Lawfare Daily: The Tariffs Decision and What Comes Next

[Intro]

Marty Lederman: If the word regulate imports and IEEPA means something, it doesn't mean this kind of daily shifting non-regulatory, arbitrary sort of action. And I thought that was sort of a polite way of the chief signaling that we have an out-of-control president here and we need to do something about it.

Scott R. Anderson: It's the Lawfare Podcast.

I'm Senior Editor Scott R. Anderson with Kathleen Claussen, Marty Lederman, and Peter Harrell, all of the Georgetown University Law Center.

Peter E. Harrell: I do think we saw the justice, the chief justice, the other justices really finding galling the chaos of the trade policy. And if we see continued chaos just under a new statutory name, we'll see how that plays out in the courts.

Scott R. Anderson: Today, we're discussing the Supreme Court's recent tariffs decision and what its implications may be for President Trump's trade policies and beyond.

[Main Episode]

So we're excited to have our all-star Georgetown panel back together again. We all sat down the day of oral arguments for Learning Resources and V.O.S. Selections, the two cases centering on President Trump's tariff agenda.

We now have an opinion. It's been a few days. Peter was kind enough to join us the day of the opinion for our live stream on litigation developments, but we weren't able to get the whole panel together until now, but we wanted to get together because there's a lot o break down about this opinion and what comes next, and we cannot think of three better people to talk about it with.

So let's start with the holding itself. We ended up with a, I think it's fair to say, easiest to think at least of the opinion, kind of three different stripes, a six to three majority striking down the whole universe of IEEPA based tariffs, including both the reciprocal global tariffs to all U.S. trading partners Trump administration imposed under the International Emergency Economic Powers Act—

And the, quote unquote, trafficking tariffs for relating to fentanyl, unlawful immigration, a few other specific bilateral issues imposed on Canada, Mexico, and China, both of which were subject to legal challenges before the court. Of course, this also in this holding ruling that IEEPA does not authorize revenue generating tariffs.

It also has implications for other tariffs the Trump administration imposed under the same set of authorities, including threatened tariffs against Europe related to Greenland, including secondary tariffs relating to Iran, a whole bunch of other actions that weren't technically before the court, but that this clearly has ramifications for.

And we had a two-part majority. We had the three kind of Democratic appointees taking one perspective focused on conventional statutory interpretation. Three Republican appointees, Chief Justice Roberts, Amy Coney Barrett, and Justice Gorsuch embracing different stripes, I think it's fair to say, of the Major Questions Doctrine, at least in addition to or supplementing this conventional statutory interpretation approach.

And then we have the dissenters, Alito, Kavanaugh, and Thomas dissenting for slightly different reasons, but most generally being viewing that the president deserves a fair amount of deference and can get broad delegation from Congress in this particular issue set.

So, Peter, I wanna start with you first. Elaborate or build out on any part of that I might have at trying to give a quick summary that you think is particularly relevant. But talk to us about what surprised you about this opinion, what ways it may have departed from what you were expecting, what ways it lined up, what you were expecting. You know what the implications are likely to be for the Trump Administration's core trade agenda. We’re gonna talk a little bit about what happens afterwards, but how big of a blow is this, essentially?

Peter E. Harrell: This was actually kind of the opinion I thought we would get, right? I had thought from the beginning that a majority of the Supreme Court was going to conclude that IEEPA, this 1977 emergency power statute simply didn't authorize the power to tariff. And they're both like doctrinal reasons, I thought the court would get there. And there are also pragmatic reasons I thought the court would get there.

Maybe I'll start with the pragmatic reasons, which is that if you weren't going to take this kind of clean reading of IEEPA. The power a tariff is simply not within the authorities granted by the statute, the court was going to discover—

But well, if the court both didn't wanna have this kind of clean reading of the statute and also did not want to give the president a truly unbounded tariff authority, the court was going to quickly discover it was going to have to get in the business of drawing lines about what tariffs would and would not be allowed under the statute.

And I frankly, as somebody who has worked on IEEPA in the sanctions context for decades now, I'm sort of embarrassed to admit, did not think that the court would want to get into that particular morass. So I actually always thought that if they were going to limit the power the president's powers under IEEPA, they would find a way to do it cleanly. And the logical way for them to do it cleanly was to simply read the stretch statute as not containing a tariff power.

So I actually thought this was the outcome of where they would land. It was interesting to me a little bit on how they get there, and that of course is where you saw the biggest split between the majority opinion, the opinion of the court by the Chief Justice and the concurrence by Justice Kagan, which is, do you really need the Major Questions Doctrine as a part of the way to get there? Where the chief justice, I think was looking both at the bounds of the statute, comparing the way in which this statute was drafted with the way tariff statutes are drafted, and then concluding, in light of how the tariff statutes are drafted,

there is not a kind of clear congressional authorization for tariffs here and because of the economic significance of these tariffs, which the government itself had readily conceded that these were enormously economically significant, Congress should have spoken clearly.

Obviously in the concurring opinion, liberal justices are kind of continuing to maintain their belief that the major Major Questions Doctrine should not be a thing. And so, you know, looked more narrowly at sort of, narrow is not quite the word—looked more specifically at the, you know, history and text of the statute to reach the same outcome.

Scott R. Anderson: Kathleen, lemme come to you with the same question. I mean, what jumped out at you or was surprising here?

