On Wednesday, speaking from the White House, US President Donald Trump suggested that families scale back on gifts this year.
Asked about his tariff program, the president remarked, “Somebody said, ‘Oh, the shelves are gonna be open. Well, maybe the children will have two dolls instead of 30 dolls, and maybe the two dolls will cost a couple of bucks more.’”
But the toy stores where those dolls are sold might have something to say about it.
Earlier in the week, Mischief Toy Store in St. Paul, Minnesota joined a growing number of American small businesses suing the president over his emergency tariff plan.
Throughout April, a groundswell of lawsuits led by 13 states further challenged Trump’s ambitious tariff program. Their success or failure rests on hundreds of years of judicial policy and American constitutional law.
The legal basis for the Trump tariffs
When Trump first announced his ambitious tariff program to the world, you might have wondered, Why is he allowed to do this? Well, he may not be. The president’s power to unilaterally impose tariffs is not rooted in the office’s constitutional Article II power. Instead, it is a delegation of authority by Congress.
Article I of the US Constitution creates Congress, and Section 8 delegates the authority to “lay and collect taxes, duties, imposts and excises.” For much of the United States’ history, this is precisely what it did — through a series of colorfully named tariff programs like the Tariff of Abominations of 1828, the Dingley Tariff of 1897 and culminating in the infamous Smoot-Hawley Tariff of 1930.
At the time, Smoot-Hawley was widely perceived as contributing to the devastation of the Great Depression. As a consequence, Congress’s use of tariffs became viewed as corrosively political and dysregulated, spurring change.
In the early 1930s, then-President Franklin Delano Roosevelt pushed for legislation to grant his office the authority to negotiate tariffs. He argued that tariffs had wrecked the economy and that he should have the power to reduce them:
World trade has declined with startling rapidity. Measured in terms of the volume of goods in 1933, it has been reduced to approximately 70 percent of its 1929 volume; measured in terms of dollars, it has fallen to 35 percent. The drop in the foreign trade of the United States has been even sharper. Our exports in 1933 were but 52 percent of the 1929 volume, and 32 percent of the 1929 value […] a full and permanent domestic recovery depends in part upon a revived and strengthened international trade and that American exports cannot be permanently increased without a corresponding increase in imports.
Thus followed the Reciprocal Trade Agreement Act of 1934 (RTAA), which gave the president the power to set tariff rates, provided it came as part of a reciprocal agreement with a counterpart. This allowed the office to negotiate directly with other nations and promoted a period of liberalized trade.
The RTAA, however, is not the law that Trump is now relying on. His tariffs are unilateral, not reciprocal, and would require another century of law to conceive.
After the RTAA, Congress continued to delegate authority to the president through the midcentury. Notably, this included the Trade Expansion Act of 1962, which allowed the president to impose unilateral tariffs in response to national security threats; the Trade Act of 1974, which allowed the president to retaliate against unfair trade practices; and, crucially, the International Emergency Economic Powers Act of 1977, known as IEEPA.
Now, the IEEPA doesn’t say anything about tariffs; it is better known as the law that recent presidents have used to levy sanctions against enemy nations like Russia. It grants the president the power to respond to declared emergencies in response to “unusual and extraordinary threat[s]” (the president also has the power to declare emergencies, but that comes from the National Emergencies Act, a different law) by “investigat[ing], regulat[ing], or prohibit[ing] any transactions in foreign exchange.”
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Despite this novel application, the Trump administration has seized on the law because, unlike all other tariff statutes, it permits the president to act through executive order alone.
Throughout his young second term, Trump has used this statute to declare arbitrary tariffs on virtually all of America’s trading partners. First, declaring 25% tariffs on Canada and Mexico and then various large tariffs on the rest of the world.
To do so, Trump declared a “national emergency posed by the large and persistent trade deficit that is driven by the absence of reciprocity in our trade relationships and other harmful policies like currency manipulation and exorbitant value-added taxes (VAT) perpetuated by other countries.”
This was the first time a president had attempted to use the law in this way, and many legal scholars believe it is illegal.
Like flies to honey
Almost immediately after Trump’s tariffs were announced, lawsuits began to trickle in. Fearing retribution from the administration, many trade groups and major players reportedly chose to bow out of proceedings. However, California became the first state to sue on April 16, followed a week later on April 23 by a dozen other states.
There are basically two legal arguments you can make against Trump’s tariffs: (1) The IEEPA doesn’t authorize the president to implement his tariff program, and (2) it is unconstitutional for the IEEPA to delegate such broad authority to the president.
