June 17, 2025 • 31 mins
Swings in US tariff policies have convulsed markets and kept trading partners on edge, and court rulings might only be adding to the uncertainty. Stanford law professor Alan Sykes joins Bloomberg Intelligence litigation analyst Holly Froum to discuss May 28-29 rulings by the US Court of International Trade and Federal District Court of Washington DC striking down tariffs imposed on China, Canada and Mexico, and reciprocal tariffs. Professor Sykes examines the rulings, next steps, whether a continuation of a stay granted by the appellate courts presages reversal, what could happen on appeal and more in this Votes & Verdicts podcast.
See omnystudio.com/listener for privacy information.
Mark as Played
Transcript
Episode Transcript
Available transcripts are automatically generated. Complete accuracy is not guaranteed.
Speaker 1 (00:15):
Welcome to the Votes and Verdicts podcasts hosted by Bloomberg Intelligence,
the investment research arm of Bloomberg LP. In this podcast series,
we talk about the intersection of business policy and law.
My name is Holly from I'm an analyst with Bloomberg
Intelligence covering consumer and industrials litigation. Today's podcast will focus
on several key court rulings impacting tariffs and specifically a
(00:36):
May twenty eighth decision by the US Court of International
Trade and May twenty ninth decision by a Washington District
court holding that President Trump's reciprocal tariffs and terriffs imposed
on China, Canada, and Mexico were unlawful. I'm delighted to
be joined today by Stanford Law School Professor Alan Sykes.
Professor Sykes is the founder of Stanford Law School's LM
program in International Economic Law, Business and Policy, as editor
(01:00):
of various trade journals. He's a graduate of Yale Law
School and received his PhD in economics from Meale University.
Professor Sykes signed and amicus freef and support of the
plaintiffs in both cases that the International Trade Court decided.
One of those cases was filed by importers who say
they would suffer irreparable harm if there reciprocal terariffs were
allowed to continue, and the second was filed by twelve states.
(01:20):
Thank you for joining us again, professor, and we'll dive
right into the topic. So, the International Trade Court on
May twenty eighth found executive orders imposing so called reciprocal
tariffs or otherwise known as worldwide tariffs and tariffs on China, Canada,
and Mexico related to fentanyl trafficking were unlawful. Can you
explain the International Trade Course ruling?
Speaker 2 (01:42):
Sure? The Port of International Trade took the two sets
of tariffs separately, the worldwide and retaliatory tariffs and the
so called trafficking tariffs relating to fentanyl. With respect to
the worldwide and retaliatory tariffs, which are the bulk of
the tariff on the rest of the world other than
Canada and Mexico, the court ruled that the International Emergency
(02:07):
Economic Powers Act, known as AEPA does not give the
President the authority to impose the sweeping tariffs that he
proposed to impose on the world as a whole, the
ten percent tariff on everyone and then the reciprocal tariffs
that would range up to I believe it was something
like eighty percent on certain countries. The reasoning on the
(02:32):
worldwide retaliatory tariffs was interesting. The court did not accept
the argument put forward by some plaintiffs that AEPA does
not allow the use of tariffs at all, but rather
the court said that even if AYEPA does allow tariffs
under certain circumstances, it does not allow the kind of
(02:54):
unbounded tariffs that the President has imposed, which are not
limited in time, very much higher than US tariff commitments
in US statutes, and goes without saying, much higher than
the US commitments under international trade agreements, and chosen against
any country the President wishes. That that sort of sweeping
(03:16):
authority was beyond what IEPA conferred, and the thinking, in
part was that if the authority, as the government put
it forward, were to be accepted, then AEPA would be
in effect of delegating to the President all authority over
tariffs to do whatever he wants, any tariff he wants,
(03:37):
in any country he wants, for any duration he wants,
and that would be unacceptable under the Constitution, both in
relation to what's known as the non delegation doctrine and
what's known as the major questions doctrine. So the Court said,
we're going to construe the statute to be consistent with
the Constitution, and therefore the sweeping tariffs that the President
(03:58):
composed under AEPA or simply not acceptable. Then with respect
to the so called trafficking tariffs, the Court said that
the tariffs imposed by the president. First of all, it
concluded that this was not an unreviewable political question, that
the Court did have authority to review the president's decision
with regard to the trafficking tariffs. And then, having reached
(04:20):
that conclusion, it went ahead to say that these trafficking
tariffs do not, in the words of the statute, deal
with the emergency, which is thought to be drug trafficking. Either,
they simply impose punishment on Canada and Mexico for failing
to have done more themselves to abate the problem of
drug trafficking. And the Court ruled that that did not
(04:43):
meet the statutory requirement that the measures taken by the
President actually deal with the emergency in question.
Speaker 1 (04:50):
You said you agree with the results of the International
Trade Court's ruling. Do you see any possible vulnerabilities on appeal.
Speaker 2 (04:58):
I do agree with the result. I hope that it
holds up on appeal. If I were to take the
other side of the argument for argument's sake, I think
one possible criticism would be that the statute, even if
it does not grout, does not grant unbounded statutory authority
(05:20):
for tariffs. The President didn't literally claim unbounded authority. He
declared a national emergency, said it was an unusual and
extraordinary situation, So he went through all the statutory hoops
and did not in a formal sense claim unbounded authority
over tariffs, although as a practical matter, one could certainly
(05:42):
argue that that's what he took on. Another aspect of
the decision that might be open to argument would be
the part of the decision that said that the Trade
Act of nineteen seventy four, and I didn't mention this
before the Court of International Trade said that the Trade
Act of nineteen seventy four, essentially because it was responding
(06:02):
to the President Nixon import surcharge at the end of
the gold standard period in the early seventies, and it
created a statute called the section of the statute called
the Trade Act of nineteen seventy four. Section one twenty
two of that statute gives the President very limited authority
to impose time limited, modest tariffs in response to a
(06:27):
balance of payments emergency, and the Court of International Trade
said that by implication, the enactment of section one twenty
two of the seventy four Act took away the president's
authority under AEPA to impose tariffs for balance of payments purposes,
and it interpreted the worldwide and retaliatory tariffs based on
(06:48):
our trade deficits to be effect in effect, a balance
of payments measure. So that the argument might be on
the other side that even if section one twenty two
does give the president limited authority to deal with balance
of payments problems, it doesn't necessarily take away the emergency
authority that might have been contained in IEPA. And then
(07:10):
I think maybe the hardest issue that might come up
on appeal for the plaintiffs relates to the trafficking tariffs,
where the Court ruled that the tariffs on Canada and
Mexico did not deal with drug trafficking. Rather, they simply
punished and put pressure on Canada and Mexico to change
their own behavior. The problem with that thinking, potentially, is
(07:34):
that the United States for decades has used sanctions to
try and persuade or coerce, whichever word you prefer our
counterparties in the world in various situations to change their
behavior to help the United States. And to say that
the United States cannot do that under AEPA is perhaps
(07:58):
at odds with what one might expect it to be
the construction of So I think that'll be an argument
that's raised off pel for sure.
