Episode Transcript
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Speaker 1 (00:15):
Welcome to the Votes and Verdicts podcast hosted by Bloomberg Intelligence,
the investment research arm of Bloomberg LPA. In this podcast series,
we talk about the intersection of business policy and law.
My name is Holly Frome. I'm an analyst with Bloomberg
Intelligence covering consumer and industrials litigation. Today's podcast, we'll focus
on several key court rulings impacting tariffs, and specifically a
(00:39):
May twentieth decision by the US Court of International Trade
and May twenty ninth decision by a Washington, d c.
District Court holding that President Trump's reciprocal tariffs and tariffs
imposed on China, Canada, and Mexico were unlawful. I'm delighted
to be joined today by law Professor John Yu. Professor
U is a Senior Research Fellow at the Cibitas Institut,
(01:00):
a Distinguished Visiting Professor at the School of Civil Leadership
at the University of Texas Austin, the Emmanuel Heller Professor
of Law at the University of California at Berkeley, and
a non resident Senior Fellow at the American Enterprise Institute.
Professor U served as an official in the US Department
of Justice General Counsel of the US Senate Judiciary Committee,
(01:21):
and was a law clerk for Supreme Court Justice Clarence
Thomas and Federal Appeals Judge Lawrence Silberman. He has written
or assisted in the writing of numerous books on constitutional
law national security in the Supreme Court and graduated Harvard
College and Yale Law School. Professor U also serves on
the board of the Pacific Legal Foundation, which is representing
businesses that have filed a case called Princess Austin versus
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Customs and a separate lawsuit against the Trump administration over
the tariffs we will discuss today. Thank you so much
for joining us, Professor U. So, just by way of background,
the International Trade Court on May twenty eighth found executive
orders imposing so called reciprocal terrors were also called worldwide
terraffs and terraffs in China, Canada, and Mexico related to
(02:05):
fentanyl trafficking unlawful. The Court found reciprocal terrafts lawful because
it found the International Emergency Economic Powers Act, the law
the President used to impose them, doesn't permit unbounded teriffs.
If it did, the Court said it would violate the
major questions and non delegation doctrines, and with respect to
fentanyl trafficking terraffs, it found that the terriffs don't deal
(02:25):
with the emergency as required by what's the Internationalency Economic
Powers Act were also known as AIPA. So, as many
people know, the President posed reciprocal terrafs on the grounds
that the trade deficit constituted an emergency. And you've said
that the judges of the International Trade Court could have
rejected the reciprocal terraces on the straightforward ground that the
(02:46):
trade deficit doesn't qualify as an unusual and extraordinary threat
as required by AEPA, But the court didn't make that determination.
Why do you think they didn't?
Speaker 2 (02:56):
Thanks for having me, Holly, And it's an interesting question.
There's really two different parts to it. One is what's
the right role of the courts? And that's the question
you just asked, why didn't the courts reach a certain
question or not? And then the second one is just
under the statute is this and appropriate use of the
emergency international Economic powers? So I think as to the
(03:19):
first question, courts have always been reluctant to second guess
the executive branch, and when it decides there's an emergency.
In fact, I don't think that any court really ever
has overturned a finding of it by the president of
an emergency. This is because courts feel a great deal
(03:40):
of reluctance in this area to try to determine what
the facts are. They understand that emergencies are fast moving,
that they happen in an unanticipated way. That's in fact
why Congress often delegates broad authority to the president. So
(04:01):
I think that this court, this Court of International Trade,
which is a very unusual court. It's in fact, for
most of its history it was actually an administrative agency,
and it's not like the other kinds of federal courts
were used to reading about, which have what we call
a general jurisdiction. They can hear almost any issue under
federal law. This court especially created just to hear really
(04:26):
cases about dumping and unfair subsidies in the trade context.
I don't think they wanted to step out and be
the first federal court to ever overturn of finding a
presidential emergency. That doesn't mean that, you know, as to
the second question I raised, under the law itself, this
is an emergency. It might just be that this court thought,
(04:47):
maybe be it should be the Supreme Court or the
Federal Circuit, the higher appeals court that take this fateful step.
