The real "Liberation Day"
Wednesday's court ruling is a great start but the administration will try to work around it
That’s what a Liberation Day feels like, at least a little.
The US Court for International Trade, in a per curiam decision (not signed by a particular judge, and often but not always unanimous), ruled that President Trump does not have the legal authority to impose tariffs as he's been doing.
As I mentioned on yesterday's KOA show when talking with an attorney who's bringing a very similar case in the same court (Molly Nixon from Pacific Legal Foundation), it's important to separate the questions of what should the president do versus what can the president do. Sometimes a president should do something he can't, sometimes the president shouldn't do something he can, etc. In this case, while some people like the tariffs, I think they're bad policy and I think they're illegal. Therefore, I think he shouldn't do something he can't...but has been.
The ruling, which has already been appealed, is not just -- not even primarily -- a win for the economy, but instead it's a very important win for the rule of law and preventing presidents from accumulating power that they simply don't have. Whether or not you like the idea of tariffs, you should oppose presidents doing illegal things.
It's been distressing but not surprising to see so many liberals support Biden's illegal efforts to reassign student loan debt to taxpayers, and then to see the same people who were in an uproar about that be just fine with Trump breaking the law to impose tariffs. (To be fair, I think it was much more obvious to most people that Biden was breaking the law because Biden kept trying stuff even after the Supreme Court ruled against him. You'd have to have read/thought about the law at least a little bit to have a strong view, as I have, that Trump's tariffs are illegal. Again, this is a very separate question from whether they’re good policy.)
The most likely outcome here is that the administration will look for other areas of law to use to impose tariffs. They probably can find a way to impose tariffs on aluminum and steel, unfortunately, and they may claim that somehow there's a national security implication of the North American auto manufacturing supply chain.
As I write this a bit after 5 AM MT on Thursday, stock index futures are up about 1%, a strong move but well off of the highs from last night.
UPDATE: About 45 min after the Thursday market open, S&P 500 futures are only up about 0.3%.
Unfortunately, yesterday's ruling probably doesn't add as much certainty as businesses would like to see. And Trump, who truly believes in tariffs in the same way that some people truly believe the earth is flat, is not likely to give up. As a Goldman Sachs economist put it, “This ruling represents a setback for the administration’s tariff plans and increases uncertainty but might not change the final outcome for most major US trading partners. For now, we expect the Trump administration will find other ways to impose tariffs.”
We’re not liberated from Trump’s illegal and unwise* tariffs yet but today’s a good start. Business can give a small sigh of relief, but only a small one, because in the short term we’re more likely to get more chaos and confusion rather than any sort of policy certainty. And that, as much as low-ish levels of tariffs themselves, is an impediment to business formation and expansion. It will be interesting to see what the stock market does over the next few weeks. Typically, the next few months are “seasonally” weak, from roughly now until September or so. But nothing during a Trump presidency is typical and I’m not trading this market.
Federal trade court blocks Trump's sweeping 'Liberation Day' tariffs | AP News
Court ruling: 25-66.pdf
* I maintain my caveat that China is a special situation and there might be some rational use of tariffs with China. But none of the answers are obvious.