Speaker 1 (08:04):
Yeah, I was reading that. You know, some station lawyers
are concerned because they think that this would take away
the president's power to use those kinds of pressures to
get compliance with whatever policy or problem he's trying to address. So,
in turning now to the other decision, I mentioned the
(08:25):
District Court's decision of Washington d. C. That court also
found the tariffs unlawful. Can you explain how that court's
ruling differed from the International Trade Court's ruling.
Speaker 2 (08:38):
Yes, The key difference was that the DC District Court
accepted the argument put forward by a number of plaintiffs
that AIPA does not contain authority for tariffs at all,
that it simply is a statute about using other kinds
of measures in emergency situations rather than tariffs, and that
(09:04):
meant that the case did not have to be transferred
to the Court of International Trade, which has exclusive jurisdiction
over disputes arising out of statutes that imposed tariffs and
so forth. By ruling that AIPA does not allow tariffs
at all, the Court was able to keep jurisdiction. And
of course, once you say that AIPA does not those
(09:27):
tariffs at all or allow the imposition of terifts at all,
it immediately follows that all of the tariffs imposed by
the Trump administration, both the worldwide and retaliatory tariffs and
the trafficking tariffs, are unlawful. So this was a different
type of decision. The Court emphasized its view that the
(09:48):
power to regulate is not the power to tax. IIPA
refers to the regulation or gives the power to regulate
importation of property in which a foreign national has an interest.
The court said regulating importation is not the same as
taxing importation, and went through a lot of historical material
(10:09):
to argue that the power to regulate is not the
power to tax, and in the course of that analysis,
The Court referred to a decision by the Court of
Customs and Patent Appeals, which is the predecessor to the
Federal Circuit, in a case called Yoshida, which ruled under
the Trading with the Enemy Act, which has language more
(10:30):
or less identical to the AIPA language in terms of
what the president's authority is. The court said that it
found the Yoshida decision, which said that the predecessor Act
did allow tariffs to be unpersuasive, and that it was
not binding on the District Court at DC in any event,
because the District Court of DC does not sit underneath
(10:53):
what is now the Federal Circuit. So that was the
key difference in the District of DC decision.
Speaker 1 (11:00):
As you said, the District Court found APA doesn't authorized
terras at all, whereas the International Trade Court said in
a subsequent order that the word opining on whether AIPA
categorically allows for terraffs. Do you have any thoughts as
to why the International Trade Court didn't make a ruling
(11:20):
on that issue.
Speaker 2 (11:22):
Yeah, I think there are several factors. I mentioned the
Yoshida decision a moment ago, which was from the Appellate Court,
to which appeals from what is now the Court of
International Trade goes. So the Court of International Trade is
bound by the Yoshida decision, which was not a decision
under AEPA, as I said, it was a decision under
(11:43):
the Trading with the Enemy Act. But the statutory language
of that Act was essentially identical for present purposes to
the language in AIPA. So the Court might have felt
that it couldn't go against the prior ruling in Yoshida. Also,
I mean, it's clear there is a textual argument for
the government's position, which is that the statute authorizes regulation
(12:07):
of importation, and certainly a traditional way of regulating imports,
one might say, is to use tariffs. That's certainly, historically
the principal way that the United States has controlled the
flow of importation as practical matter, So the Court might
have thought that it was a less shaky basis for
(12:30):
the decision to say that we're not going to decide
whether AI allows tariffs at all. But even if it does,
it doesn't allow the broad tariffs that the President has
imposed here, and indeed such a broad tariff power would
be a constitutional issue.
Speaker 1 (12:47):
So I was going to ask you this question later,
but because it's on the topic. You had mentioned that
the Court was construing regulate the language naip A regulate importation.
A lot of it has been said about the questions
doctrine and how that might be used to strike down terrafs.
Why isn't the regular imports language naive enough to encompass TIFFs?
(13:07):
And how clear does Congress's statutory authority the authorization need
to be. Does Congress need to specifically say tariffs in
the statute?
Speaker 2 (13:16):
I don't know if it has to specifically say tariff's
in the statute, certainly that would help with the clarity.
There are a lot of issues beyond just whether or
not tariffs are authorized. There is a question of how
long they can remain in effect. If it's an Emergency
Powers Act, one might have thought that there would be
some limitation of the authority of the president to act
(13:38):
to the period of emergency. The Congress didn't speak to that.
The magnitude of the measures that are being taken, which
are or far beyond any terifts that the United States
is imposed in modern times. Congress didn't necessarily speak to
the question of whether there's any constraint on the magnitude
of the measures that the president can take. Congress hasn't
(14:02):
spoken really to the concept of what exactly is a
national emergency and could a pray deficit be construed as
a national emergency that gives the president sort of unlimited, unbounded,
no time limitation, authority to impose tariffs for as long
as he wants against him ever he wants. So there
are a lot of ways in which Congress could have
(14:24):
spoken more clearly here. And I know that there are
some commentators who think that when this issue finally reaches
the Supreme Court, that there's a decent chance that the
major questions doctrine will end up being the key issue.
Speaker 1 (14:39):
So yeah, So it reminds you sort of like my
first year contract first, your law school contract class, where
there's like no meeting of the minds that there's not
enough details in the contract. It sounds like, you know,
Congress may not have put enough details in the statute.
