Tariffs, and Trump's entire economic agenda, were just thrown into chaos
A US federal court's ruling Wednesday against President Donald Trump's authority to levy some of his most sweeping tariffs may have also dealt a serious blow to the president's entire economic agenda.
Trump's core economic policy has been his historic tariffs, but the administration has described its aggressive trade actions as just one leg of a three-legged stool. Built on tariffs, spending cuts and tax cuts, Trump's economic agenda relies on all three components to stand strong.
But a three-judge panel at the US Court of International Trade blocked Trump's global tariffs, which he imposed citing emergency economic powers. Those trade actions include the 'Liberation Day' reciprocal tariffs, 10% universal tariffs and the tariffs aimed at preventing fentanyl from entering the United States.
The three-legged economic stool just lost a leg, at least for now. Without trade, Trump's whole economic policy plan could come crashing down.
Historic tariffs have persuaded dozens of US trading partners to come to the table to make deals with Trump. In theory, those trade deals could open up foreign markets to more US goods, benefitting US manufacturers and farmers.
Revenue from Trump's tariffs, meanwhile, could, at least in part, help pay for Trump and congressional Republicans' massively expensive tax cuts, that could boost economic growth and add certainty to the markets by raising the debt ceiling. Trump's deregulation and spending cuts, particularly via the Department of Government Efficiency, could also reduce the government's costs and negate some of the impact of the tax cuts on the surging federal debt.
Because of its fragile construction, Trump's plan to usher in a new economic Golden Age has plenty of naysayers, including most mainstream economists, who argue that the administration lacks the discipline, authority and political support to make it happen. The on-again, off-again trade policy, legal battles over DOGE and intraparty standoffs on the 'Big, Beautiful Bill' serve as evidence.
Elon Musk, one of Trump's biggest financial backers who was the public face of Trump's DOGE team, criticized the bill this week, saying the legislation's massive additions to America's debt effectively undermined the cost-cutting group's efforts. Now, with the potential for no tariff component to Trump's agenda, Republican deficit hawks in Congress may not support Trump's tax cuts. Many were already extremely nervous about the bill's nearly $4 trillion price tag – even with around $1 trillion in unpopular cuts to Medicaid.
'Increased revenues from tariffs (approximately $150 billion per year) could have helped offset some of the deficit from the reconciliation package,' Aniket Shah, head of sustainability and transition strategy at Jefferies, wrote in a note to clients Wednesday.
With the legal outcome now uncertain, Shah said, Trump and Republicans may be forced to settle for reduced tax cuts or increased spending cuts to advance the House-approved bill through the reconciliation process with the Senate.
There are more questions than answers at this point. The Trump administration has appealed the ruling, which may ultimately get overturned.
'It does raise questions about how the administration will respond and how this affects, if at all, the tax package going through Congress,' noted Keith Lerner, co-chief investment officer at Truist Advisory Services.
Even as the appeal makes its way through the legal system – perhaps to the Supreme Court – Wednesday's ruling could undermine Trump's much-sought trade deals with foreign partners.
Those deals have been sparsely announced, even with just over a month to go in the three-month pause of Trump's 'reciprocal tariffs.' The administration has announced frameworks of deals with only the UK and China.
'We believe one reason bilateral negotiations had stalled was that US trading partners may have anticipated this outcome,' said Shah. 'Will they now view trade negotiations as a matter to be resolved by the courts, or will they re-engage with the US on trade policy?'
The setback for Trump's agenda, however, may be temporary. For businesses, the court's ruling provides little certainty – particularly because of the administration's appeal.
'If anything, the ruling supercharges the uncertainty already facing businesses and consumers, because it's the first hint of a possibility that … tariffs could be eliminated entirely,' said the Yale Budget Lab's Ernie Tedeschi. 'But even if they were, the Administration could try to raise tariffs using other authorities. The potential outcomes just got much more uncertain in both directions — lower or higher tariffs.'
The administration may have alternate pathways to imposing its tariffs and avoid legal scrutiny. That could include using Section 232 of the Trade Expansion Act, which was unaffected by the court's ruling. Trump has levied 25% tariffs on steel, aluminum, autos and auto parts using Section 232 authority.
'It's not over,' said Gary Clyde Hufbauer, a nonresident senior fellow at the Peterson Institute for International Economics. 'You give a kind of Whac-a-Mole flavor to this whole story.'
Hashtags
Try Our AI Features
Explore what Daily8 AI can do for you:
Comments
No comments yet...