Speaker 1 (04:54):
Yeah, that makes sense. And then I wonder why, well
we'll get I guess we'll get to it later because
you know, there's another district court case that found the
tarifs and lawful for different reasons, which we'll get to.
That court also didn't say that the trade deficit wasn't
an emergency, but the President has said that the trade
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imbalances have hollowed out our manufacturing base, inhibited our abilities
to scale domestic manufacturing, undermine critical supply chains, and rendered
our defense industrial based dependent on foreign adversaries. So why
do you think that that doesn't lead to the conclusion
that trade balance imbalances and other trade barriers doesn't arise
(05:39):
to the level of an unusual and extraordinary threat. Yeah.
Speaker 2 (05:43):
I think, Holly, that if the courts do get to
the question, if they do, unlike as you said, the
Court of a National Trade just take off what we
called denovo, a fresh look at whether an emergency exist
or not. I don't think this is what Congress had
in mind with AIPA. As you said in your introduction,
(06:03):
you quoted the statute, it requires an unusual and extraordinary
threat to the national security or foreign policy of the
United States. You go back and look, and first, I
don't think that the trade deficit has suddenly fallen upon us.
We've had a trade deficit consistently for about fifty years
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since the Nixon administration. And in fact, Nixon was the
last person to kind of try something, last president to
try something like this, to pose a kind of universal
tariff in order to solve the trade deficit, which didn't work.
And so the trade deficit has fluctuated up and down.
And I also looked, and if you correct for inflation,
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the trade deficit today is about where the trade deficit
was at the beginning of the second Bush term. So
it's been about many years. And the inflation adjusted size
of the budget deficit, there's a percentage of GDP for example,
is really not change at all. So to me, it
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seems that an emergency, you know, something unusual, extraordinary, something
that has an enormous impact, and it's something that's all
of a sudden, it's something that has fallen us in
an unanticipated way. Whereas this emergency is a non emergency.
The trade deficit is just the fact of the economic life,
or a trade SURPPLUS would be two. And it's been
(07:32):
fluctuating up and down four or five decades now, got it.
Speaker 1 (07:37):
So what the International Trade Court said was that if
the president is going to address trade deficits, he has
to do that through Section one twenty two of the
Trade Act and not through I do you agree with
that ruling.
Speaker 2 (07:53):
I think that's an I don't think that's correct. So
I think there's a number of ways that the president
can impact trade, and I think that's why this legal question,
the first one is this an emergency is all important
because if you then turn to AIPA and you read
the powers that are given to the president, it doesn't
(08:16):
use the word tariff, but it uses the words which
you make up a tariff. It says that the president
is allowed to regulate block sees any kind of transaction
with a foreign party. Essentially, so, for example, under APA,
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and keep in mind, AEPA grandfathered in other kinds of
international emergencies that have been declared and trade sanctions that
have been used, you could regularly impose an embargo on
a trade embargo on an entire country. So the predecessor
of TAIPA was something called the Trading with the Enemy Act,
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and so when Congress, which was passed in nineteen seventeen,
and so when Congress passed AEPA in nineteen seventy seven,
it was trying to change how presidents could use those powers,
but they didn't really change the powers that the president
got from the statute. And so under the Trading with
the Enemy Act and then even under AEPA, presidents have
(09:22):
regularly imposed trade sanctions that go even farther beyond teriffs,
to the point of cutting off all trade with the country.
For example, we're talking right now about secondary Russian sanctions,
which would be to impose trade sanctions on country that
do trade with Russia, not even primary sanctions, which are
(09:43):
sanctions that are just directly on US Russian trade, which
is now very small. This to me is even more
powerful tool than just straightforward tariffs, and that would be
done under IPA. I think the way to understand what
these powers are is that they're very broad, broader than
these x under the other trade laws. But I think
(10:04):
what they're really aimed at, in combination with the first question,
is this an emergency, is that the purpose of the
statute was to aim at individual countries. So, for example,
if President Trump were to say, a trade with China
and China itself is a national security and foreign policy threat,
so I'm going to impose sanctions on China, for example,
(10:27):
in order to protect American national security related industries, or
to build up alternate sources for raw materials or for
basic electronic components that if we rely on China for
I think that would fall under AUPA.