So what that leads me to the next question, which is,
you know, neither the District Court nor the International Trade
(15:02):
Court addressed whether the trade deficit constituted an emergency or
the fentanal trafficking for that matter, Do you have any
thoughts as to why both of those courts declined to
address that issue.
Speaker 2 (15:14):
Yeah, I mean, I don't know for sure what was
in their head at the time, but I think it's
awkward for any court to say we know better what
constitutes a national emergency than the President of the United States.
I think there's a very strong instinct to try and
find another basis for ruling to get the same outcome
(15:38):
without having to say that we the courts are going
to second guest the president on the issue of national emergency.
So the Court of International Trade sort of ducked that
question in favor of saying that the unbounded delegation would
run a foul of constitutional concerns and therefore will construe
(16:00):
the statute not to do that, And the District Court
duct the issue by finding that tariffs are not allowable
at all, So it wasn't necessary to address the question
of whether there's a bona fide emergency. When I said
earlier that I agreed with the result in the case,
I think the reason that I agree with it is
precisely though, because I think that at least with respect
(16:21):
to the worldwide and retaliatory tariffs, putting the fentanel issue
to the side. It is almost absurd to call bilateral
merchandise trade deficits a national emergency. We've had them since
the beginning of trade. We've had aggregate trade deficits for
the last half century. We will probably continue to have
(16:44):
them for the next half century, as long as the
United States has a greater need for capital than the
national savings provides. It is a mathematical necessity that we
run a trade deficit to finance the importation of capital.
So to call something that's on the scale of a
century and an emergency is almost absurd to any economically
(17:07):
literate person, I think, but it's hard for a court
to say that the courts are not economists. The legal
authority to review the presidential decisions is not an authority
to judge them for sound economic policy. And so both courts,
I think we're looking for other grounds to reach what
(17:28):
is clearly the right outcome here, which is to say,
this is not an emergency situation, and the Congress needs
to weigh in if we're going to impose this kind
of change in American trade policy.
Speaker 1 (17:39):
So do you think that the Supreme Court would try
to avoid that issue as well.
Speaker 2 (17:44):
I don't know. I mean, I think there's sort of,
you know, the kind of four ways to decide this
case against the administration. One is to say AIPA doesn't
allow tariffs. One is to say that it if it
or to allow the extent of tariffs that the administration
claims that it's somehow unconstitutional, either under the old non
(18:06):
delegation doctrine, which has been moribund since the New Deal,
or under the newer major Questions doctrine. And the final
thing would be to say that there's not really an
emergency here, which I think is really the correct thing
to say. That's the real reason why this is why
this action by President Trump is unacceptable. But the Supreme Court, well,
(18:28):
I wouldn't be at all surprised if it finds an
alternative way to rule, assuming the rules against the president.
I wouldn't be surprised if it was not on the
basis of whether there's a genuine national emergency, but rather
on one of these other bases. And I'll just add,
by the way that I think it would be very
difficult to rule against the government on the ground that
(18:50):
a fentanyl issue is not a national emergency. We've had
thousands of people die from fentanyl poisoning, and that I
think it is very difficult to say could not be
reasonably viewed as a national emergency. So the court, if
it wants to knock out the fentanyl related tariffs, probably
(19:10):
has to find some other legal grounds.
Speaker 1 (19:13):
Right, And so the courts, the lower courts, finding that
the terroiffs didn't deal with that emergency sort of avoided
them having to say that that was not an emergency,
because I think most commentators agree that it is. So.
Just yesterday, which was June tenth, the Federal Circuit Court
(19:36):
of Appeals made an important ruling. So, just as you
know background, the Federal Circuit Court of Appeals is the
appellate court that hears appeals from the international Trade courts ruling.
It had entered an administrative stay of the International Trade
Court's ruling on May twenty nine, and that resulted in
the terraffs being reinstated, And just yesterday, on June tenth,
(19:57):
that court entered a longer stay, saying the ruling the
lower court ruling will be on hold until the appeal
has decided on the merits, so the terrorists will be
in e fact at least until the appeal has decided.
Do you think that the Federal Circuit Court's June tenth
continuation of the stay of the lower court's ruling Penny
appeal is any indication of how it will rule on
the merits.
Speaker 2 (20:18):
I don't think it's any definitive indication at all. I
think what it means, if anything, is that the court
sees that there are serious arguments on both sides, and
it's not certain yet how it's going to rule perhaps,
and therefore it makes sense to stay the lower court
(20:41):
decision so as not to temporarily distrut disrupt the president's
trade policy agenda. If indeed, in the end, the conclusion
is that the president has the power to do what
he's doing. So I wouldn't infer from the extension of
the stay that the Federal Circuit has more made up
its mind in favor of the administration. I think that's
(21:03):
probably an unwarranted speculation, right.
Speaker 1 (21:06):
So the other question that I forgot to ask you,
was they the full circuit the full panels, So it's
going to hear this appeal. So it's called an on
bank hearing, and that's you know, usually not done. Usually
there's a three judge panel. Was that surprising to you
at all that they decided to have an on bank hearing?
Speaker 2 (21:29):
No, I mean on bank decisions are You're quite correct
to say that they're not common, but they do happen,
and they they are put together usually in matters of
particular importance, and this is this is a matter of
quite extraordinary importance. It's a it's a kind of remaking
of US trade policy, Uh, without congressional oversight by a president.
(21:55):
He's you know, decided to go against the statutes that
set tariffs, passed by Congress and signed by prior presidencies,
abrogated essentially every international trade agreement that we have, both
on a multilateral scale with the WTO and all of
our bilateral free trade agreements. And it's hard to think
(22:16):
of a case in the Federal Circuit in recent years
that's been more consequential than this. So it doesn't surprise
me at all that they decided to hear the case
on bok okay.
Speaker 1 (22:26):
And then the District court decision is also being appealed
to the d C Circuit Court of Appeals. I wonder
if that will be on bank also, I don't know.
Speaker 2 (22:38):
It's a narrower decision. As you know, the District Court
in Washington, d C. Simply and joined the application of
tariffs to the plainness in that case. So it's not
nearly as sweeping a decision. And I would imagine the
d C Circuit might think to itself that this on
(22:58):
bank decision of the Federals is probably going to be
the way that the case gets to the Supreme Court,
if it's going to get there at all. So maybe
it's not necessary to have an on bank proceeding in
the DC Circuit.