Related Articles
Yahoo
12 minutes ago
- Yahoo
U.S. Post Office Accused of Secret Deportation Assistance
President Donald Trump is enlisting an unlikely ally in his mass deportation crusade—the law enforcement arm of the U.S. Postal Service, The Washington Post reports. Trump, who has vowed to deport 'millions' of immigrants, has roped in the U.S. Postal Inspection Service to assist the Department of Homeland Security (DHS) with its tracking, detaining, and deporting efforts, the newspaper reported, citing two people who spoke on the condition of anonymity for fear of professional reprisals. It's a jarring pivot for the agency, whose usual duties—according to its own website—include investigating mail theft and violent crimes, not immigration crackdowns. The escalation comes just weeks after DHS data revealed that Trump—despite his fiery anti-immigrant rhetoric—is actually deporting people at a slower pace than his predecessor Joe Biden. According to Reuters, the Trump administration deported 37,660 people in its first month in office. That's below the monthly average of 57,000 removals and returns during Biden's final year of presidency. The sources told The Post that immigration officials are looking to gain access to the Postal Inspection Service's vast surveillance systems—such as online account data, package and mail-tracking, credit card and financial information, IP addresses, and even photographs of the exterior of envelopes and packages, known as 'mail covers.' One source familiar with the matter described the pairing as a 'complete overreach.' 'The Inspection Service is very, very nervous about this,' the source said. 'They seem to be trying to placate Trump by getting involved with things they think he'd like. But it's complete overreach. This is the Postal Service. Why are they involved in deporting people?' A senior DHS official told the Daily Beast the collab was 'a key part of ensuring law enforcement has the resources they need to fulfill President Trump's promise to the American people to remove violent criminals from our streets, dismantle drug and human trafficking operations and make America safe again.' 'Under President Trump, the Department of Homeland Security will use every tool and resource available to secure our border and get criminal illegal aliens out of our country. The safety of American citizens comes first,' the official said. Meanwhile, immigration experts are doubting that the Trump administration has deported as many people as it says it had during the president's first 100 days in office. Tom Homan, Trump's border czar, said on April 28 that the White House was on track and had deported 139,000 people since the president's inauguration on Jan. 20. 'The numbers are good,' he told reporters during a press briefing. According to USA Today, data from the U.S. Immigration and Customs Enforcement suggests that 57,000—less than half the figure provided by Homan—have been deported. Austin Kocher, a Syracuse University researcher who regularly compiles and analyzes immigration data, told the publication he thinks the administration is 'either engaging in a highly creative accounting scheme to inflate the perception of deportations or simply pulling these numbers out of thin air.'
Yahoo
13 minutes ago
- Yahoo
America's Reputation Might Not Matter as Much as People Think
America's reputation is shot. At least, that seems to be the prevailing view at the moment. 'Trump is Trashing America's Reputation,' exclaimed a recent opinion piece in the Wall Street Journal. 'Trump's erratic policy is harming the reputation of American assets,' read the headline in The Economist. And writing for The Conversation, Steve Dunne of the University of Warwick observed, 'Across the opening 100 days of his second term, Trump … has devastated—perhaps irreparably—economic confidence in the US.' The core idea in such statements is that U.S. President Donald Trump's behavior since the start of his second term has undermined the United States' role as a source of global stability and has caused the country to give up the mantel of global leadership. To determine whether this is really the case, it's is worth stepping back to reflect on how and whether reputation plays a role in international affairs. Reputation has been asserted as an important factor in understanding whether governments will honor obligations to repay sovereign debt, uphold commitments to allies, not back down in a crisis, or just generally behave cooperatively. Overall, cooperation is commonly framed as a positive for a country's reputation: One typically doesn't say that a pariah state, like North Korea, has ruined its reputation by starting to cooperate. But when international relations analysts speak of reputation, whose reputation are they speaking of? There is much debate among international relations scholars as to whether reputation tends to be associated with individual leaders, with countries, or with both. To get more in-depth news and expert analysis on global affairs from WPR, sign up for our free Daily Review newsletter. If one believes that reputation is primarily attached to leaders, then a country's reputation in world affairs is quite fluid, as it depends on who is holding the levers of power at a given time. According to this view, while Donald Trump's predictably unpredictable nature could result in a wild four years while he is in office, expectations will again reset following the 2028 election. Following his election in 2021, Joe Biden spoke of how 'America is Back' following four years of Trump as president and he sought to reset the United States' global reputation. In some respects, he did that. But the extent to which he continued with some of Trump's key foreign policies was also notable, whether those policies were economic restrictions towards China, or continuing to use the Abraham Accords to underpin a coalition against Iran. The other view is that international reputation is associated with countries as a whole and that there is something about the character of a country that leads to expectations about its behavior. In this view, the United States, independent of Donald Trump himself, has an international reputation. Still, even under this view, the leader a country chooses for itself can affect its reputation. Many observers abroad were willing to view Trump's first election as a fluke—after all, he didn't even win the popular vote the first time around. But the fact that Trump remained the figurehead of the Republican Party after his first term and then won reelection by securing the popular vote suggested to many that Trump is indicative of the more general character of the United States. This resets expectations about U.S. behavior going forward. Setting aside questions about whether Trump's approach truly marks a new phase in the