I mean, like a big divide to me is something we talked about a lot last time is these two different sets of tariffs, 'cause particularly if you're looking at, through the major questions doctrine lens, one side of these tariffs was arguably much more major than the other in terms of policy impacts.

Although maybe not, it's hard to then say, well then how can you read the statute differently in hose two different contexts? Were you surprised that this is how we ended in this sort of perspective? If so, why and or why not?

Kathleen Claussen: So I think as for the reasons Peter said, it would be hard to be surprised by very much right.

There was, there's so many different threads and ways that the justices could align themselves here. So, very little would surprise me in this outcome. This distinction between a never IEEPA, never allows tariffs or sometimes that Peter was talking about.

When you read the opening sentence of the chief justice's opinion, right, it kind of sounds like they're going for the sometimes right? Because the way they start, they talk about the scope of the president's action. Any country, any rate, any product, any time made it sound. That was what pushed them over the edge, right? That you couldn't, you just couldn't, like the federal circuit majority, you just couldn't have something quite so big.

But maybe IEEPA would allow something smaller. And so then of course, as you're reading, there are a few moments where you thought, especially their treatment of Yoshida—Maybe they're going to equivocate and maybe they'll come back to the maybe option and allow something like secondary tariffs that we talked about and maybe that would've been a better outcome legally and politically.

You know, I think there I'm with, I understand what you're saying, Peter. On the other hand, secondary tariffs might have been a pretty useful tool and I've always said, you guys have heard me say this before if we had only had secondaries from the beginning maybe we wouldn't be here at all. So, so I think Scott, bottom line is when you read that opening sentence, you thought, Gosh, maybe there's a space here for sometimes IEEPA tariffs, but overall not much to surprise.

Footnote to that is I was a little surprised at the rosy relationship between Congress and the executive that the chief justice opinion seems to suggest on trade. They're talking about all these other tariff statutes that have been working so well and look at all the love.

I'm not sure many trade lawyers would agree with that characterization. But it's something that we can all go on and discuss.

Peter E. Harrell: I just wanna jump in and make one comment because I actually, one area, or I very much agree with you, Kathleen, is that I actually think that if the facts of this case had been very different, if there had been, you know, one or two instances of secondary tariffs where there was a clear national security justification, you know, on.

You know, some country that was selling oil to Cuba or something like that. I actually think you might have seen the justices come down in a different place, but they were looking at this and finalizing this opinion at the very moment where Donald Trump is threatening tariffs over Greenland. And so I think the justices there has to be a practical reality of as they are finalizing this opinion, they see the president's threatening geopolitical tariffs, but over frankly, a kind of absurd geopolitical issue.

And I think it had to have weighed in them that, you know, very practically, if you gave this particular president a geopolitical tariff authority, he was not going to keep that as a kind of limited and contained geopolitical tariff authority.

If you had a different president who was doing narrow geopolitical tariffs, I actually agree with you. It might have come out differently.

Kathleen Claussen: Of course, that assumes Peter, that power has actually gone away. You know, I still think there's a possibility for Greenland tariffs. It's just through other means, so I'm not sure it's such a bright line on those major sort of, you said geopolitical or other foreign policy issues that the president might want to use the tariff power for.

Marty Lederman: I wanna weigh in. I mean, to a certain extent Kathleen and Peter have pointed to where I wanna go.

The really large question here, the looming question, going well beyond tariffs and IEEPA to how the court is going to deal with President Trump in particular, like in this and other cases that they're right, that to a certain extent, this is a Trump created outcome that might not have been present in other circumstances.

And I'll give a couple of examples from the case itself, but that because the Court is very wary to say the least, of actually issuing a specifically anti-Trump opinion and of various different sorts, the irony is that they end up issuing the broadest possible ruling that will tie the hands of this an every future president to come under IEEPA. Right?

So it's a classic case of if you want the Court to, to contract and restrict executive power, just abuse that power. Well, you know, broadly enough. And that's what you'll get. So let me give a, I mean, Peter your hypo is right there, right? It's, and it's in Justice Kavanaugh's dissenting opinion. In August of last year, President Trump issued another IEEPA tariff order with respect to India based on an alleged extraordinary and unusual threat of what Russia is doing in Ukraine. And the tariff was imposed on India because India continued to import Russian Federation oil. Alright.

Let's say that's all Trump had done. He had said there's a national crisis with respect to Ukraine. We need to cut out, we need to put leverage on Russia to change its posture toward Ukraine. One of our allies, India is undermining that effort by purchasing tons of oil from Russia. So we're going to start imposing IEEPA tariffs on India, and that had been litigated and gone up to the Supreme Court.

I'll give you another hypo that comes from the oral argument. Justice Thomas asked Neil Kachel: If one of our major trading partners, for example, China, were holding U.S. citizens hostage, could the president instead of embargoing or setting quotas on Chinese imports, say the most effective way to gain leverage and to get China to release our hostages is to impose a tariff to leverage our position. Imagine that case. Imagine a president that used IEEPA to do that.

I don't think it's too much of a stretch to say that if either of those cases had come before the court would've held nine to zero or close to it. That IEEPA authorizes tariffs of that sort, but instead the court's holding is categorically no, IEEPA doesn't authorize any tariffs. Full stop.