Speaker 1 (23:12):
Who knows, Yeah, that makes sense. So there's a divergence
in court opinions about whether the International Trade Court has
exclusive jurisdiction to hear these cases. The International Trade Court
said yes, The California Federal Court recently said yes and
dismissed a case that was brought there that's currently on appeal.
And then the District Court said no, said IPA doesn't
(23:35):
authorize terrorists at all. So the Court of International Trade
is not an exclusive jurisdiction. Which court do you think
got it right?
Speaker 2 (23:42):
You know, it really turns on it turns on the
decision on the merits. As the District Court pointed out
as to whether or not APUA allows for terrorists at all.
It's pretty clear in the jurisdictional statute for the Court
of International Trade that if we have a dispute rising
out of a statute that allows for the imposition of tariffs,
(24:05):
then the Court of International Trade does have exclusive jurisdiction.
So it really is a question of whether AIPA allows
tariffs at all. The District Court said no and therefore
kept jurisdiction. Other courts have read aip but to authorize tariffs,
or at least arguably to authorize tariffs, and thought then
that the Court of International Trade should resolve the issue. Ameke,
(24:30):
This brief I signed includes a section arguing that AIPA
does not authorize tariffs, and so I'm not going to
say anything that would conflict with that, but I think
that's where the battle is joined on who has jurisdiction right.
Speaker 1 (24:44):
So inevitably these cases are likely destined for the Supreme Court.
How do you think the Supreme Court justices will rule
on these cases, both on a potential appeal of the
lower court decision to continue to stay and on the merits.
Speaker 2 (25:00):
Well, my guess is that Supreme Court would not interfere
with the stay pending the expedited on bank appeal at
the Federal Circuit. As far as the ultimate ruling on
the merits is concerned, you know, it's always difficult to
rule against the president in the exercise of emergency powers.
(25:25):
On the other hand, I think the President has essentially
co opted an emergency power statute to take over American
trade policy in a situation that does not constitute an
emergency at all, again putting the fentanyl issue to the side,
And I suspect that many of the Supreme Court justices
would have sympathy with that view, whether they are prepared
(25:50):
to go against the president here, whether they have to
think through all of the unintended consequences that might have
company a ruling against the president on whatever grounds they
might choose. So I don't think I can predict the
outcome of merits at the Supreme Court, but I do
hope that they will find a way to return trade
(26:11):
policy to the Congress, which is where the Constitution puts it.
And with a conservative majority court, I think the you know,
fidelity to the Constitution and the original separation of powers
is something that a lot of the justices care about.
So you know that that kind of bodes somewhat well
in terms of the plain is hope that the Supreme
(26:32):
Court will ultimately rule against the administration.
Speaker 1 (26:35):
So if the Supreme Court does it, for a meaning,
it holds both reciprocal tariffs and trafficking tariffs and lawful
are there or or you know, one or the other.
It holds reciprocal tarifts on lawful but allows the trafficking terrorists.
Are there other statutes the president could use to implement
either of these terroriffs?
Speaker 2 (26:55):
Yeah, this is uh, this is something that obviously is
very important in terms of the practical impact of all
this litigation. The steel and aluminum tariffs that the president
imposed in his first administration and that he's now recently
doubled are predicated in part on a statute from nineteen
sixty two allowing presidential use of tariffs or other measures
(27:20):
to address national security problems, and that requires a finding
by the Commerce Department that imports or a threat to
national security. The Commerce Department under the first Trump administration
and Secretary Wilbur Ross made that finding, and that was
a basis for the president's first round of steel and
aluminum tariffs, and one suspects that the Commerce Department under
(27:42):
Secretary Lutnik would renew that kind of finding with respect
to a number of different industries, where the claim might
be made, perhaps with a straight face, perhaps not that
the imports are a threat to national security, so that
could be used on a sectoral basis after findings by
the Commerce Department that there was a threat to national
(28:04):
security from imports of particular items. The broadest statute beyond
the President's interpretation of i EPA giving tariff emphysician authority
is Section three oh one of the nineteen seventy four
Trade Act, which allows It was primarily enacted to allow
the President to respond to other countries that violate their
(28:26):
commitments under trade agreements with the United States, but it
also contains the section that says the President can respond
to unreasonable practices by foreign governments that burden US commerce.
And of course, you may recall that the so called
reciprocal tariffs were alleged by the President to be the
product of unfair treatment of American exporters in foreign markets,
(28:52):
and so this provision of the section three oh one Act,
Second three oh one of the seventy four Act rather
could be invoked to say that all of these bilateral
trade deficits are a product of unreasonable behavior by foreign governments,
and that's how we can justify these whopping reciprocal tariffs
that were proposed back on so called Liberation Day. So
(29:17):
that's a statute that might very well come into play
as well. It was used already to impose very high
tariffs on China during the first Trump administration, and so
one can imagine that by shifting to the National Security
Statute and the Unfair Trade Statute, the President, even if
he lost on AEPA, could reconstruct a lot of the
(29:38):
tariffs that he is now imposing under AEPA. It would
require some time. It requires some preliminary investigations and findings
by the agency. Commerce has to deal with the national
security issue. The US Trade Representative has to make findings
on the unreasonableness of foreign trade practices. But they've already
done a lot of that legwork. Every every year or so,
(30:01):
the USTR issues what's called the National Trade Estimates Report,
which lists all of our major trading partners and all
of the practices by those trading practors partners that we
view as burdensome and unfair to the United States, and
that could be the basis for findings of unreasonableness against
(30:22):
all sorts of countries, and then retaliatory tariffs to punish
them for their unreasonableness could be forthcoming under Section three
oh one. So even if the President loses under i EKO,
that's the battle might be one, but the war would
not be over against the use of these large tariffs
without congressional authorization.
Speaker 1 (30:43):
Interesting. Well, thank you so much for joining us, Professor Sykes,
and it would be interesting to see what happens for sure,
taken
Welcome to the Votes and Verdicts podcasts hosted by Bloomberg Intelligence,
the investment research arm of Bloomberg LP. In this podcast series,
we talk about the intersection of business policy and law.
