What the actual tariff?

Katie Martin (0:06)

Pushkin. Donald Trump is learning the hard way that you can't always get what you want. Last week, the Supreme Court said that, actually, Mr. President, no, you cannot have your beloved emergency trade tariffs that you announced last April because you're not using them for an emergency. And anyway, you can't just do that because you feel like it. I'm paraphrasing the legal wording here, but the point is no tariffs. Trump reacted in his usual even-handed, thoughtful manner by saying the judges who voted against him should be absolutely ashamed. He also slapped on some other tariffs. It's all a mess that goes to show you can't spell tariffs without FFS.

This is Unhedged, the markets and finance podcast from the Financial Times and Pushkin. I'm Katie Martin, a markets columnist here at FT Towers in London, the greatest city on earth. Joining me, I have, as usual, my co-pilot, Captain Robert Armstrong, of the Unhedged newsletter in New York City. But also, I have someone who actually understands all this stuff and writes about it for the FT, Alan Beattie in the house. Alan, thanks for coming back. Clearly, we failed to put you off last time.

Alan Beattie (1:17)

Yeah, well, I very much appreciate that I get invited on to Unhedged basically when there's a massive carnage in the global trading system. And I sort of like get the vulture in who won't come and pick the carcass clean. Of any scraps of meaning.

Rob Armstrong (1:31)

I think of you more like a crow rather than a vulture.

Alan Beattie (1:35)

I'm actually going to take some time to think about that. And possibly the next time I'm invited on, I'll have an answer for you.

Katie Martin (1:41)

So Alan, look, normal people have better things to do with their time than track Supreme Court rulings on trade tariffs. So please, for those of us at the back of the class, get us up to speed. What happened last Friday?

Alan Beattie (1:55)

What happened was the Supreme Court basically backed rulings last spring and summer from something called the Court of International Trade and then the Federal Appeals Court that said, you're trying to use a particular piece of legislation, the International Emergency Economic Powers Act, which is supposed to be, as its name suggests, for use in emergency and it allows you to regulate or prohibit, quote unquote, imports. It has never been, it's been around for 50 years, it has never been used for tariffs. He's clearly not using it in an emergency. He's clearly just using it for tariffs. For that reason, this particular bit of legislation, you cannot use for this.

Katie Martin (2:28)

So is it that it's not an emergency or that you can't declare it to be an emergency? Or is it like a combination of all these things?

Alan Beattie (2:35)

I mean, he did declare an emergency. Congress subsequently voted against one particular bit of it and said it isn't. But what a lot of the argument focused on was that this particular thing doesn't let you use tariffs.

Katie Martin (2:47)

Right.

Alan Beattie (2:47)

That's it. It's, you know, other things that you use tariffs, try and go and use other things, which we'll talk about. But this particular thing, this is not what it's for and that's what, and you can't do it.

Rob Armstrong (2:55)

I don't mean to argue about scripture with a none here, Alan, but reading through the decision from the Supreme Court, a lot of it was about constitutional principle. Does the president have the unilateral right to impose taxes? And is this him doing that? In other words, has he taken the powers of Congress from Congress? And the majority said, yes, he has, and it's not allowed. So it wasn't all particular. Some of it was broad and sweeping.

Alan Beattie (3:25)

That is true, but there are various bits of legislation where the president can impose tariffs without necessarily having to be voted on by Congress. It's just the issue that this is not one of them. And by using this one, he's doing exactly what you just said, which is expanding the powers of the executive beyond what the Constitution said that he actually has.

Katie Martin (3:47)

So it's basically just no, just knock it off. Now, but it's not just no, is it? Because quick as a flash, Trump says, well, I'm going to declare a 10% global tariff. Actually, no, call it 15%. Make this make sense to me, Alan, how come he can still do this? Or can he still do it?

Alan Beattie (4:05)

So if you think of it as being like a workshop and there's a whole bunch of tools lying around. So to begin with, he picked up the IEPA, that's the International Emergency Economic Powers Act, and started using that. And Supreme Court said, put that down right now.