Why did it do that? Because of the way this IEEPA authority is being misused by President Trump, and so they could have gone a couple of other ways, one of which we talked about in the last episode.

And when the episode we taped after, I think after the oral argument, which is they could have said that President Trump's findings that there was an extraordinary and unusual threat to national security caused by the trade deficits was simply not plausible and did not warrant judicial deference and therefore the predicate for invoking IEEPA was not there.

And this Court so far is just unwilling to challenge presidential findings pursuant to statutory delegations that are extraordinarily broad, even though this president every day is exploiting those broad delegations to make findings that virtually no one thinks are plausible.

Secondly, it's what Peter was describing. Trump then proceeded even with respect to the emergency and the extraordinary threat that he had identified, not to act in any consistent way, but to act the way Donald Trump does with respect to everything, which is to use this authority as a means of daily leverage and poker playing and changing it right, left and sideways every day in what seems to be just matters of peak or matters of strategy or in order to look unpredictable. So the trading partners will do his bidding. It's what he is doing with Iran right now with the threat of using force and the like.

So to my mind, the most telling paragraph in the entire opinion is one that Kathleen sort of alluded to it, but on page three of the chief's opinion. The chief describes since imposing the tariffs, the president has issued several increases, reductions in other modifications. One month after imposing the 10% tariff on Chinese goods, he increased it to 20. Then he removed a statutory exemption. Then less than a week after that, he increased the rate on Chinese goods from 34% to 84%.

The very next day, he increased it to 125. Then he brought that, then he shifted sets of goods into and out of the reciprocal tariff framework, et cetera, et cetera, et cetera, every day. He wasn't treating IEEPA the way Congress or anyone else thought it ought to be used. He was instead using it to be this matter of leverage in which every day he was acting almost arbitrarily not regulating it.

If the word regulate imports and IEEPA means something, it doesn't mean this kind of daily shifting non-regulatory, arbitrary sort of action. And I thought that was sort of a polite way of the chief signaling that we have an out-of-control president here and we need to do something about it. But instead of simply saying this is not the kind of regulation that IEEPA contemplates, we're gonna strike down what President Trump is doing, 'cause he's abusing this. They got six votes for actually deciding well, that shows that this statute can be abused, and so we are going to hold that it never authorizes tariffs—

Even if in one of those other cases that we've hypothesized and that the justice is hypothesized, I think the court would've overwhelmingly been inclined to, to say that IEEPA does authorize tariffs.

Kathleen Claussen: Or there wouldn't have been any litigation at all.

Marty Lederman: Or there might not have been any, or the lower courts might have said so, and it would've been certain to not.

Peter E. Harrell: You know, Marty, the striking thing, as I hear your point, bringing back to the chief justice and I agree, it really comes through in his opinion the chaos of it. I actually think you could have made a very similar argument, not the coming down, but the going up to what the Biden administration did on Russia under IEEPA in early ‘22, like over about four weeks there were like 16 different IEEPA sanctions actions that were rolled out.

And so what's interesting is like, that is actually exact sort of chaotic, we're gonna like do a bunch of things on short order, but in many different tranches is exactly how IEEPA has been used in the sanctions context for many years.

And that I, and I think for the justices trying to draw a line about, well, why would we allow that chaotic, you know, 16 actions in two weeks at right after Russia invades Ukraine, but not allow it in the tariff context. I think that's the line they were starting to realize they'd have a hard time drawing.

Scott R. Anderson: So let me turn back to you, Marty, on an aspect of this and pivot this a little bit and just the broader implications of the methodological tools we're seeing the justice use here. The big one that's gotten the focus is the Major Questions Doctrine, we obviously have this debate between Justice Barrett, Justice Gorsuch, about what is it exactly? Is it, relative of the non-delegation doctrine with some sort of constitutional foundation, is it really just a common sense statutory interpretation tool?

Beyond that, though, there is this question about how it applies in context like this, where you have a spectrum of potential uses of an authority and you're being asked to evaluate it in a particular factual circumstance with a holding that necessarily extends well beyond that, but using a test that its foundation is about the potential ramifications of how you use it, like the policy ramifications.

Do we get any information from this opinion really about how the Court's gonna apply it? That complicated question, which it's hard to imagine, doesn't come up again for this administration, which really is quite willing to aggressively interpret and apply its statutory authorities and constitutional authorities in very disruptive ways.

So does this, you have a hint about how the Court will handle that?

Marty Lederman: My take on this is a little idiosyncratic. I think the message on this, you know, Justice Gorsuch has dozens and dozens of pages of trying to revive a very strong Major Questions Doctrine that he would ground in some sort of constitutional, you know, requirement that Congress at least speak clearly or else the Constitution doesn't allow it to delegate broadly. To my mind, that's basically rebuked by seven or eight of the other justices. I'm not sure where the chief is or if the chief cares with a grand about a grand Unified theory as long as he has this tool available, but certainly the three, the Kagan Sotomayor Jackson component, reject that and clearly the three dissenters think that it shouldn't apply in the context of foreign affairs and Justice Barrett, I think politely, but very firmly rebukes Justice Kavanaugh, and the whole idea that the Major Questions Doctrine is constitutionally based.

