Trump's new 10% tariffs: legal challenges, economic impact, and global trade concerns

President Donald Trump has long idealized the late 19^th century as a period of high tariffs and low-income taxes. He has often called tariffs "the most beautiful word in the dictionary."  Trump has unsurprisingly linked tariffs to border control, drug smuggling, value-added taxes, and TikTok to promote his territorial ambitions.   

On April 2, President Donald Trump declared the largest break in America's trade policy in more than a century. He announced a universal tariff flat rate of 10%, with higher tariffs on some trading partners as high as 50%, depending on their trading balances with the U.S. The 10% tariffs took effect on April 5, and individualized "bad actor" tariffs take effect today (April 9) unless paused.  

The tariffs on trading partners - including on an island inhabited only by penguins - are set to continue until Trump decides otherwise. The possibility of exemptions from the tariffs has set in motion a stampede to the White House for exemptions. This creates the opportunity for corrupting bilateral backdoor deals on an epic scale.

The Executive Order (EO) implementing this policy is titled: "Regulating Imports with a Reciprocal Tariff to Rectify Trade Practices that Contribute to Large and Persistent Annual United States Goods Trade Deficits." The authority for the action is based on 1) the International Emergency Economic Powers Act (IEEPA) (50 U.S.C. §§ 1701 et seq.); 2) the National Emergencies Act (NEA) (50 U.S.C. §§ 1601 et seq.); the Trade Act (19 U.S.C § 2483); and 3 U.S.C. § 301 (Presidential delegation authority). Trump argues that persistent U.S. trade deficits in goods "have given rise to the national emergency that this order is intended to abate and resolve."   

The identified sources of authority for the EO are legally questionable for several reasons.   

First, the President has the duty to "take care that the laws are faithfully executed (U.S. Const. art. II, § 3). Congress has the power to regulate foreign commerce, impose tariffs, and raise revenue (U.S. Const. art. I, § 8). The lines between these constitutional provisions may occasionally blur. But one thing seems clear. A President can impose tariffs only to the extent that Congress has allowed it. The problem is that the IEEPA (50 U.S.C. §§ 1701-02) is silent on the President having such broad authority. The failure to clearly authorize the President to act may be fatal. Stated somewhat differently, it is not the role of the judiciary to legally backfill statutory omissions left by Congress' silence or inaction.

Second, the "major questions doctrine" (MQD) is a principle of statutory interpretation applied in administrative law cases. Reciprocal tariffs present a question of "vast economic and political" significance. In such cases, the MQD says that Congress must speak clearly when it wishes to assign to an agency such power. Statutes must not be interpreted as delegating power to the Executive to decide major questions unless the text clearly grants that power. The Supreme Court relied on the MQD in Biden v. Nebraska (600 U.S. 477 (2023), which was decided by a 6-3 vote. The Court ruled against the Biden Administration's student loan forgiveness program because the HEROES statute did not authorize the program "at all, much less clearly." 

Third, the universal 10% tariff rate is, simply put, a blunt tax borne by American consumers through increased prices. The flat rate obviously doesn't address specific foreign trade barriers. It's not clear why the tariffs are "necessary" to resolve an "emergency." The argument that America's "large and persistent" trade deficits in goods legitimately threatens the nation's security is not convincing. Until January 2025, when Trump started flooding the country with haphazard EOs linked to tariffs, the American economy was the envy of the world. The American economy had led the G7 for decades. Trump's reciprocal tariff brinkmanship, which clearly is not reciprocal, has roiled the domestic and global financial markets and upended the global trading system. Rather than resolving an emergency, Trump has created one. A court may find it difficult to factually or legally sustain the proposition that the "reciprocal tariffs" are necessary to resolve a trade deficit emergency.

Fourth, to the extent that the IEEPA and NEA survive these legal difficulties, the reciprocal tariffs may be challenged under the nondelegation doctrine. Congress, the argument goes, has delegated too much of its power to the President over tariffs and the regulation of commerce with foreign nations, which is a violation of the nondelegation doctrine.  

The Trade Act of 1974 as amended (19 U.S.C. § 2483) gives the President the broad authority to counteract injurious and unfair trade practices within the limits set by Congress. Section 2483 provides: "The President from time to time, as appropriate, embody in the Harmonized Tariff Schedule ... actions, including removal, modification, continuance, or imposition of any rate of duty or other import restriction." The Harmonized Tariff Schedule (HTS) sets out the tariff rates and statistical categories for all merchandise imported into the U.S. The reciprocal tariffs go far beyond counteracting injurious and unfair trade practices.

Finally, 3 U.S.C. § 301 deals with the Presidential delegation authority to cabinet members. It is not a grant of authority to impose tariffs, reciprocal or otherwise.

Considerable uncertainty exists as to the legality of Trump's reciprocal tariffs on goods. On the one hand, a President needs flexibility to conduct foreign policy effectively. Courts are reluctant to cabin presidential power. On the other hand, there is a worry about Trump's willingness to declare national emergencies under the IEEPA as a workaround on trade-specific laws. If not limited, Trump will continue to arrogate power and sidestep Congress' constitutional authority.

The reciprocal tariffs outlined in the EO will continue to cause economic havoc. It ignores the fact that the U.S. is the world's largest exporter of services, as distinguished from goods. America consistently runs a trade surplus in services, such as intellectual property, cloud computing, financial services, and other business services. Retaliatory foreign tariffs on the export of U.S. services may move the country toward a trade war - "whatever a man soweth, that he shall also reap."