Tariffs and Messaging

Sponsored by: Patriot Home Funding

This morning, in a 6-3 ruling with Justices Thomas, Alito, and Kavanaugh in the minority, the Supreme Court ruled that the tariffs charged and collected under the International Emergency Economic Powers Act of 1977, or IEEPA, were unconstitutional. Let's take a look at what the ruling did and didn't do. I'm going to use 2025 numbers for this explanation.

First, none of the trade deals that Trump used the tariffs as coercive measures to negotiate were struck down, so those agreements stay in place.

Second, the court didn't rule whether the tariffs collected under IEEPA have to be refunded, nor did they prescribe any such plan for any refund.

Third, this decision merely strikes down the power to tariff under IEEPA, and directs the President to use other legal tariff avenues. It does not rule all tariffs illegal.

Fourth, by its nature the ruling restricts future administrations from using IEEPA to enact tariffs. An example would be if a leftist somehow won the presidency, declared a climate emergency or a COVID emergency, and enacted tariffs as a "climate or COVID tax."

Fifth, it does not restrict the IEEPA law except in the levying of tariffs. It can still be used to negotiate foreign policy and enact economic sanctions, and it is a very broad and robust law which gives the President many tools in the execution of foreign policy.

Estimates of the gross revenue from tariffs enacted by President Trump in 2025 were about $287 billion. Of that amount, about 56%, or about $161 billion, are affected by this ruling regarding IEEPA. Again, the court did not rule that those funds are to be refunded nor did it prescribe any vehicle for such a refund. This will have to be handled by either Congress, or the courts, or both. the remaining tariffs are unaffected and will remain in place, especially the steel, medical supplies, chips, etc tariffs, those deemed to be of national security under section 232.

Here is a brief list of the Tariff authority laws available to the President to cover the gap left by today's decision.

Section 122: Used to address large and serious trade deficits. Trump is using this section in his executive order today levying 10% tariffs globally. The President can use this section without any investigation and enact it by proclamation. The tariffs may not exceed 15% and may last up to 150 days.

Section 201: Used for serious threats to domestic industries. International Trade Commission has 120 days to investigate and must report findings to the President within 180 days. The President has 60 days from that point to make a ruling. The initial action can last up to 4 years and may be extended for an additional 8 years. The maximum tariff rate is 50%.

Section 232: Used for national security threats. Department of Commerce investigates and must report its findings within 270 days. The President has 90 days to determine the remedy. there are no limitations to the tariffs or duration under this section.

Section 301: Discriminatory trade practices. US Trade representative, in this case Jamison Greer, recommends action within 12 months. The President can initiate retaliatory action within 30 days. This action is good for 4 years with no limit on the tariffs but must be reviewed by the US Trade Rep to be extended.

Section 338: Discrimination against US Commerce. No investigation is required. The International trade Commission informs the President of the discrimination. Tariffs may not exceed 50% but there is no limit of duration.

Sections 201, 232, and 301 have been used before. Sections 122 and 338 have not, that is until today as Trump is signing an executive order levying a global tariff of 10% under Section 122.

So where does this leave us? First, the administration will use the tools I outlined to change the tariffs. It sure seems like the administration knew this would happen but needed to use the tariffs for leverage in trade talks, to end wars, and to induce foreign investment into the country. And they knew that time was of the essence so they used IEEPA to push everything out. There's an old saying that it is easier to ask for forgiveness than permission, and that seems to be the case here.

Trump got the trade deals, the political capital from "Liberation Day," about $300 billion of receipts into the Treasury, and he made the world a safer place by ending 7 wars. Trump also got a limitation placed on IEEPA that will put guard rails on its usage in the future, which can be a good thing in the case of the climate emergency or a COVID type emergency example I spoke of earlier. As Chris has said over and over, sometimes you win when you lose.

The democrats get a narrative of a rogue, out of control president operating outside the boundaries of law to illegally tax our citizens and our allies in an election year. They will message this right off their existing narratives of the past 10 years, and they should be able to effectively fundraise off of this, too.

It sure seems like on balance Trump won again all things considered, because he used the power he earned by being a strong and decisive executive as we discussed a couple of weeks ago, but that's for the voters to decide; and to that end, it all comes back to messaging as we talked about last Friday.

So here we are, with a Supreme Court decision that on the surface neither side is completely happy with, and a debate about how it is spun in the court of public opinion, with an election looming in 8 months. How will the voters see it? We'll know soon...