She says in the end, if Congress wants to delegate broadly to the executive, who are we to stop them from doing so? And so it's both the major questions doctrine and the non-delegation impulse behind it in Gorsuch, I think he's standing alone and you can tell, you can feel that in the desperation of his law review article that he writes to try to desperately try to bring some of his colleagues on board, and Kagan and Barrett in particular, saying, thank you for the invitation. That's very nice of you. But, no, we're not going there and politely rebuking him.

So I don't really think there is much of a Major Questions Doctrine. That said, I do think that what goes under the moniker of Major Questions Doctrine is very different presumptions on the part of the various justices about what it is reasonable to assume Congress intends across various sorts of cases. For Justice Kavanaugh, it seems absolutely unthinkable that Congress would not delegate to the President the broadest, most unbounded foreign affairs powers imaginable. That's his view of the world and what Congress has been doing for a hundred years.

Going back to Curtiss-Wright and before, and he thinks it's just other worldly to think that Congress didn't mean in IEEPA to give a blank check to the president. He thinks that's the appropriate baseline presumption that one should have. The other justices think otherwise. And they think, for instance, that in the domestic settings where the major questions doctrine came up in the Biden administration, it's completely reasonable to think that Congress gave broad authorities to OSHA and to HHS and to the CDC and all these other, and to the IEEPA and other examples.

And Justice Barrett has already shown in her separate opinion in the student loans case, know that she starts from a proposition that her understanding is that Congress wouldn't give the executive these broad powers. It would keep them to themselves. And so it's really that there are divisions on the court about their underlying baseline presumptions about what Congress intends, that are deep and important, and Peter is right.

This comes through in Kavanaugh's opinion. In the major questions cases in the Biden administration, they thought, I think wrongly, but they, the majority believed that the Biden administration was using broad delegations that Congress gave to the executive branch for one thing in order to rule accomplish things that were outside what Congress was trying to do and that the delegations were being exploited or contextually abused, not in the same way that Trump is doing here, but it's really eyeing the executive branches trying to take advantage of broad delegations in a way that Congress, according to these justices, would not have contemplated or wanted.

So I think that the real split is sort of these background presumptions about what Congress has intended over the years with respect to all of these broad delegations, both domestic and foreign.

Scott R. Anderson: That's so interesting. Kathleen, let come to you to spin off a part of this question that is the foreign versus domestic split. Can we do see this wrestling with this? You know, you see Justice Kavanaugh building on a theme that I think has been, he's been pretty reliable on for 15, 20 years now at least, which is the idea that in a foreign relations, national security context, statutory delegations, the executive branch should get the benefit of a doubt on at least until you get the point where there's unambiguously, you know, limitation on their authority.

Just Chief Justice Roberts, I read at least a little bit of flexing this. He says, well, it's not clear that this is the type of that, that this is the type of foreign affairs context where that comes into play. At least that's how I read it a little bit. Although I'm, you know, I think you could read it different ways.

How do we see the foreign affairs context play in here? Is it that trade is not a foreign affairs issue? Is it that foreign affairs, non-foreign affairs is not a convenient distinction? Or this you could say about national security? Is this about the normalization of foreign relations law? A kind of idea that if you're a foreign relations law nerd, we've heard a lot of it the last 15 years, to different effects.

What do you think this tells us about how the justices view that lens when applied to different authorities? 

Kathleen Claussen: I think it's a great question, Scott, and one that will probably take some more time for us all to unpack as we go study over these opinions some more. But your question really speaks to the frame that jumps out off the page here. That is the tax frame, right?

Because when you think about what is the foreign commerce power, this complex power that really draws on two different constitutional clauses, right? The tariff clause, the duty taxes clause and then the power to regulate commerce with foreign nations clause, the foreign commerce clause taken together, they, that really forms the foreign commerce power. They really come together.

So here the justices had the option presented very clearly by the parties of going down one road or the other. Is this a regulate foreign affairs sort of thing, or is this a tax sort of thing and tax it just comes through so, so clearly. So I think you're right that there, there's a lot here to understand and more about, and the foreign affairs implications more broadly. But trade really situates itself right at that intersection, and that's always been part of the challenge in trade law.

You see it repeatedly over the years. Why is it that some of our non delegation cases are trade cases, right? These are questions that come up repeatedly since the founding. And they're going to continue to come up.

And that gives me the chance to say one further thing too here, Scott, which is about sort of the before and after of what happened on Friday from a trade law perspective. And we'll talk more I know about what's happened in the last week.

But simply to say that, you know, before 10:00 AM last Friday, you could say maybe we had six major clear statutes that allowed the president to impose pretty significant economic actions that is trade actions when he felt there was some sort of national security basis to do so. And at 10:01 we just had five statutes that allow the president to impose major economic actions on the basis of a very loose definition of national security.

So I hear a lot, I've just been abroad this week and talking to a number of governments and colleagues and importers and exporters. You know, it's like, oh, let's celebrate. Right? What a win. This is such a big win. And I feel like this is how I wanted to say, did you read my blog post last year?

Because you know, it was last May when the CIT first came down against the president that I tried to say, Hey everybody, you know, forest for trees, because this is a bit of a red herring, right? That as we've already seen this week, the president is going to move forward with this policy. And again, I think that speaks to your question as to how trade is just a really special area.

Marty Lederman: Quick comment. I can't resist, but I'll be showing my age. I mean, anyone who was involved in the moot courts and then in the actual oral argument in this case, knew going in and it was confirmed at the actual oral argument, the SG was gonna try to pitch this as a national security foreign affairs case.