Speaker 1 (10:44):
So do you think he would have been on better
legal footing perhaps if he had directed it in a
specific country instead of the you know, the worldwide chairis
where he directed it in almost every country.
Speaker 2 (10:55):
Exactly right, Holly. That I think is the way APA
is supposed to work is here's a country like a China,
like a Russia, they now pose a threat to our
national security. Then AIPA gives you much broader therapy power
than just terriffs. You know, president could just close off
all trade, not just trade. You can close off trade,
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you could close off travel, you could close off communications
with that country. But it has to be I think,
country by country, and it has to be because, of course,
you find that country is a threat, not because they're
just part of the overall trade deficit that we have.
That makes sense. So the District Court of Washington, d c. However,
(11:39):
said that AIPA doesn't authorize tariffs at all. And one
of the points the court raised was that AIPA never
even mentions the word tariff. What do you think, what
do you make of the argument that if Congress meant
to authorize the president to impose terriffs vi iepa, it
would have explicitly said so in the statute. You know,
this is a I think a problem with that opinion
(12:01):
and the Court of International Trades opinion is that I
think they ignore that Supreme Court decisions in this area
of international emergencies and economic powers. It has very different
fundamentals than domestic law. So you mentioned earlier that the
(12:24):
Quarter of International Trade had held that the Trump administration
was violating what's called the major Questions doctrine. This is
essentially what the Court in Washington has helped too. And
this idea that the Supreme Court has articulated in cases
like striking down President Biden's effort to forgive student loans
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or the nationwide vaccine mandate. This is the idea that
a statute that's vague, isn't to be read to give
the executive branch power on a question of major economic
or social or political importance. In other words, if Congress
really wanted to give the executive branch that power, for example,
(13:11):
to acquire a nationwide COVID nineteen vaccine mandate, it would
say so in the statute. And courts aren't to give
the president the benefit of the doubt. And that's been
a very important development under the Robbers Court. But the
Supreme Court has never applied that to foreign affairs. And
so there's another line of cases involving international economic regulations
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where the Court has rejected exactly that argument, and in
fact it rejected it exactly in the area of interpreting AIPA.
The first major use of AEPA was against Iran, and
it was to resolve the Iranian hostages crisis. Is a
case called Dames and Moore versus Reagan. And in that case,
the Court, I'm sorry, the President had to execute certain
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economic sunctions and lifting of sanctions that were not permitted
under a EPA. The Court said that even though the
statute did not clearly deny the authority to provide the
authority for that, it was going to give the president
the benefit of the doubt because it involved foreign affairs
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and involved national security, involved fast moving events that the
court was reluctant to resecond guests. And that's exactly I
think what's going on here. So that's why I think
really the hard question for the courts are going to
be are they going to review the emergency declaration? I
think once they do, then the major questions doctrine. So
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far the Supreme Court can always change his mind. The
major questions doctrine and the theory of it has not
been held to apply to IBA. Got it.
Speaker 1 (14:50):
So the International Trade Court said that if the law
allowed unbounded terrafts, as it found a reciprocal terrafs were,
it would violate the non delegation doctrine which you talked about.
And that doctrine, you know, as you said, this says
that Congress can't delegate a power to the president without
providing intelligible principle or limits around that power. And you
(15:14):
said you believe this line of reasoning, though, opens the
door for Trump to prevail on appeal. Can you explain
why you think that?
Speaker 2 (15:22):
Yes, So this pulls from that case in dameson Moore
versus Reagan. The Court held that, So, I don't want
to get too complicated, but this was the deal that
freed the hostages in nineteen eighty and part of the
deal was the United States had to had frozen all
Iranian government assets in the United States under a EPA,
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and a whole bunch of people and companies had also
sued Iran's government for nationalizing all their assets and had
won judgments and attached them all throughout the country. And
so as part of that deal, the Carter first and
then the Reagan administration had to free up all that
money and send it out of the country. AIPA doesn't
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allow you to do that. AIPA doesn't actually say that you,
the president, in the course of a national emergency, can
take away basically lift all those attachments and basically eliminate
all those judgments in court. And so the Supreme Court said, yes,
we admit. They were very open. They said, we admit
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that the Statute APA doesn't specifically give the president that power.
