The legal case for — and against — Trump's tariffs

NPR.

This is the indicator from Planet Money.

I'm Waylon Wong, and I am here today with NPR's economics correspondent, Scott Horsley.

Welcome back to the show, Scott.

Great to be here.

It's always a big day when you're here.

And as we've been covering, President Trump's new round of tariffs take effect today.

They are on goods from many of the United States' major trading partners.

And that means tariffs that had been set at 10% across most of the world are going to jump to 15 or 25%, in some cases, even higher.

That's going to boost the average tax on imports to the U.S.

to about seven and a half times what it was last year before Trump returned to the White House.

The government is already collecting close to $30 billion a month from these tariffs, and that number could go go even higher as these new higher tax rates take effect.

So who's paying for that?

Depends, right?

Right.

We've talked about how foreign suppliers could absorb some of the cost, but it's U.S.

importers that initially have to pay the tariff, and then they have to decide whether to pass some or all of that expense on to their customers.

Dan Rayfield is the Attorney General of Oregon.

He argues that eventually American families will get stuck with a big chunk of that $30 billion a month month bill.

Tariffs are passed down to all of us.

We as Zoomers, we as families, people that are working day in, day out to try and pay their bills, don't have the flexibility in their budget to afford it.

That is a tax on all of us, right?

But it's hidden in disguise as a tariff.

Dan argues that the president's tariffs are not only costly, but also illegal.

And so far, a special federal trade court has agreed.

For now, though, the government is still collecting the import taxes while the case is on appeal.

Today on the show, the legal arguments for and against the president's tariffs, where the court case stands now, and what happens to that $30 billion a month bill if Trump loses.

We'll find out after the break.

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The legal challenge to President Trump's tariffs was brought by a group of a dozen, largely blue states, and by a handful of businesses that includes a small family-owned wine business in New York State called VOS Selections.

The founder of VOS is Victor Schwartz.

I'm an unintentional plaintiff.

This was not something I was looking for.

But tariffs have become a big expense.

If Victor imports $100,000 worth of wine from Europe, for instance, he might have to pay a $15,000 tariff before he sells his first bottle.

And Victor imports wine from 16 countries around the world, not just the usual suspects like France and Italy, but also Morocco and Croatia and Mexico.

So just keeping track of all the tariffs has been a nightmare.

You know, when we heard about the tariffs, we literally went through every single skew in our book, which is quite a few, and had to decide what we were going to be doing pricing-wise.

For most of these tariffs, Trump has relied on the authority of a 1970s law that gives the president special powers in the case of an international emergency.

But Victor's lawyer, Jeffrey Schwab, says those special powers do not include taxing imports.

In fact, the word tariff never appears in the law.

It doesn't authorize tariffs at all.

It doesn't say anything about tariffs.

Congress can't entirely delegate its authority to tariff, which it's given under the Constitution.

And the court agreed with us.

Tariff opponents won the first round two months ago.

That's when a specialized trade court made up of judges appointed by Presidents Reagan, Obama, and Trump himself ruled unanimously that the emergency tariffs are illegal.

That ruling is on hold for now, though, while the case makes its way through the appeals process.

We reached out to the White House and asked what they think about the law, and Deputy Press Secretary Kush Desai responded with a statement saying, quote, the administration is legally and fairly using tariff powers that have been granted to the executive branch by the Constitution and Congress to level the playing field for American workers and safeguard our national security.

Last week, an appeals court in Washington held a hearing in the case.

Assistant Attorney General Brett Schumate argued for the administration.

He says, Trump's tariffs are justified by a growing U.S.

trade deficit, which amounts to a national emergency.

The hearing was actually broadcast on YouTube because the stakes are so high and there's so much interest.

Now, the audio quality is not great, but here's Shoemate making his case.

The president identified a severe spike in the trading deficit over the last four years that have caused, essentially, it's reached a tipping point, right?

It's affecting our military readiness.

It's affecting our domestic manufacturing capabilities.

So yes, absolutely.

Many of the judges on the 11-member appeals panel sounded skeptical as they peppered Shoemate with questions.

What constitutes an emergency?

Are there any limits on a president's power to act in an emergency?

And how does it help military readiness to slap attacks on imported coffee, which we don't grow in this country anyway?

Attorney Neil Katial argued for the businesses challenging the tariffs.

He said if Congress wanted to give the president power to tax imports simply by by declaring an emergency, lawmakers would have said so.

But they didn't.

Again, YouTube quality alert here.

The whole idea is that tariffs and taxation are always tempting for kings and for presidents, and so that's why that power was located in Congress.

And every single time Congress has departed and given that power to the president, they've done so clearly.

There are cases where Congress has specifically authorized the president to impose tariffs.

Trump did so during his first term in office, taxing imported steel and aluminum and lots of goods from China.

But Oregon's Attorney General says whenever Congress has allowed the administration to impose tariffs like that, lawmakers have added guardrails.

They haven't just given the president the kind of blanket tax authority that Trump claims to have.

Congress passed safeguards for our economy.

Things like how long tariffs can be in place, how high the tariffs can be, and having factual findings for the implementations of the tariffs.

And Trump didn't want to do that.

He ignored them all.

He didn't want to follow that law.

And that's why he went to this emergency power that no other president has used.

The tariffs that Trump has ordered are the highest in a century.

They're also constantly changing, often with little or no warning.

Dan says that makes it almost impossible for businesses to make plans since they have no idea what their costs might be in a day or a week, let alone next year.

The chaotic nature of how Trump has been implementing his trade policy is just wild.

There one day, gone the next.

back there the next day, even higher.

So you have incredible uncertainty that is put into the market.

It's put into small businesses who are trying to lock in prices.

And that impacts all of us.

And what the courts said, they said, hey, if you're going to do tariffs, do it the way that Congress intended you to do it.

Dan says the president's unpredictable trade policy has not only made it more expensive to import goods to Oregon, it's also made it harder to export.

Oregon's plant nurseries, for example, usually do a a brisk sales business in Canada, but that's been undermined by Canadian boycotts because our northern neighbors are so unhappy with the way Trump has treated their country.

They're spitting on our plants up there in Canada.

Now, you might think domestic producers would benefit from Trump's high tariffs, that taxing wine from France, for example, would be great for winemakers in Oregon or California.

But in many cases, it hasn't worked out that way.

Victor, the New York wine merchant, says tariffs have introduced a bitter taste to his whole industry.

The whole wine and spirits distribution system in America is very global, and American wineries depend upon distributors that carry international products.

I mean, 25, 30% of my portfolio are domestic wines.

So the health of my company is very important to my domestic suppliers as it is as much to my international suppliers.

It's all intervined.

Ultimately, the legal challenge to Trump's tariffs is likely to wind up at the Supreme Court.

And Victor's attorney, Jeffrey, says their side will be ready.

Absolutely.

And we're pretty confident that our arguments are correct and that the president's actions exceed the authority that he's been given.

As we said, the Treasury Department is collecting about $30 billion a month in tariffs, even before this week's tax increases take effect.

It's all sitting in the Treasury now.

But if the courts ultimately side with the tariff challengers, the government will have to give most of that money back.

Scott, we have to send you back to the news desk, but we hope you come back again soon.

Thank you.

My pleasure.

This episode was produced by Angel Carreras with Engineering by Cena Lafredo.

It was fact-checked by Sierra Juarez.

Kate Kincannon is the show's editor.

And The Indicator is a production of NPR.

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