And Neil Kachel was gonna try to pitch it as a taxing case. And some of the justices actually asked, they're like, should we treat this as a, for a domestic or foreign affairs? And it's like shimmer. It's both a dessert topping and a floor wax. I dunno if that, I dunno if that resonates with how many of our viewers will remember that, remember the reference, but of course it's both.

These are permeable categories. In this case, it's not only that it's attacks, but it's actually assessed against domestic actors for foreign affairs purposes. It's very much like our viewers will know this reference, I hope, like Youngstown, right?

Truman went in and said seizing steel companies was a wartime measure. It was done for National Security Affairs. It's about Korea and the Court's like, no, that's, that would be one thing. Talk to us. Come back to us later. If you do something in Korea, you're seizing steel manufacturing facilities here in the United States.

And so, it's both right? And so there's—no, even if the doctrine were to neatly break down in terms of you can delegate broadly in national security and foreign affairs, but not in domestic, of course you can do both. The cases just wouldn't fit neatly on one side of the line or the other.

Scott R. Anderson: Well, I wanna turn to these other tariff authorities, which is gonna be the next lines of battle that we're gonna see over the next year or two as these get litigated out.

Before I do though, Peter, lemme turn to you on a last aspect of the majority decision that Kathleen mentioned that I wanna dig on, and that is the framing of this as a taxing clause issue because we do see all six justices in, I think, section 2(a)(1), right? The kind of conventional statutory interpretation before you get to the Major Questions Doctrine, be that the three Democratic appointee opted out of, they frame the taxing clause as having a kind of unique significance.

They quote Federalist papers as saying that powered tax was the most important power given to the union by the framers. And that for that reason, it has very specific limitations on it that, you know, bills to fund the government originate with the house, which they quote and they say for that reason, we assume if the Congress were gonna give away that authority, they would do it expressly.

That is ramifications for a lot of things beyond just IEEPA. And the taxing clause in this context of tariffs. You know, you've written for Lawfare and you know, you and I have talked about efforts to get funding out in Nvidia, right? Which may not structured as the tax, but is revenue generating for the U.S. government.

In fact, revenue generation through unconventional channels is actually kind of a signature move of this administration. Whether it's, you know, accepting gifts for which there are various statutory authorities. So I don't wanna pretend like there aren't, or the Nvidia deal, the minerals agreement with Ukraine, which I don't think we hundred percent know what that looks like from a domestic law perspective. At least I haven't figured it out.

So the, do you see this having broader ramifications for other parts of the Trump administration's agenda and potentially other executive branch policy sets? Or is this, is that maybe reading too much into the framing they adopted precisely to maybe get away from the more conventional foreign affairs lens some justice may have been pushing for?

Peter E. Harrell: I think it's gonna be a very interesting question to see how that plays out. And I actually begin with starting in the opposite way, which is, and this comes through in the opinion. I think the court was worried that if they did not take this approach to the taxing power, and if they took the view that the language of, regulate … importation or exportation. If the taxing power was embedded in this power to regulate, what would that mean in other contexts? Right?

Would that mean, you know, the Clean Air EPA under the Clean Air Act could impose pollution, taxes? Would that mean, you know, motor vehicles highway safety department could impose taxes as, you know, motor vehicle regulations.

So I think they were thinking about it the other way, that if Congress did not, if they did not rule that Congress has to give away this taxing power cleanly and clearly and. They could find future presidents discovering all kinds of taxing powers in the federal code. So I think they, that was reinforcing this view that, you know, as the history made clear, Congress did see the taxing power—

The framers did see the taxing powers kind of a uniquely dangerous power that they wanted divest. And that's where you saw the decision land. The other thing that I think was relevant there is relevant, there is a historical matter. And came through maybe a little bit in the opinion, although not that much, is that of course, when the framers were debating the taxing power, they were overwhelmingly talking about tariffs, right?

The tax that was in place largely for the federal government at the time of the founding was tariffs. For the first several decades of the government's existence, something like 80 to 90% of federal revenue is tariffs. So, actually, this is the kind of tax that the framers were talking about, which is also just like a historical backdrop.

I think it is an interesting question, and I do think the way the court talked about the taxing power raises the odds that we might see some attempted legal challenges to some of these other creative ways the Trump administration is raising revenue. So you mentioned they are trying to get a sort of a tax off of Nvidia chip sales to mainland China.

They are also like take, apparently, going to be taking an ownership stake in various Japanese and Korean government funded investments in the United States, which kind of feels like a tax on those investments. So you know, there are various creative ways the administration is trying to raise revenue and I think, you know—

If I were looking as a way to challenge I would feel a little bit more energized about challenging some of those in light of this opinion than I would've before. That said, there are going to be uphill problems in any of those challenges to those other kinds of raising revenue that this opinion doesn't address.

Scott R. Anderson: Alright, so we've got a good sense of this opinion. Let's look at the next phase of this fight, which we're already seeing beginning to play out.

The day the opinion drops. I believe President Trump says, I'm reinstating global reciprocal tariffs using Section 122 of the 1974 Trade Act. One of the authorities that have been in the discussions as a likely fallen authority for which he can do it for 150 days before he needs to go back to Congress.