My name is Holly from I'm an analyst with Bloomberg
Intelligence covering consumer and industrials litigation. Today's podcast will focus
on several key court rulings impacting tariffs and specifically a
(00:36):
May twenty eighth decision by the US Court of International
Trade and May twenty ninth decision by a Washington District
court holding that President Trump's reciprocal tariffs and terriffs imposed
on China, Canada, and Mexico were unlawful. I'm delighted to
be joined today by Stanford Law School Professor Alan Sykes.
Professor Sykes is the founder of Stanford Law School's LM
program in International Economic Law, Business and Policy, as editor
(01:00):
of various trade journals. He's a graduate of Yale Law
School and received his PhD in economics from Meale University.
Professor Sykes signed and amicus freef and support of the
plaintiffs in both cases that the International Trade Court decided.
One of those cases was filed by importers who say
they would suffer irreparable harm if there reciprocal terariffs were
allowed to continue, and the second was filed by twelve states.
(01:20):
Thank you for joining us again, professor, and we'll dive
right into the topic. So, the International Trade Court on
May twenty eighth found executive orders imposing so called reciprocal
tariffs or otherwise known as worldwide tariffs and tariffs on China, Canada,
and Mexico related to fentanyl trafficking were unlawful. Can you
explain the International Trade Course ruling?
Speaker 2 (01:42):
Sure? The Port of International Trade took the two sets
of tariffs separately, the worldwide and retaliatory tariffs and the
so called trafficking tariffs relating to fentanyl. With respect to
the worldwide and retaliatory tariffs, which are the bulk of
the tariff on the rest of the world other than
Canada and Mexico, the court ruled that the International Emergency
(02:07):
Economic Powers Act, known as AEPA does not give the
President the authority to impose the sweeping tariffs that he
proposed to impose on the world as a whole, the
ten percent tariff on everyone and then the reciprocal tariffs
that would range up to I believe it was something
like eighty percent on certain countries. The reasoning on the
(02:32):
worldwide retaliatory tariffs was interesting. The court did not accept
the argument put forward by some plaintiffs that AEPA does
not allow the use of tariffs at all, but rather
the court said that even if AYEPA does allow tariffs
under certain circumstances, it does not allow the kind of
(02:54):
unbounded tariffs that the President has imposed, which are not
limited in time, very much higher than US tariff commitments
in US statutes, and goes without saying, much higher than
the US commitments under international trade agreements, and chosen against
any country the President wishes. That that sort of sweeping
(03:16):
authority was beyond what IEPA conferred, and the thinking, in
part was that if the authority, as the government put
it forward, were to be accepted, then AEPA would be
in effect of delegating to the President all authority over
tariffs to do whatever he wants, any tariff he wants,
(03:37):
in any country he wants, for any duration he wants,
and that would be unacceptable under the Constitution, both in
relation to what's known as the non delegation doctrine and
what's known as the major questions doctrine. So the Court said,
we're going to construe the statute to be consistent with
the Constitution, and therefore the sweeping tariffs that the President
(03:58):
composed under AEPA or simply not acceptable. Then with respect
to the so called trafficking tariffs, the Court said that
the tariffs imposed by the president. First of all, it
concluded that this was not an unreviewable political question, that
the Court did have authority to review the president's decision
with regard to the trafficking tariffs. And then, having reached
(04:20):
that conclusion, it went ahead to say that these trafficking
tariffs do not, in the words of the statute, deal
with the emergency, which is thought to be drug trafficking. Either,
they simply impose punishment on Canada and Mexico for failing
to have done more themselves to abate the problem of
drug trafficking. And the Court ruled that that did not
(04:43):
meet the statutory requirement that the measures taken by the
President actually deal with the emergency in question.
Speaker 1 (04:50):
You said you agree with the results of the International
Trade Court's ruling. Do you see any possible vulnerabilities on appeal.
Speaker 2 (04:58):
I do agree with the result. I hope that it
holds up on appeal. If I were to take the
other side of the argument for argument's sake, I think
one possible criticism would be that the statute, even if
it does not grout, does not grant unbounded statutory authority
(05:20):
for tariffs. The President didn't literally claim unbounded authority. He
declared a national emergency, said it was an unusual and
extraordinary situation, So he went through all the statutory hoops
and did not in a formal sense claim unbounded authority
over tariffs, although as a practical matter, one could certainly
(05:42):
argue that that's what he took on. Another aspect of
the decision that might be open to argument would be
the part of the decision that said that the Trade
Act of nineteen seventy four, and I didn't mention this
before the Court of International Trade said that the Trade
Act of nineteen seventy four, essentially because it was responding
(06:02):
to the President Nixon import surcharge at the end of
the gold standard period in the early seventies, and it
created a statute called the section of the statute called
the Trade Act of nineteen seventy four. Section one twenty
two of that statute gives the President very limited authority
to impose time limited, modest tariffs in response to a
(06:27):
balance of payments emergency, and the Court of International Trade
said that by implication, the enactment of section one twenty
two of the seventy four Act took away the president's
authority under AEPA to impose tariffs for balance of payments purposes,
and it interpreted the worldwide and retaliatory tariffs based on
(06:48):
our trade deficits to be effect in effect, a balance
of payments measure. So that the argument might be on
the other side that even if section one twenty two
does give the president limited authority to deal with balance
of payments problems, it doesn't necessarily take away the emergency
authority that might have been contained in IEPA. And then
(07:10):
I think maybe the hardest issue that might come up
on appeal for the plaintiffs relates to the trafficking tariffs,
where the Court ruled that the tariffs on Canada and
Mexico did not deal with drug trafficking. Rather, they simply
punished and put pressure on Canada and Mexico to change
their own behavior. The problem with that thinking, potentially, is
(07:34):
that the United States for decades has used sanctions to
try and persuade or coerce, whichever word you prefer our
counterparties in the world in various situations to change their
behavior to help the United States. And to say that
the United States cannot do that under AEPA is perhaps
(07:58):
at odds with what one might expect it to be
the construction of So I think that'll be an argument
that's raised off pel for sure.