This is exactly what California and the consortium of 12 states did — arguing that (1) the president’s actions are ultra vires — beyond his legal authority — and (2) they would violate separation of powers.
There are a few reasons this might be true. For one, as the states identified, any action under the IEEPA must be tailored to “deal with an unusual and extraordinary threat,” and, “[t]he nearly worldwide 10 percent tariff level is wholly unconnected to the stated basis of the emergency declaration: it applies without regard to any country’s trade practices or purported threat to domestic industries.”
Second, there is a constitutional limit on Congress’s authority to delegate Article I powers to the president, known as the “nondelegation doctrine.” While in theory this could be robust, it has generally been nerfed by the obsequious Supreme Court’s past.
Nonetheless, there remains an “intelligible principle test” that such delegation may only be allowed “if Congress shall lay down by legislative act an intelligible principle to which the person or body authorized to fix such rates is directed to conform.”
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In theory, if Congress had actually given the president plenary authority to fix tariffs according to his whims, it should violate this doctrine. But the Supreme Court has not struck down an executive action on these grounds since Panama Refining Co. v. Ryan in 1935.
Despite the constitutional uncertainty, the net of the arguments is broadly perceived as strong. This is why one “prominent conservative lawyer” told ABC News that plaintiffs may win in a fight against Trump:
There is a strong argument that the tariffs imposed under the IEEPA are not legal or constitutional. Under that particular statute, tariffs are not listed amongst the various actions a president can take in response to the declaration of a national emergency.
But there are some factors in the president’s favor. For one, the administration may be able to hear these claims in the US Court of International Trade (CIT), which has exclusive jurisdiction over most tariff disputes.
Appeals from this court are heard in the Federal Circuit, which is generally seen as favorable for Trump. The 12-state complaint was actually filed in this court from the outset, but California filed its complaint in the Northern District of California, which sits in the less deferential Ninth Circuit.
If Trump succeeds in removing that action to CIT, it will be an early victory for the administration.
More importantly, the administration is attempting to invoke the “political question doctrine.” In the first major Supreme Court case, 1803’s Marbury v. Madison, the Court noted that “[q]uestions, in their nature political or which are, by the Constitution and laws, submitted to the Executive, can never be made in this court.” Ever since then, pusillanimous courts have used the doctrine to avoid difficult questions, most notably in cases involving impeachment, foreign policy and partisan gerrymandering.
The Trump administration argued exactly this in its April 29 motion for preliminary injunction and summary judgment in the states’ AG case. Trump argues that “courts have consistently held that the President’s emergency declarations under NEA, and the adequacy of his policy choices addressing those emergencies under IEEPA, are unreviewable” and that “[t]herefore, any challenge to the fact of the emergency itself — particularly the claim that the emergency is not ‘unusual’ or ‘extraordinary’ enough, in plaintiffs’ view — is a nonjusticiable political question that this Court lacks jurisdiction to consider.”
To date, no rulings hint at which side the courts are likely to prefer. The president’s track record in court has historically been poor, with a win rate of 35% in the Supreme Court during his first term, compared to an average presidential win rate of 65.2%.
The outlook for crypto
As the tariff fight has matured, the outlook for crypto is uncertain. It is a peculiarity of tariffs that they apply only to goods and not services or digital products. This has left cryptocurrency assets — intangible, borderless and often routed through offshore entities — outside the reach of traditional trade barriers.
As markets shuddered at Trump’s policies, Bitcoin (BTC) finished April up 14% on the month. If Trump is allowed to pursue an arbitrary trade policy and abide by Peter Navarro’s wish to turn the United States into a new hermit nation, it may prove the final validation to force cryptocurrency as the medium of international trade.
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Source: SEMB
Crypto ETP flows by asset (in millions of US dollars). Source: CoinShares
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BTC/USD, 1-week chart, 2020-2021. Source: Cointelegraph/
Wong (left), KuCoin EU CEO Oliver Stauber (middle) and Cointelegraph reporter Ezra Reguerra (right) at the Token2049 event in Dubai. Source: Market AcrossRegulators drive global players away from local markets
The AML Handbook. Source: EUCI
Bitcoin LTH profit levels (screenshot). Source: GlassnodeTrader: BTC price upside potential “looks thin”
Bitcoin exchange order book liquidity data. Source: TheKingfisher/X
BTC/USD chart with 11-day SMA, STH realized price. Source: Glassnode