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What conclusion did the court come to?
The charges concern the so-called IEEPA tariffs, which are based on a law that gives the president the power to regulate international trade in the event of a national emergency. For example, after the terrorist attack on the World Trade Center in 2001, the law was used to stop funds suspected of going to terrorist organizations.
However, the Trump administration has taken a much broader interpretation, using the law, among other things, as support for the tariffs imposed on numerous countries around the world last year. The White House then explained that the measures were necessary because of the US trade deficit with the rest of the world.
However, according to the court, the government has overstepped the president’s authority and opened the door for companies that pay tariffs under the IEEPA to now sue the state to get them back.
Was the decision surprising?
Not directly. Already during hearings related to the trial, there were indications that the judges did not view the White House’s position favorably. The law has never before been used to impose tariffs, a policy area that is typically on Congress’s table.
Officially, Donald Trump and his administration claimed they would win. But there were cracks in the facade. Recently, Trade Representative Jamieson Greer stated that the administration is prepared to replace the IEEPA tariffs with other tariffs if necessary.
This could be an explanation for the fact that stock markets in both Europe and the US are only rising slightly due to the news. However, in New York, leading indices turned positive after starting the trading day in the red due to dismal GDP figures for the final quarter of last year.
What does this mean for Trump’s economic agenda?
There is no point in mincing words – it is a serious setback and diplomatically embarrassing. Tariff policy is absolutely central to the president’s economic policy. It is the tool he has used to ignore both other countries and companies, and the revenue is the basis for major economic promises in the run-up to the fall midterm elections.
Just over half of the more than $250 billion in customs revenue the U.S. Border Patrol collected last year came from tariffs based on the IEEPA. Those are amounts that may be difficult to fully replace because the other laws giving the president some authority to impose tariffs that have previously been approved by the courts are not as far-reaching as the IEEPA.
However, one should not count on peace and quiet when it comes to trade policy. Rather the opposite. A beleaguered Trump administration, now forced to repair and repair such a central part of its economic agenda, is more unpredictable than ever.
Whether this is a wise strategy in the run-up to the midterm elections, which appear to be primarily about pocketbook issues when polls by both American and European experts show that American companies and consumers have footed almost the entire bill for tariff policy, is another question.