Although I know I've heard some people say they think maybe he'll try and roll that over or reinitiate in different ways, which I guess is possible. Then we have section 232, 301 tariffs, a variety of other of the three digit tariffs following behind this that we started in investigations and the procedures for, to get at.

So, Kathleen, why I start with you to talk about this. You've, I think, been fairly bullish on the ability to get a lot of this tariff agenda back and through these authorities. I guess my question for you is, if there is no delta, why didn't the Trump administration start this a long time ago? 'cause now it's stuck where it's got this 150 days and then it's, it could have started these investigations with 232, 301 a long time ago.

Frankly, when this challenge first got filed, that's fully what I expected to happen because I'd be like, well, they'll shift to the statutory basis while this is all getting litigated, they'll never face any disruption that didn't happen. What's has prevented them from doing it this far? Why, and what is the delta then?

Like, what do, what is it they, why did they wanna win this case in the first place so much that they didn't appear to wanna endanger it by shifting over to these other statutory authorities earlier?

Kathleen Claussen: Okay. So a couple things there implicit in what you said or maybe assumed behind what you said there, Scott.

One is that they haven't already started. Of course, they, these have been in the works I all of last year, so, so, yes. I mean, I hear what you're saying. Why didn't they end IEEPA and go to these other things in the interim?

Scott R. Anderson: Better way to describe it. Yes.

Kathleen Claussen: Sure. But I think that is the answer to the other question that you asked, which is why not do that in kind of in the first place or why IEEPA was so important to the president?

And this gives me a chance to plug what you and I wrote back in, you know, 2019. The president said he liked, he wanted to use IEEPA right? Somebody told him he could use IEEPA for tariffs. And that time it was the Mexico, it was something with the border with Mexico. Right? And so he, something he could just do like with the stroke of his pen.

And I think we've seen from this president something that he can do easily by himself at his own whim is something that he enjoys. And so at that time, 2019, right? We know of course he, somebody convinced him not to do that. This time coming into this administration, right. It seemed, we knew it was top of mind.

So, so I think that's why clearly this power was particularly important to him personally. I think for all the reasons that are sort of associated with his presidency.

Scott R. Anderson: Peter, you wrote a really useful piece for us for Lawfare this week where you dug into not only the three big bucket of authorities I mentioned 122, 232, 301 that people have been talking about, but also played out a little bit in a very useful way, some of the legal arguments you might see for a challenge.

Talk to us, walk us through that a little bit. Where do you see the strength and the potential vulnerabilities in this next wave of tariff action coming from the administration and how do you kind of might see that play out?

Peter E. Harrell: Yeah. Well, so let's start with 122 because that is the one that the president invoked basically immediately, you know, within a couple hours of the Supreme Court opinion, he had invoked 122 to impose a 10% tariff on many U.S. imports. He has said that he's gonna raise it to 15% though as we record this on Friday afternoon, he has not yet raised that 10% to 15%.

So 122’s never been used before, and 122 is a, you know, product of a fairly unique set of historical circumstances.

It is an authority that gives the president when, I've pulled it up to make sure I have the words accurate here, gives the president the authority that “whenever fundamental international payments problems require special import measures, basically tariffs. One, to deal with large and serious United States balance of payments deficits or to prevent a depreciation of the dollar, or to encourage cooperation with other countries in addressing balance of payments issues, he can impose a 10% tariff for up to 150 days.”

And so we've seen over the last week a lively debate in the press and on the social media platforms about whether there are in fact fundamental international payments problems, right, which is clearly a precondition for the exercise of the statute, and then whether the tariffs can help resolve balance of payment deficits.

And I have to say, I think that at least as the framers of Section 122 thought about these issues, we probably don't have fundamental international payments problems, and we probably don't have major structural balance of payments deficit. When they drafted 122, we were coming off the gold standard. We were moving to a fixed—to a floating exchange rate.

There was some thought we might go back on a fixed exchange rate. And so they wanted to give the president a sort of discreet authority to do what Nixon had done in 1971, which was to impose a temporary 10, 15% surcharge to help deal with balance of payments issues. And there's a lot of argument, sort of as a factual matter that potentially we don't have these problems,as a matter of fact today.

And I think the first question the courts are gonna be asking is how much deference should they give to the president on this matter? 'cause what we saw on Friday of last week was the president put out a long proclamation or he said, you know, his advisors had advised him that in addition to the ongoing trade deficit, we had seen a reduction in the income earned by U.S. investments overseas. We had seen the most negative net international investment position of any developed country in the United States.

They made various factual findings around purported balance of payments deficits or creating international payments problems. And so the first question the court's gonna ask is, should they be reviewing whether or not the these requirements are in fact met or should they just be deferring to the president here?

And I will say that the case law out of the court of international trade in the federal circuit, right, which is where these cases are gonna go before they go up to the Supreme Court, is reasonably deferential to the president on various findings in the trade area. So I think that, you know, this is gonna be litigated.

I think we're clearly seeing interest out of the private sector and litigating this, but I think it's going, the first thing that's gonna have to be overcome is this deference that I think the courts are likely to show to the president here.

And one particular thing I think plaintiffs are gonna have to deal with is the fact that when the CIT, the trial court that will hear any challenge to 122 and a court of international trade ruled on the IEEPA tariffs and ruled against the IEEPA tariffs, the Court of International Trade actually said pretty directly that in its view as the court of international trade, the president probably could have used 122 to impose the kinds of tariffs that he had imposed under IEEPA, the subject to the 15% rate and to the 150 day duration.