Speaker 1 (08:04):
Yeah, I was reading that. You know, some station lawyers
are concerned because they think that this would take away
the president's power to use those kinds of pressures to
get compliance with whatever policy or problem he's trying to address. So,
in turning now to the other decision, I mentioned the
(08:25):
District Court's decision of Washington d. C. That court also
found the tariffs unlawful. Can you explain how that court's
ruling differed from the International Trade Court's ruling.
Speaker 2 (08:38):
Yes, The key difference was that the DC District Court
accepted the argument put forward by a number of plaintiffs
that AIPA does not contain authority for tariffs at all,
that it simply is a statute about using other kinds
of measures in emergency situations rather than tariffs, and that
(09:04):
meant that the case did not have to be transferred
to the Court of International Trade, which has exclusive jurisdiction
over disputes arising out of statutes that imposed tariffs and
so forth. By ruling that AIPA does not allow tariffs
at all, the Court was able to keep jurisdiction. And
of course, once you say that AIPA does not those
(09:27):
tariffs at all or allow the imposition of terifts at all,
it immediately follows that all of the tariffs imposed by
the Trump administration, both the worldwide and retaliatory tariffs and
the trafficking tariffs, are unlawful. So this was a different
type of decision. The Court emphasized its view that the
(09:48):
power to regulate is not the power to tax. IIPA
refers to the regulation or gives the power to regulate
importation of property in which a foreign national has an interest.
The court said regulating importation is not the same as
taxing importation, and went through a lot of historical material
(10:09):
to argue that the power to regulate is not the
power to tax, and in the course of that analysis,
The Court referred to a decision by the Court of
Customs and Patent Appeals, which is the predecessor to the
Federal Circuit, in a case called Yoshida, which ruled under
the Trading with the Enemy Act, which has language more
(10:30):
or less identical to the AIPA language in terms of
what the president's authority is. The court said that it
found the Yoshida decision, which said that the predecessor Act
did allow tariffs to be unpersuasive, and that it was
not binding on the District Court at DC in any event,
because the District Court of DC does not sit underneath
(10:53):
what is now the Federal Circuit. So that was the
key difference in the District of DC decision.
Speaker 1 (11:00):
As you said, the District Court found APA doesn't authorized
terras at all, whereas the International Trade Court said in
a subsequent order that the word opining on whether AIPA
categorically allows for terraffs. Do you have any thoughts as
to why the International Trade Court didn't make a ruling
(11:20):
on that issue.
Speaker 2 (11:22):
Yeah, I think there are several factors. I mentioned the
Yoshida decision a moment ago, which was from the Appellate Court,
to which appeals from what is now the Court of
International Trade goes. So the Court of International Trade is
bound by the Yoshida decision, which was not a decision
under AEPA, as I said, it was a decision under
(11:43):
the Trading with the Enemy Act. But the statutory language
of that Act was essentially identical for present purposes to
the language in AIPA. So the Court might have felt
that it couldn't go against the prior ruling in Yoshida. Also,
I mean, it's clear there is a textual argument for
the government's position, which is that the statute authorizes regulation
(12:07):
of importation, and certainly a traditional way of regulating imports,
one might say, is to use tariffs. That's certainly, historically
the principal way that the United States has controlled the
flow of importation as practical matter, So the Court might
have thought that it was a less shaky basis for
(12:30):
the decision to say that we're not going to decide
whether AI allows tariffs at all. But even if it does,
it doesn't allow the broad tariffs that the President has
imposed here, and indeed such a broad tariff power would
be a constitutional issue.
Speaker 1 (12:47):
So I was going to ask you this question later,
but because it's on the topic. You had mentioned that
the Court was construing regulate the language naip A regulate importation.
A lot of it has been said about the questions
doctrine and how that might be used to strike down terrafs.
Why isn't the regular imports language naive enough to encompass TIFFs?
(13:07):
And how clear does Congress's statutory authority the authorization need
to be. Does Congress need to specifically say tariffs in
the statute?
Speaker 2 (13:16):
I don't know if it has to specifically say tariff's
in the statute, certainly that would help with the clarity.
There are a lot of issues beyond just whether or
not tariffs are authorized. There is a question of how
long they can remain in effect. If it's an Emergency
Powers Act, one might have thought that there would be
some limitation of the authority of the president to act
(13:38):
to the period of emergency. The Congress didn't speak to that.
The magnitude of the measures that are being taken, which
are or far beyond any terifts that the United States
is imposed in modern times. Congress didn't necessarily speak to
the question of whether there's any constraint on the magnitude
of the measures that the president can take. Congress hasn't
(14:02):
spoken really to the concept of what exactly is a
national emergency and could a pray deficit be construed as
a national emergency that gives the president sort of unlimited, unbounded,
no time limitation, authority to impose tariffs for as long
as he wants against him ever he wants. So there
are a lot of ways in which Congress could have
(14:24):
spoken more clearly here. And I know that there are
some commentators who think that when this issue finally reaches
the Supreme Court, that there's a decent chance that the
major questions doctrine will end up being the key issue.
Speaker 1 (14:39):
So yeah, So it reminds you sort of like my
first year contract first, your law school contract class, where
there's like no meeting of the minds that there's not
enough details in the contract. It sounds like, you know,
Congress may not have put enough details in the statute.
So what that leads me to the next question, which is,
you know, neither the District Court nor the International Trade
(15:02):
Court addressed whether the trade deficit constituted an emergency or
the fentanal trafficking for that matter, Do you have any
thoughts as to why both of those courts declined to
address that issue.
Speaker 2 (15:14):
Yeah, I mean, I don't know for sure what was
in their head at the time, but I think it's
awkward for any court to say we know better what
constitutes a national emergency than the President of the United States.
I think there's a very strong instinct to try and
find another basis for ruling to get the same outcome
(15:38):
without having to say that we the courts are going
to second guest the president on the issue of national emergency.