It gives a president a lot of other broad powers.
And so we think that in the area of an
economic regulation during an international emergency, we are going to
basically give the president the benefit of the doubt, let
(16:51):
him exercise that power, just kind of like filling a
gap in the statute and not strike down something during
the during an international emergency, which we don't want to
second guests. So that case really is the one that
the Trump administration should be relying on, and I'm sure
they will as this case moves up to the Supreme Court.
(17:12):
It's actually quite I don't think they did, though. I
think it's really puzzling that the trial courts weren't confronted
with this case and so have to explain, you know,
why they were able, you know, why they were able
to hold what they did in the face of you know,
the most recent This is the clearest Supreme Court President
president on the IPIS Statute itself.
Speaker 1 (17:31):
So, if this case does make its way to the
Supreme Court, do you think there's a way that they
can affirm the International Trade Court's decision with regard to
worldwide sheriffs but disagree with its reason for finding them
am awful.
Speaker 2 (17:49):
Yes, I mean, I think the easiest thing the Supreme
Court could do would be to say we don't consider
this an emergency within the meaning of the Statute. And
to do that would be to look at, as I said,
all the emergencies under the Trading with the Enemy Act
and look at that which were all nations specific, and
(18:11):
then to say, you know the purpose of the statue
and the way it's been used, And that's the thing
a court has been looking at a lot in its
recent cases in other areas, is what's been the tradition
and history, what's been the practice under the statute and
say these all appeared to us to be aimed at
specific countries that pose a threat, and then actually gives
(18:32):
you broader powers and terrors. But that what the Congress
didn't think an international emergency would be is something that's
again been with us for fifty years, hasn't really changed
in twenty years. So it's hard to say it's an emergency.
Speaker 1 (18:48):
You've said that the Trade Court's decision intrudes into foreign
policy in a manner no federal court has ever done before.
Can you explain what you mean by that?
Speaker 2 (18:58):
So this is the thing I think that's dangerous. You know,
it's close to but different than the argument I was making,
which is, I don't know though, if the courts want
to get in the position of saying we can decide
whether this is an emergency or not just on our
own power. I think what's easier about what I just
laid out what the court would try to do is
(19:20):
figure out what did Congress think is an emergency? You know,
what does Congress think it was doing. What did Congress
think it was doing when it passed the EYEPA law.
What kind of international emergencies did it have in mind
when it said unusual an extraordinary threat to the national
security and foreign policy United States? But I think what
(19:42):
the courts will be cautious of is sort of deciding
for itself whether something is an emergency. I think you
mentioned that the Court the lower courts have been doing
this in other areas, specifically immigration cases, and so far
the Supreme Court is actually intervened mean to overturn the
cases where the Supreme Court the lower courts have done
(20:04):
this and said, reconsider what you're doing. It's not clear
that this is what the federal courts should be. You know,
this is this this question is included in our powers,
the question of what is an international emergency in terms
of just the president's powers, in terms of the constitution.
All they would have to do in the course that
(20:25):
I think they might follow is just say this is
what we think, congressman, when they gave the power to
the president in the first place.
Speaker 1 (20:31):
I wonder if they would run into that same problem,
you know, that they are overstepping their authority. The courts
when they if they decide, you know, Congress didn't meanness
because AIPA is meant to be meant to give the
president powers you know in the invention emergency that Congress
can't contemplate.
Speaker 2 (20:50):
Yes, I think that's a fair question. I think that's
the best argument for the Trump administration is to say, uh,
you shouldn't really the courts, you really shouldn't limit yourself
to what Congress thought was an international emergency. Congress is
very broad words in the statute. They knew they couldn't
(21:11):
anticipate the future. And that's a very point of an
emergency is you can't write laws in advance to really
deal with them because they haven't happened yet and they're extraordinary.