So I think you get that particular, at least at the trial court level, you have that particular challenge. And what the CIT did there was they basically relied on a definition of the balance of payments that said that rather than the balance of payments being the aggregate balance of payments, it could be a referred 122, could refer to a deficit in any particular part of the balance of payments, which includes financial flows, which includes the trade deficit, et cetera. And there is clearly an imbalance in the different, you know, in one or more constituent pieces of this.

So I think they're gonna, you know, I don't I think it'll be interesting to see this to be litigated. As a policy matter, I'm quite skeptical of these 10% tariffs, but I'm not talking about this as a policymaker. That's neither here nor there. As a policy matter, I'm quite skeptical, but I think the courts are gonna be inclined to be deferential to the president here.

Marty Lederman: Can I ask you, Peter and Kathleen you know, I know nothing about, I don't even know what balance of payments deficits are.

So, but if you guys are right that there's very little factual support for it, at least across the board. The courts are, then the challengers come in and they say, maybe you have to defer to the president on whether a balance of a U.S. balance of payments deficit is serious, but whether it is large is a factual determination that the courts can review, and thus far, the government hasn't provided any evidence at all that might have been the basis for that finding, at least at the broader level.

Is there a factual basis for the idea that there are large. Even if serious U.S. balance of payments deficits or even your constituent parts, Peter, are any of them large? I mean I, I know that large is not a precise term, but surely the tariffs that he's imposed have to be at least roughly tailored to the scope of such balance of payments deficits.

And I wonder if there is room there for courts to say whatever deference we might apply. It doesn't come within a million miles.

Peter E. Harrell: I mean, I guess and I, just going back to what the president has declared, and you know, I am a sort of trade lawyer. I am not an economist. And I think that is important because, you know, we saw John Roberts and the chief justice and the final part of his opinion to basically say, you know, the courts aren't the economists. The courts aren’t the national security experts. They're just there to interpret the law.

And, you know, the president has asserted in this proclamation various facts like that, in 2024, the United States maintained a current account deficit 4% of GDP, which was twice the share that prevailed between 2013 and 2019. And the highest since 2008. I mean, again, I'm not the economist, but they do, they did go through and cite some stats, statistics about money and you know, financial things moving through the global economy to try to justify this position they're taking.

Kathleen Claussen: I would say I also would leave this to the economist for sure.

But, you know, I think what Peter's describing is a problem that extends beyond 122, right. For all of the other statutes, and I think, Scott, this goes to what you were saying earlier, for all of the other statutes the effect of the Supreme Court decision pushes us into a litigation space that's very hard for plaintiffs to win.

For two reasons. One is the substantive reason that Peter has alluded to that you know, we've talked about in prior podcasts and blog posts about this deference issue, right? Especially when it comes to economic security. We've seen that as Peter said repeatedly in the 232 cases, and then more recently in 301 as well.

So that's a space where plaintiffs don't wanna be, they're gonna lose substantively if that's the posture that we continue to see. But secondly, procedurally, it's also very hard to win, right? Because even though these things have a lot of investigative components, there are all sorts of, there are APA requirements that apply to the agencies, although not 122 is that there's the president acting but where it comes to 301 and others.

It's hard to win on the procedure because the court will send it back to the agency to correct, which they will do, and then it will continue after that. So I think it's really, again back to my theme of nothing to celebrate here we're in a much more complicated and more difficult space as the administration builds up its tariff wall again.

Peter E. Harrell: I wanna add one, one thing because I, I do wanna come back actually, Marty to point you and to Scott made earlier, which is that one thing that clearly seemed to the chief justice clearly seemed to find galling was this way the tariff rates kind of moved around all the time and seemed unbounded by any teasonable sort of objectively available standard.

And I will say that you know the idea in 122, the idea in 301 is very clearly that you should have, you know, 122 a time limited tariff of up to 15% in 301. It is very clearly you should have a tariff against a country to deal with a particular trade problem.

And where presidents have used 301in the past, you know, for example, on China during Trump's turn first term the courts have been pretty deferential. I do think there'll be a question if all of a sudden we see Trump trying to use these statutes to do what he did under IEEPA, you know, move rates around constantly, take rates way up through the roof, you know, not just at sort of a couple of percent or even 10%, but you know, he tries with 301 to do, you know, 45% tariffs and then bring them down.

Like, I think if we see the same chaos, well there will still be a very hard case law of eference Hill to overcome. I think at that point, you know, the courts might begin to look a little bit more skeptically at, you know, some of what is going on and I can't kind of, within the case law walk you how we get from case law that is currently extremely deferentialm to case law that is less deferential. But I do think we saw the justice, the chief justice, the other justices really finding galling the chaos of the trade policy.

And if we see continued chaos just under a new statutory name, I, we'll see how that plays out in the courts.

Scott R. Anderson: Kathleen, there's one other part of this, I mean, two other parts we need to talk about. There’s questions of refunds which is gonna be a little bit of a legal fight coming out of this. And then the various trade deals that of course, is the actual objective of the Trump administration.

