibility as a trade negotiator has been badly damaged."
There are at least four other legal avenues Trump can use to justify tariffs. Trump took the novel approach of basing his tariffs on the claim of a national emergency because it gave him maximum flexibility. Were the courts to find it legal, Trump could impose any tariff of any amount on any product at any time he chose.
The whole reason Trump thinks tariff is "the most beautiful word" is probably that he thinks it gives him unchecked power to micromanage the economy and punish any country, company, or even individual with a custom-made tariff.
