The big story is SCOTUS striking down Trump’s invocation of emergency powers to levy tariffs without Congressional approval:
WASHINGTON — The Supreme Court delivered a major blow to President Donald Trump, ruling Friday that he exceeded his authority when imposing sweeping tariffs using a law reserved for a national emergency.
The justices, divided 6-3, held that Trump’s aggressive approach to tariffs on products entering the United States from across the world was not permitted under a 1977 law called the International Emergency Economic Powers Act (IEEPA).
As I correctly predicted, some of the tariffs were left intact, allowing Trump to bypass Congress. As Roberts wrote, “The president asserts the extraordinary power to unilaterally impose tariffs of unlimited amount, duration and scope.” Indeed, Trump has plans for new tariffs that are exempt from the ruling:
Trump’s ability to impose tariffs using other laws is not affected by the ruling, and Trump said he plans to use those authorities to impose new duties on a global basis. He said he will soon implement a 10% global tariff, which would be a reduction for nearly all foreign nations.
Likely, these will be challenged too, in what will be a never-ending legal morass (or at least until the end of his term, or unless he capitulates entirely, which is very unlikely). I am reminded of two policies that led to similar legal quagmires and more bureaucracy: Obamacare and Brexit. Years later, the fallout is still being felt. The putative ruling or decision, whether it was the Brexit vote or the ratification of Obamacare, only led to protracted legal standoffs, more paperwork, and confusion.
Between the untold billable hours in challenging or defending the tariffs, similar to Obamacare, and companies seeking refunds, which will be paid for by the Treasury, any revenue will probably be negated by refunds and legals costs, rendering the entire thing a wash and only adding to bureaucracy and confusion.
But as I also correctly predicted, the economic fallout was minimal, contrary to the doom and gloom by the media of tariffs ‘tanking the economy’. Stocks were unchanged after this ruling broke, indicating that market participants saw the annulment of the tariffs as not being consequential for earnings expectations, as reflected by unchanged stock prices. Given that Polymarket was giving 30% odds of the court ruling in Trump’s favor, the ruling was not entirely priced in.
Small to medium-sized businesses were disproportionately hurt. But retail giants such as Walmart benefited by the tariffs hurting their smaller competitors. This was similar to Covid as well, in which Walmart and Amazon thrived as small businesses were shut down. The pattern is ‘bigger is better’. This is yet another narrative ‘building block,’ alluding to yesterday’s post. This is why I keep recommending the same mega-sized companies, which are much more impervious to political risk.
In the end, the tariffs likely offered no tangible benefit. And since Trump’s approval ratings didn’t improve after the earlier rounds of tariffs, it’s unclear how digging in helps him politically.