behavior of the United States or whether its even possible to render such a judgment after only a few months in office, there is evidence that the U.S. reputation prior to Trump remains intact. He was elected again, but under circumstances that were particularly advantageous to the non-incumbent party. The U.S. courts have also continued to block and slow his agenda, most recently his beloved tariff policy, and civil society actors are pushing back against his agenda in myriad successful ways. In the end, it might turn out that the U.S. under Trump perfectly illustrates the old saying attributed to Winston Churchill, that 'Americans can always be expected to do the right thing, after all other possibilities have been exhausted.' This suggests that the United States, regardless of who is in office, has long had a reputation of being inward looking and not particularly cooperative with the rest of the world, but ultimately doing so when it is needed most. Such debates are interesting, but there is a larger question at play. Is it even worth worrying about reputation? After all, states and leaders are generally shortsighted. As I've written before, because the international system is inherently complex, decisionmakers within states are typically just going from one fire to the next trying to avoid the worst possible outcomes. Memories are short because there is only so much that can be learned about future likely behavior from particular cases. The political scientist James Morrow made this point when he wrote that 'in international crises … factors always vary across cases.' For example, does the U.S. failure to defend country X mean that it will fail to defend country Y? Not necessarily, because countries X and Y are likely in very different situations. Consider Trump's views toward Ukraine and Taiwan. If he were to cease U.S. military aid to Ukraine—a possibility that seems increasingly unlikely—this should not be seen as an encouraging sign to Beijing, because the context is very different. Defending Taiwan, an island, is very different than defending Ukraine and its large land border with Russia. Trump views the war in Ukraine as the fault of his predecessors, but likely would view a Beijing attack against Taiwan as a personal affront to him. Moreover, U.S. economic and security interests are arguably clearer with Taiwan than they were for Ukraine. In the same way that behavior in one situation may not translate to behavior in another situation, it is questionable whether reputation in one issue area, such as trade, will matter in another, such as defense cooperation. The contexts are again significantly different, and a country's reputation for behaving a certain way in trade relations may not say much about how it behaves as a partner in other contexts. In sum, it may well be desirable for a leader and a country to exhibit predictable cooperative behavior. But such predictability regarding the past doesn't supersede context-specific considerations of power and interests. Donald Trump may well understand this feature of international politics. Stated simply, reputation's importance in international politics may be largely because people think it matters, not because it actually matters in reality. Paul Poast is an associate professor in the Department of Political Science at the University of Chicago and a nonresident fellow at the Chicago Council on Global Affairs. The post America's Reputation Might Not Matter as Much as People Think appeared first on World Politics Review.
Yahoo
13 minutes ago
- Yahoo
New Trump Office Has Name Reportedly Linked to Racist Policy of the Far Right
In a sweeping State Department overhaul, the Trump administration plans to create an 'Office of Remigration,' embracing a term closely linked with the European far-right involving the race-based mass deportation of immigrants. The revamp is part of a broader effort by President Donald Trump to deport millions of undocumented migrants. According to a document sent by the State Department to six congressional committees and obtained by multiple news outlets, the new office would serve as a hub 'for immigration issues and repatriation tracking.' The office would be part of the Bureau of Population, Refugees, and Migration, a State Department official cited by Axios said. The plan, sent for approval by July 1, has sparked alarm as the term 'remigration' has become a buzzword for the global far right. In Europe, the ideology calls for the expulsion or forced repatriation of non-white immigrants and their descendants, regardless of their legal status. It has been used by far-right parties such as Austria's Freedom party (FPÖ) which in June 2024 urged the EU to name a 'remigration commissioner.' 'The Office of Remigration will serve as the [Bureau of Population, Refugees, and Migration]'s hub for immigration issues and repatriation tracking,' the document said. 'It will provide a policy platform for interagency coordination with DHS and other agencies on removals/repatriations, and for intra-agency policy work to advance the President's immigration agenda.' In a nod to remigration ideology, the Office of Remigration 'will also actively facilitate the voluntary return of migrants to their country of origin or legal status,' Wired reported. The Daily Beast has reached out to the State Department for comment. Wendy Via, CEO and president of the Global Project Against Hate and Extremism, described the plans as 'outrageous.' 'There is no hiding from the fact that the ultimate goal of 'remigration' is purely about ethnic cleansing. It is a terrible day for our country when 'remigration' proponents are crediting the US and Trump's administration for normalizing the term,' she told Wired. Aaron Reichlin-Melnick, senior fellow with the American Immigration Council, said on X: 'In a move likely intended to cause public outrage, Sec. Rubio is proposing eliminating the refugee and migration division at the State Department and replacing it with an 'Office of Remigration' — a term closely associated with the European far right and ethnic cleansing.' 'The way that it worked before, Population Refugee Migration was basically an entire bureau dedicated to bringing people into the United States,' a State Department official, who spoke on condition of anonymity, told Axios. 'It had the migration function—it's in the name—we're just reversing the flow of migrants who shouldn't be here to go out of the country.' The development comes weeks after DHS data revealed that Trump—despite his fiery anti-immigrant rhetoric—is actually deporting people at a slower pace than his predecessor Joe Biden. According to Reuters, the Trump administration deported 37,660 people in its first month in office. That's below the monthly average of 57,000 removals and returns during Biden's final year as president.