And that's the whole point of these emergency statutes in
the first place. And you can see I agree with
that. You can see the courts are reluctant, at least the
Supreme Court has been reluctant to have the federal courts
(21:34):
tread into this area, which you look at the Constitution.
Obviously it sets up Congress and the President as the
branches to lead the country in the context of an emergency.
But at the same time, you could see the Supreme
War is not going to say that's an unlimited power
either that at some point, you know, at some point,
(21:57):
the courts, I don't think, are going to allow a
president to declare an emergency for something that's really slow moving,
really is permanent kind of social problem. So the example
I give is, I don't think the Court would say
that climate change is an an international economic emergency because
(22:25):
it has been going on for so long and is
very slow moving that I don't think the Court, for example,
would allow presidents to say climate change triggers i EPA powers.
Speaker 1 (22:36):
Right, That's an interesting example. I've never heard that one
used before, but that makes sense to me. So you've
said that the International Trade Court's decision with respect to
the trafficking terraffs, and what the Court did there was
they said that those don't deal with the fentanyl emergency.
And you've said the Court's decision would allow courts to
(22:58):
sit in judgment over the weather the president has chosen
the most effective means to achieve its goals. Do you
support an approach that makes the presence means of dealing
with an emergency not subject to judicial review? And if not,
what role do you think the courts should have in
reviewing such questions?
Speaker 2 (23:15):
Well, I think this was the problem that you know,
the Supreme Court is going to be worried about that
if the trial courts really start getting into the business
of reviewing is this an international emergency at all? And
then this is what the corporal then went a head
and said, is this responsive what the government's doing responsive
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to the international emergency? I think that's really an area
where courts have very little competence. And this was a
good example. The Court said below that we don't see
how putting trade sanctions in Mexico and Canada have anything
to do with the flow fentanyl into the United States.
(24:00):
So how does the court know that The reason that
the administration might have done that, for example, is to say, well,
we're putting that sanction on Mexico because if they start
to suffer a lot of economic losses from terrorists, then
the government in Mexico will start to take the steps
that we want them to take to reduce ventanyl and
that seems perfectly logical to me. It may not be
(24:23):
high probability. That's up to you know, the President and
the Secretary Stay and the just Department, the DEA. They're
the ones who have the real information about how fentyel's
getting into the country, and they're the ones who really
have to make the hard decisions about how to try
to stop it from getting into the country. I don't
see how a judge can just sit back in Washington
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and just say I don't think it's going to work.
You know, the court doesn't have the kind of experience
or information regarding our national security to make those kinds
of decisions. But that's what I think is worrisome. I
think that for the Supreme Court or if they are
going to let trial courts make decisions about is this
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really an emergency? And then the next step would then
an WLB is what the court, I'm sorry, is what
the administration proposing in response effective? That's that's that's something
no court has ever done, actually is to been has
been to hold on whether a certain measure by the
government is really effective or not for our national security.
Speaker 1 (25:28):
So this is my final question. My So many commentators
have said that no court will rule that the fenttional
trafficking isn't is not an emergency. Do you agree with that?
And if so, is there any other way the Supreme Court,
if it follows precedent, can find venttional trafficking terrorists on lawful.
Speaker 2 (25:48):
So I think that that that the chance of survival
of the President's tariffs are much higher for the ones
that were you know, they're separate, right, the ones that
are that were in ounced on China and Mexico and
Canada are separate from the other terrorifts what I call
it the court calls these worldwide tariffs, for example. So
(26:09):
I think that is much more in line those targeted
terrorists are much more in line with how AIPA might
buso saying the rise of fentanyl which is coming through
and the present saying is coming through the borders of
Canada and Mexico and it's produced by China. And because
of that, I'm going to impose these terroriffs in order
(26:29):
to get those down, you know, those ventanyl trafficking down.
That's actually I think much more likely to survive than
every country in the world's going to pay ten percent terrorists.
Speaker 1 (26:40):
Right, that makes sense, Professor you. I could keep you
here for hours asking questions, but I know you have
other things to do. Thank you so much for joining
me today. Well, we'll be keeping a lookout for more
articles you publish on the topic. Thanks you so much
again
Speaker 2 (27:03):
To