So the Court of International Trade sort of ducked that
question in favor of saying that the unbounded delegation would
run a foul of constitutional concerns and therefore will construe
(16:00):
the statute not to do that, And the District Court
duct the issue by finding that tariffs are not allowable
at all, So it wasn't necessary to address the question
of whether there's a bona fide emergency. When I said
earlier that I agreed with the result in the case,
I think the reason that I agree with it is
precisely though, because I think that at least with respect
(16:21):
to the worldwide and retaliatory tariffs, putting the fentanel issue
to the side. It is almost absurd to call bilateral
merchandise trade deficits a national emergency. We've had them since
the beginning of trade. We've had aggregate trade deficits for
the last half century. We will probably continue to have
(16:44):
them for the next half century, as long as the
United States has a greater need for capital than the
national savings provides. It is a mathematical necessity that we
run a trade deficit to finance the importation of capital.
So to call something that's on the scale of a
century and an emergency is almost absurd to any economically
(17:07):
literate person, I think, but it's hard for a court
to say that the courts are not economists. The legal
authority to review the presidential decisions is not an authority
to judge them for sound economic policy. And so both courts,
I think we're looking for other grounds to reach what
(17:28):
is clearly the right outcome here, which is to say,
this is not an emergency situation, and the Congress needs
to weigh in if we're going to impose this kind
of change in American trade policy.
Speaker 1 (17:39):
So do you think that the Supreme Court would try
to avoid that issue as well.
Speaker 2 (17:44):
I don't know. I mean, I think there's sort of,
you know, the kind of four ways to decide this
case against the administration. One is to say AIPA doesn't
allow tariffs. One is to say that it if it
or to allow the extent of tariffs that the administration
claims that it's somehow unconstitutional, either under the old non
(18:06):
delegation doctrine, which has been moribund since the New Deal,
or under the newer major Questions doctrine. And the final
thing would be to say that there's not really an
emergency here, which I think is really the correct thing
to say. That's the real reason why this is why
this action by President Trump is unacceptable. But the Supreme Court, well,
(18:28):
I wouldn't be at all surprised if it finds an
alternative way to rule, assuming the rules against the president.
I wouldn't be surprised if it was not on the
basis of whether there's a genuine national emergency, but rather
on one of these other bases. And I'll just add,
by the way that I think it would be very
difficult to rule against the government on the ground that
(18:50):
a fentanyl issue is not a national emergency. We've had
thousands of people die from fentanyl poisoning, and that I
think it is very difficult to say could not be
reasonably viewed as a national emergency. So the court, if
it wants to knock out the fentanyl related tariffs, probably
(19:10):
has to find some other legal grounds.
Speaker 1 (19:13):
Right, And so the courts, the lower courts, finding that
the terroiffs didn't deal with that emergency sort of avoided
them having to say that that was not an emergency,
because I think most commentators agree that it is. So.
Just yesterday, which was June tenth, the Federal Circuit Court
(19:36):
of Appeals made an important ruling. So, just as you
know background, the Federal Circuit Court of Appeals is the
appellate court that hears appeals from the international Trade courts ruling.
It had entered an administrative stay of the International Trade
Court's ruling on May twenty nine, and that resulted in
the terraffs being reinstated, And just yesterday, on June tenth,
(19:57):
that court entered a longer stay, saying the ruling the
lower court ruling will be on hold until the appeal
has decided on the merits, so the terrorists will be
in e fact at least until the appeal has decided.
Do you think that the Federal Circuit Court's June tenth
continuation of the stay of the lower court's ruling Penny
appeal is any indication of how it will rule on
the merits.
Speaker 2 (20:18):
I don't think it's any definitive indication at all. I
think what it means, if anything, is that the court
sees that there are serious arguments on both sides, and
it's not certain yet how it's going to rule perhaps,
and therefore it makes sense to stay the lower court
(20:41):
decision so as not to temporarily distrut disrupt the president's
trade policy agenda. If indeed, in the end, the conclusion
is that the president has the power to do what
he's doing. So I wouldn't infer from the extension of
the stay that the Federal Circuit has more made up
its mind in favor of the administration. I think that's
(21:03):
probably an unwarranted speculation, right.
Speaker 1 (21:06):
So the other question that I forgot to ask you,
was they the full circuit the full panels, So it's
going to hear this appeal. So it's called an on
bank hearing, and that's you know, usually not done. Usually
there's a three judge panel. Was that surprising to you
at all that they decided to have an on bank hearing?
Speaker 2 (21:29):
No, I mean on bank decisions are You're quite correct
to say that they're not common, but they do happen,
and they they are put together usually in matters of
particular importance, and this is this is a matter of
quite extraordinary importance. It's a it's a kind of remaking
of US trade policy, Uh, without congressional oversight by a president.
(21:55):
He's you know, decided to go against the statutes that
set tariffs, passed by Congress and signed by prior presidencies,
abrogated essentially every international trade agreement that we have, both
on a multilateral scale with the WTO and all of
our bilateral free trade agreements. And it's hard to think
(22:16):
of a case in the Federal Circuit in recent years
that's been more consequential than this. So it doesn't surprise
me at all that they decided to hear the case
on bok okay.
Speaker 1 (22:26):
And then the District court decision is also being appealed
to the d C Circuit Court of Appeals. I wonder
if that will be on bank also, I don't know.
Speaker 2 (22:38):
It's a narrower decision. As you know, the District Court
in Washington, d C. Simply and joined the application of
tariffs to the plainness in that case. So it's not
nearly as sweeping a decision. And I would imagine the
d C Circuit might think to itself that this on
(22:58):
bank decision of the Federals is probably going to be
the way that the case gets to the Supreme Court,
if it's going to get there at all. So maybe
it's not necessary to have an on bank proceeding in
the DC Circuit.
Speaker 1 (23:12):
Who knows, Yeah, that makes sense. So there's a divergence
in court opinions about whether the International Trade Court has
exclusive jurisdiction to hear these cases. The International Trade Court
said yes, The California Federal Court recently said yes and
dismissed a case that was brought there that's currently on appeal.
And then the District Court said no, said IPA doesn't
(23:35):
authorize terrorists at all. So the Court of International Trade
is not an exclusive jurisdiction. Which court do you think
got it right?
Speaker 2 (23:42):
You know, it really turns on it turns on the
decision on the merits. As the District Court pointed out
as to whether or not APUA allows for terrorists at all.
