In April, former President Donald Trump introduced sweeping tariffs on imports from nearly all countries, asserting they were essential to address a “national emergency” tied to an “unusual and extraordinary threat” against U.S. national security, foreign policy, or economic stability. However, a legal brief signed by 45 American economists argues that this justification is based on a fundamental misunderstanding of economic principles. n nThis evaluation aligns with what a prominent international trade textbook describes as a “virtually complete consensus among economists,” and it carries significant weight as the Supreme Court considers the legality of these measures under the International Emergency Economic Powers Act (IEEPA). One central issue is whether IEEPA, enacted in 1977 without reference to import duties and never previously used to impose them, grants the executive branch any authority over tariffs. Even if such power exists, lower courts have already dismissed the idea that a president can unilaterally overhaul the tariff structure established by Congress. n nThe economists’ submission centers on a third point: whether the conditions for invoking IEEPA are genuinely met. Specifically, they challenge Trump’s framing of the persistent gap between U.S. imports and exports as an emergency. Trade imbalances, they note, have been a consistent feature of the American economy for over half a century, were present throughout much of the 1800s, and are common across most nations in recent decades. As such, they are neither “unusual” nor “extraordinary,” but rather routine. n nThe brief emphasizes that overall or bilateral trade gaps are not inherently harmful and do not pose a threat to national well-being. In fact, the term “deficit” can be misleading, since a higher volume of imports relative to exports corresponds to a surplus in foreign capital inflows. When a nation imports more than it exports, it typically attracts greater investment from abroad than it allocates overseas—indicating financial strength rather than economic vulnerability. n nWhile Trump often praises foreign investment, the brief points out that such inflows naturally contribute to a wider trade imbalance unless offset by other economic adjustments. Additionally, his suspicion of bilateral surpluses with specific countries overlooks basic economic dynamics. Differences in consumer demand, production specialization, and comparative advantage make uneven trade relationships inevitable. n nTo economists, the idea of rebalancing trade on a country-by-country basis appears illogical. Furthermore, there is no positive correlation between foreign tariffs on U.S. goods and the size of the U.S. trade deficit, undermining claims of systemic unfairness. n nThere is also little evidence that these tariffs will reduce the trade imbalance. Although tariffs clearly reduce total trade activity, they tend to suppress both imports and exports. As a result, while overall trade volume declines, the deficit itself may remain stable. Supporting this view, the U.S. goods trade deficit actually increased between January and June, despite a substantial rise in tariff rates. n nEven if the intended economic outcomes are not being achieved, the financial consequences of these policies are profound. The economists project trillions of dollars in economic impact across the United States over the next ten years. This scale reinforces the relevance of the “major questions” doctrine, which demands explicit congressional approval when executive actions carry major economic and political consequences. If such sweeping tariff measures do not qualify under this standard, few policies would. n— news from Reason Magazine
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Trump’s Economic Fallacies Are Legally Relevant in His Tariff Case
In April, President Donald Trump announced stiff tariffs on goods from nearly every country on the planet, saying they were necessary to “deal with” a “national emergency” involving an “unusual and extraordinary threat” to “the national security, foreign policy, or economy of the United States.” According to a Supreme Court brief signed by 45 American economists, Trump ‘s description of that huge, unilateral tax increase was fundamentally mistaken. n nThat assessment, which reflects what a leading textbook on international trade calls a “virtually complete consensus among economists,” should be of more than passing interest to the justices as they weigh the legality of Trump ‘s tariffs. It goes to the heart of the powers Trump is asserting under the International Emergency Economic Powers Act (IEEPA). n nOne question for the Supreme Court is whether IEEPA, a 1977 law that does not mention import taxes and has never before been used to impose them, gives the president any tariff authority at all. Assuming it does, another question is whether the law empowers him to completely rewrite the tariff schedule approved by Congress—a proposition that three lower courts have rejected. n nThe economists ‘ brief focuses on a third issue: Does Trump ‘s use of IEEPA meet the law ‘s criteria for invoking it? That depends on whether he is right to portray the “large and persistent” gap between U.S. exports and imports of goods as a national emergency. n nTrade deficits “have existed consistently over the past fifty years in the United States, for extended periods in the United States in the nineteenth century, and in most countries in most years in recent decades,” the economists note. “They are thus not ‘unusual and extraordinary, ‘ but rather ordinary and commonplace.” n nThe brief adds that there is nothing inherently problematic about aggregate or bilateral trade deficits, such that they would constitute a “threat” to the United States. Even the term deficit is misleading in this context, since the situation that Trump bemoans necessarily corresponds to a “foreign investment surplus.” n nWhen a country “imports more than it exports,” the brief explains, that means it “receives more foreign investment than it invests abroad.” That is why “the leading explanations of the U.S. trade deficit view it as a sign of U.S. strength, not weakness.” n nTrump seems to view foreign investment as a good thing. Yet “absent offsetting adjustments elsewhere,” the brief says, “these investments will increase the U.S. trade deficit.” n nIn addition to worrying about the overall difference between imports and exports, Trump thinks it is inherently suspicious whenever another country runs a trade surplus with the United States. But because of variations in demand, specialization, and comparative advantage, the economists note, “bilateral trade deficits are a virtual logical certainty.” n nIt is therefore “odd to economists, to say the least, for the United States government to attempt to rebalance trade on a country-by-country basis,” the brief says. And contrary to Trump ‘s presumption of unfairness, “foreign tariff rates on US exports do not correlate positively with the size of US trade deficits.” n nNor is it reasonable to expect that Trump ‘s tariffs will “deal with” this supposed national emergency by shrinking U.S. trade deficits. While “tariffs unambiguously reduce total trade flows,” the economists note, “they generally do so in both directions—both in and out.” n nConsequently, “the volume of trade will fall,” but “the level of the trade deficits may remain unchanged.” Consistent with that observation, the U.S. trade deficit in goods rose between January and June, “despite a very large increase in tariffs.” n nAlthough Trump ‘s tariffs are not working as advertised, the economists note, they will have “a massive impact across the United States,” amounting to trillions of dollars during the next decade. That fact is also legally relevant. n nThe “major questions” doctrine requires “clear congressional authorization” when executive agencies “claim the power to make decisions of vast economic and political significance.” If Trump ‘s tariffs do not fall into that category, it is hard to imagine what would.