How are businesses supposed to plan for the future if they have no idea what the rules of the game are going to be? Businesses thrive in a predictable environment, but we have entered a period of time of extreme uncertainty. One day we are facing high tariffs, the next day one court strikes them all down, and then the next day another court temporarily reverses that decision. How is anyone supposed to make solid business decisions in such an environment? Our economy has been heading in the wrong direction for a long time, and we need to take bold action to fix things. But if legal battles are going to be constantly upending the rules of the game, there is no way that we are going to be able to pull out of our economic death spiral.
On Wednesday, three judges at the U.S. Court of International Trade made headlines all over the world when they dramatically struck down all of President Trump’s tariffs…
A federal court on Wednesday ruled that President Donald Trump overstepped his authority to impose sweeping tariffs that have raised the cost of imports for everyone from giant businesses to everyday Americans.
But the administration immediately appealed the decision on Wednesday night, leaving the situation uncertain for consumers and companies and potentially prolonging the battle over whether Trump’s import duties will stand – and possibly reshape the global economy.
A three-judge panel at the US Court of International Trade, a relatively low-profile court in Manhattan, stopped Trump’s global tariffs that he imposed citing emergency economic powers, including the “Liberation Day” tariffs he announced on April 2. It also prevents Trump from enforcing his tariffs placed earlier this year against China, Mexico and Canada, designed to combat fentanyl coming into the United States.
Many news outlets on the left were in a celebratory mood once this decision was announced.
For example, the following comes from Politico…
The U.S. Court of International Trade’s unanimous ruling against Trump’s signature tariffs is not the first judicial rebuke of Trump’s second term administration — and it will not be the last — but it may be the most serious and consequential to date. For the time being, the decision provides a major source of relief to the large majority of Americans who opposed Trump’s tariffs; to the U.S. businesses, both large and small, whose operations were existentially threatened by a policy that changed by the day; to the country’s foreign trading partners, whose economies were thrown into disarray; and to international financial markets, which quickly rose after the decision came down.
And the Chinese were quite thrilled by the decision as well…
China reiterated its call for the U.S. to abolish its tariffs after a panel of federal judges ruled that President Donald Trump did not have the authority to introduce them under the emergency powers he had used. The Trump administration is appealing the decision.
He Yongqian, spokesperson for the Chinese Commerce Ministry, said Beijing has “noticed that the court ruled that tariffs imposed over [the] fentanyl issue and Trump administration’s worldwide reciprocal tariffs are illegal and blocked them from going into effect.”
“China has always maintained that there are no winners in a trade war and that protectionism has no way out,” He said, according to state media outlet Global Times.
But the truth is that this court decision really didn’t change much at all.
Economists at Goldman Sachs quickly pointed out that the Trump administration has other ways to impose tariffs and that this ruling “might not change the final outcome for most major US trading partners”…
Goldman Sachs economists said the White House has a few tools at its disposal that could ensure the court ruling is only a temporary problem.
“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,” Goldman Sachs economists said in a research note.
“For now, we expect the Trump administration will find other ways to impose tariffs,” they added.
In particular, the Trump administration could use “Section 122 of U.S. trade law, Section 301 investigations and Section 338 of the Trade Act of 1930” to impose new tariffs in place of the tariffs that were struck down…
The Trump administration nevertheless has other legal means of imposing tariffs, Goldman says, flagging Section 122 of U.S. trade law, Section 301 investigations and Section 338 of the Trade Act of 1930.
Section 122 of the Trade Act of 1974 does not require a formal investigation and could therefore be one of the swiftest ways to get around the court roadblock.
“The administration could quickly replace the 10% across-the-board tariff with a similar tariff of up to 15% under Sec. 122,” analysts at Goldman said.
But for now, none of that will be necessary, because the U.S. Court of Appeals for the Federal Circuit has temporarily stopped the decision by the US Court of International Trade from taking effect…
A federal appeals court on Thursday granted the Trump administration’s request to temporarily pause a lower-court ruling that struck down most of President Donald Trump’s tariffs.
The Trump administration had earlier told the U.S. Court of Appeals for the Federal Circuit that it would seek “emergency relief” from the Supreme Court as soon as Friday if the tariff ruling was not quickly put on pause.
The judgment issued Wednesday night by the U.S. Court of International Trade is “temporarily stayed until further notice while this court considers the motions papers,” the appeals court said in its order.
What a mess.
White House Press Secretary Karoline Leavitt is insisting that this is a matter that will ultimately need to be decided by the U.S. Supreme Court…
- “There is a troubling and dangerous trend of unelected judges inserting themselves into the presidential decision making process,” she said. “America cannot function if President Trump, or any other president for that matter, has their sensitive diplomatic or trade negotiations railroaded by activist judges.”
- She added, “But ultimately, the Supreme Court must put an end to this for the sake of our Constitution.”
She is right.
The Supreme Court will need to get involved.
But how long will that take?
And at this stage, it is very unclear what the Supreme Court will choose to do…
“At the moment, it is anyone’s guess as to whether these very unpopular tariffs will be reinstated on appeal or by the Supreme Court,” said Carl Weinberg, chief economist at High Frequency Economics, in a May 29 research note. “So, uncertainty is now poised to escalate.”
It could take weeks or even months before a final decision is reached.
So what are U.S. businesses supposed to do during that time?
I have heard from a number of U.S. business owners that are experiencing quite a bit of stress right now.
Sadly, the numbers show that the U.S. economy had shifted into contraction mode even before the global trade war erupted…
According to the Commerce Department’s Bureau of Economic Analysis (BEA), the advanced GDP Growth Rate is expected to have contracted by 0.2% in the January-March period. The readings show a marked pullback from the prior quarter’s 2.4% expansion.
The drama that has played out right in front of our eyes this week is yet another example of how broken our system has become.
In the months ahead, there will be many more matters that directly affect our economy that will end up in the courts, and unelected judges will get to decide what happens.
It is not good for our society to have endless battles between the executive branch and the judicial branch.
Meanwhile, Congress is so paralyzed that it literally can’t seem to get much of anything done.
If you are trying to run a business in the midst of this madness, you definitely have my sympathy, and I have a feeling that a lot more uncertainty is ahead of us.
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