It's pretty clear in the jurisdictional statute for the Court
of International Trade that if we have a dispute rising
out of a statute that allows for the imposition of tariffs,
(24:05):
then the Court of International Trade does have exclusive jurisdiction.
So it really is a question of whether AIPA allows
tariffs at all. The District Court said no and therefore
kept jurisdiction. Other courts have read aip but to authorize tariffs,
or at least arguably to authorize tariffs, and thought then
that the Court of International Trade should resolve the issue. Ameke,
(24:30):
This brief I signed includes a section arguing that AIPA
does not authorize tariffs, and so I'm not going to
say anything that would conflict with that, but I think
that's where the battle is joined on who has jurisdiction right.
Speaker 1 (24:44):
So inevitably these cases are likely destined for the Supreme Court.
How do you think the Supreme Court justices will rule
on these cases, both on a potential appeal of the
lower court decision to continue to stay and on the merits.
Speaker 2 (25:00):
Well, my guess is that Supreme Court would not interfere
with the stay pending the expedited on bank appeal at
the Federal Circuit. As far as the ultimate ruling on
the merits is concerned, you know, it's always difficult to
rule against the president in the exercise of emergency powers.
(25:25):
On the other hand, I think the President has essentially
co opted an emergency power statute to take over American
trade policy in a situation that does not constitute an
emergency at all, again putting the fentanyl issue to the side,
And I suspect that many of the Supreme Court justices
would have sympathy with that view, whether they are prepared
(25:50):
to go against the president here, whether they have to
think through all of the unintended consequences that might have
company a ruling against the president on whatever grounds they
might choose. So I don't think I can predict the
outcome of merits at the Supreme Court, but I do
hope that they will find a way to return trade
(26:11):
policy to the Congress, which is where the Constitution puts it.
And with a conservative majority court, I think the you know,
fidelity to the Constitution and the original separation of powers
is something that a lot of the justices care about.
So you know that that kind of bodes somewhat well
in terms of the plain is hope that the Supreme
(26:32):
Court will ultimately rule against the administration.
Speaker 1 (26:35):
So if the Supreme Court does it, for a meaning,
it holds both reciprocal tariffs and trafficking tariffs and lawful
are there or or you know, one or the other.
It holds reciprocal tarifts on lawful but allows the trafficking terrorists.
Are there other statutes the president could use to implement
either of these terroriffs?
Speaker 2 (26:55):
Yeah, this is uh, this is something that obviously is
very important in terms of the practical impact of all
this litigation. The steel and aluminum tariffs that the president
imposed in his first administration and that he's now recently
doubled are predicated in part on a statute from nineteen
sixty two allowing presidential use of tariffs or other measures
(27:20):
to address national security problems, and that requires a finding
by the Commerce Department that imports or a threat to
national security. The Commerce Department under the first Trump administration
and Secretary Wilbur Ross made that finding, and that was
a basis for the president's first round of steel and
aluminum tariffs, and one suspects that the Commerce Department under
(27:42):
Secretary Lutnik would renew that kind of finding with respect
to a number of different industries, where the claim might
be made, perhaps with a straight face, perhaps not that
the imports are a threat to national security, so that
could be used on a sectoral basis after findings by
the Commerce Department that there was a threat to national
(28:04):
security from imports of particular items. The broadest statute beyond
the President's interpretation of i EPA giving tariff emphysician authority
is Section three oh one of the nineteen seventy four
Trade Act, which allows It was primarily enacted to allow
the President to respond to other countries that violate their
(28:26):
commitments under trade agreements with the United States, but it
also contains the section that says the President can respond
to unreasonable practices by foreign governments that burden US commerce.
And of course, you may recall that the so called
reciprocal tariffs were alleged by the President to be the
product of unfair treatment of American exporters in foreign markets,
(28:52):
and so this provision of the section three oh one Act,
Second three oh one of the seventy four Act rather
could be invoked to say that all of these bilateral
trade deficits are a product of unreasonable behavior by foreign governments,
and that's how we can justify these whopping reciprocal tariffs
that were proposed back on so called Liberation Day. So
(29:17):
that's a statute that might very well come into play
as well. It was used already to impose very high
tariffs on China during the first Trump administration, and so
one can imagine that by shifting to the National Security
Statute and the Unfair Trade Statute, the President, even if
he lost on AEPA, could reconstruct a lot of the
(29:38):
tariffs that he is now imposing under AEPA. It would
require some time. It requires some preliminary investigations and findings
by the agency. Commerce has to deal with the national
security issue. The US Trade Representative has to make findings
on the unreasonableness of foreign trade practices. But they've already
done a lot of that legwork. Every every year or so,
(30:01):
the USTR issues what's called the National Trade Estimates Report,
which lists all of our major trading partners and all
of the practices by those trading practors partners that we
view as burdensome and unfair to the United States, and
that could be the basis for findings of unreasonableness against
(30:22):
all sorts of countries, and then retaliatory tariffs to punish
them for their unreasonableness could be forthcoming under Section three
oh one. So even if the President loses under i EKO,
that's the battle might be one, but the war would
not be over against the use of these large tariffs
without congressional authorization.
Speaker 1 (30:43):
Interesting. Well, thank you so much for joining us, Professor Sykes,
and it would be interesting to see what happens for sure,
taken
Host
Elliott Stein
Popular Podcasts
On Purpose with Jay Shetty
I’m Jay Shetty host of On Purpose the worlds #1 Mental Health podcast and I’m so grateful you found us. I started this podcast 5 years ago to invite you into conversations and workshops that are designed to help make you happier, healthier and more healed. I believe that when you (yes you) feel seen, heard and understood you’re able to deal with relationship struggles, work challenges and life’s ups and downs with more ease and grace. I interview experts, celebrities, thought leaders and athletes so that we can grow our mindset, build better habits and uncover a side of them we’ve never seen before. New episodes every Monday and Friday. Your support means the world to me and I don’t take it for granted — click the follow button and leave a review to help us spread the love with On Purpose. I can’t wait for you to listen to your first or 500th episode!
The Breakfast Club
The World's Most Dangerous Morning Show, The Breakfast Club, With DJ Envy And Charlamagne Tha God!
The Joe Rogan Experience
The official podcast of comedian Joe Rogan.