This is the tool they were using to leverage themselves into better trade deals with various trading partners. Tell us a, something about how we've seen that impact things so far in both directions and the refund being a new challenge the administration has to undertake and where we think that may go in, in the coming weeks.

Kathleen Claussen: Well, yeah, Scott, I, we could have a wholea nother podcast of course, on another episode. On those topics we're okay. Alright. I mean, briefly the refunds, right? I, yeah, I think that is, that merits another episode given the complexities. But either we're gonna see that in the courts in customs itself or by Congress.

And because Customs and Congress are kind of outta the picture the only remaining c of my three Cs really is the courts. So we're gonna see some courts, some litigation there. That will take a lot of time. And we can get into that on another day on the deals. Also merits its own episode. But let's just be brief about it.

I think there's a big question that, a factual question that we have not heard the answer to that's really important coming out of the decision. And that is and what the president ended Friday afternoon, and that is what is the status of any of the rates that were supposedly agreed—I used the term loosely, but I don't think we know the answer to that. And on the basis of, I said my travels this week, other people don't seem to know either. We really need a clear statement from the administration as to how they're treating those deals. And the reason we need certainty from the administration is because the, his Friday executive order concerning taking down all the IEEPA statute all the IEEPA, eos, which was actually very helpful because it wasn't really clear what would happen next, right after the Supreme Court issued its decision.

But it, there's some ambiguous language there, Scott, that I think mayors everyone's further review 'cause it's just not clear from that whether some of the EOs implementing the deals, those still stand or not. So there's a lot of chatter on the part of USTR. They're gonna try and rebuild using 301 to get back to the deal.

But I think again, it's a question as to how are you treating all the other implemented deals, those executive orders as they could be stand still standing right now.

Scott R. Anderson: So we're almost outta time. Marty, I wanna come back to you with one last question, from the non-trade lawyer perspective I think Kathleen and Peter are bringing a lot of experience in this area of law to this question, but I will admit when I look at this set of cases with these other authorities, I see a couple of factors that might make me more nervous if I were the government, including we are now.

Most of this press in that's highly deferential is from the federal circuit, not from the Supreme Court. It's in a preop or bright era. Before this court has really reconsidered how we're supposed to be approaching certain statutes in this context as before this decision where again, they seem to give this super powered sort of delegation principle to the taxing power, which I would read as implying not just a binary, is it delegated, is it not expressed or not, but also to the scope of delegation.

I would think it would weigh into how you would interpret some of these terms against broader, more open-ended interpretation. How do you view this? I mean, is this a case where we might see the Supreme Court surprise us and how closely they read some of these statutes compared to the federal circuit in the past?

Or is there likely to be more continuity? We got through this IEEPA emergency question and that's gonna be enough for the court.

Marty Lederman: So are you asking just about trade statutes or are you asking about STA potentially—

Scott R. Anderson: More broadly too?

Marty Lederman: Delegations more broadly. I'm not sure there's going to be a one size fits all answer to that.

I think as the courts go through the statutes, it could be the Enemy Aliens Act, it could be the power to remove a Federal Reserve governor for cause, right? All these different statutes that come before the court. I think they'll deal with each of them separately. But I, but what I would predict, or what seems to be the case, is instead of just taking, and this is to circle back to where we started this podcast, instead of simply issuing what we might call various different kinds of Trump specific holdings, this president's findings were contextual.

It is, yes, it's a broad delegation, but it requires some sort of reasonableness and non arbitrariness, and this is, and that this seems wildly arbitrary. It seems that the justices are more inclined to issue and the litigants are more inclined to litigate, aort of brought off on questions about whether statute X, you know, how to construe statute X.

It happened in the Illinois National Guard case that I filed a brief in, right? They, instead of deciding what it meant to be unable to execute federal immigration laws, or whether Trump's findings to that effect should be delegated they issued a holding with respect to what it meant to be the regular forces available to the president.

And I think that—I would not be at all surprised if that's what we find in many of these cases, that the court will be issuing statutory construction rulings and holdings that it might not otherwise, in more reasonable and more tailored and more cabin circumstances with an ordinary precedent of the court.

You know what's really interesting about the Kavanaugh opinion? He points back to Yoshida, he points back to Damon Moore. He points back to the other tariff case that would the, these were, you know, fairly overwhelming if not unanimous decisions deferring to the president and the underlying, the sort of sub rosa theme of the Roberts opinion and the others is how can you possibly be analogizing to those cases when there were reasonable presidents doing reasonable things?

Of course, we upheld those. They're not remotely analogous to what we have here. But the court's unwilling to say that as a holding. And so what that means is that 98% of the briefs and the oral argument and probably the decisions by the justices are going to be on broad questions of does the statute cover X?

Just as here it was does IEEPA allow tariffs, full stop? And that's a strange position for the court to be in to issue, you know, perhaps quite limiting constructions of broad statutory delegations in order to prevent the abuse of those statutes by a president who seems willing to exploit them to the hilt.

Who knows? I mean, maybe that will be true in some of the cases, but not others. But that's, so far, that seems to be the pattern.

Scott R. Anderson: Well, we will all have to keep our eyes peeled to the cases to come and maybe we'll have reason to reconvene. But until then, we are out of time. Marty Lederman, Peter Harrell, Kathleen Klausen, thank you for joining us on the Lawfare Podcast.

Peter E. Harrell: Thank you. Thanks so much, Scott.

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