Legal showdown looms over Donald Trump's 'Liberation Day' tariffs

Australia Broadcast Center

3 days ago

A US appeals court has paused Thursday's trade court decision that found many of the Trump administration's tariffs were illegal.
The Court of International Trade ruled that US President Donald Trump had overstepped his authority when he imposed the "Liberation Day" tariffs in April.
But the United States Court of Appeals for the Federal Circuit has put an immediate pause on that decision.
It paves the way for a legal showdown between the Trump administration and the US legal system.
"The [US] Constitution gives the power over tariffs to Congress, not the White House," professor of economics and public policy at the University of Michigan Justin Wolfers told the ABC.
"Now, over the years, Congress has given some of that power, or handed it off, to the White House, but only in a very limited and constrained way.
"So a simple reading of the rules would say the president can't do this.
"So in order to have across-the-board tariffs, or what he calls reciprocal tariffs, on every country in the world, he's had to call it a national emergency and invoke the Emergency Powers Act.
"First of all, that act has nothing about tariffs. And secondly, there's no emergency," Professor Wolfers said.
The US has trade deficits with many countries, and has had so for 50 years.
Professor Wolfers says financial markets and academics had assumed for some time now the tariffs would get knocked down in the courts.
This week they did, with a three-judge panel: an Obama-appointed judge, a Reagan-appointed judge and a Trump-appointed judge.
A US District Court judge, in a separate case this week, issued an injunction that also said the Trump's tariffs were not constitutional.
"So that all seemed pretty clear until we hit this afternoon when the US federal government filed an appeal with the Court of Appeals," Professor Wolfers said.
The Court of Appeals agreed to hear the case.
Until the case is heard, the tariffs will stay as they are.
"So within a couple of weeks, they're going come back with their decision," Professor Wolfers said.
"If, as I expect, they find this to be unconstitutional, then the tariffs will be back off again.
"Then we'll be off to the Supreme Court.
"We'll see the same drama play out one more time.
"Ultimately, my guess is the White House lawyers are just going to find other ways of creating International trade havoc."
Some key questions then remain.
How far is Mr Trump prepared to go in implementing the tariffs, and why have financial markets largely stopped swinging wildly in response to tariff news out of the White House?
"I'm an economist and what I can see is a consistent pattern of behaviour, which is the president genuinely believes that tariffs are a good idea," Professor Wolfers said.
"His lawyers will be telling him, as of this afternoon, Mr President, the statutory authority you're using will come under question, but if you want to push ahead with tariffs, I've got lots of other ways you can do it.
"My guess, based on recent history, is that he'll say, 'That's terrific, let's keep going.'"
The financial markets have become incredibly volatile.
In early April, when he announced the so-called Liberation Day tariffs, share markets plunged.
When Mr Trump paused the tariffs, stocks soared.
The response to these latest developments has been noticeably muted.
"Now there are two interpretations of that," Professor Wolfers said.
"One is that markets believe that tariffs are so fundamentally important to the profitability of American businesses, they have no choice but to rise and fall dramatically every time something happens.
"If that were true, then you would have thought that the Supreme Court making it unconstitutional should have caused markets to absolutely soar today, and they barely rose a little.
"The other possibility is that the original policy announcement was so incoherent, so poorly thought through, so dramatic, so unconstitutional on its face, so absurd, with so much overreach in both the economic, political, and legal domains, that it signalled an administration that's out of control.
"And [one] they could do a lot of damage.
"And so maybe that's what they [financial markets] were learning in early April.
"They reacted a little bit to tariffs and a huge amount of learning that this is a an economically unhelpful administration.
"And if that's the case, then all that we learnt today when the courts say, 'Trump wasn't allowed to do tariffs in a particular way,' you're only going to see a small reaction.
Investment bank Barrenjoey's chief interest rate strategist Andrew Lilley says global leaders, policy makers and financial markets are waking up to the idea that Mr Trump's decisions are more bold, unpredictable and chaotic in his second term.
"People doubted that Trump would have the stomach to take any action that would cause the stock market to decline by 10 per cent or more," Mr Lilley said.
"Everybody always said Trump, at the end of the day, he wants to change things, he wants to build a legacy of being more than just a tinkerer.
"At the end of the day he is a populist, and a populist doesn't want to take any action that causes the stock market to fall by more than 10 per cent.
"So the fact that [he implemented the tariffs], knowing for sure, surely he knew, that it would evoke a stock market reaction.
"And when after 24 hours he hadn't recanted and he hadn't softened.
"In fact, he stepped up the tariffs.
"This caused us to reshape our view of 'what is the stomach that Trump has?'
"And now we realise actually this is a very different version of Trump from Trump that we saw from 2016 through 2020."
The US Appeals Court has ordered the plaintiffs in the trade court case — a group of small businesses — to respond by June 5, and it ha given the US government until June 9 to reply.