In Tariff Case, Trump's Attorneys Can't Decide if Foreign Investment Is Good or Bad for America
The administration's legal brief reveals a critical contradiction in Trump's trade policies.
When the Trump administration's lawyers go before the U.S. Supreme Court on Wednesday to argue a crucial case that will determine the limits of presidential tariff authority, they will be asking the justices to accept contradictory claims about the value of foreign investment in the United States.
In a brief filed with the court ahead of this week's oral argument, the government's attorneys argue that foreigners buying up American "assets" is a serious enough threat to require emergency executive powers over trade.
"By the end of 2024, foreigners owned approximately $24 trillion more of U.S. assets than Americans owned of foreign assets," the administration argues. That imbalance has "weakened" the United States and "created an ongoing economic emergency of historic proportions."
In the same brief—indeed, just four pages later—those same attorneys warn that undoing Trump's tariffs would jeopardize "trillions of dollars" in foreign investment that the president has successfully negotiated. They point to $600 billion in investments pledged by the European Union and another $1 trillion promised by the governments of Japan and South Korea. Those investments, the administration argues, will "rectify past imbalances."
How can it be that previous foreign investments are a threat to the United States—one so severe as to require an unprecedented expansion of executive power—while investments secured by the administration are the exact opposite?
"In short, their argument is that the tariffs are necessary to reduce foreign ownership of American assets, but the Supreme Court must keep the tariffs in place to allow more foreign investment," points out an amicus brief filed by the National Taxpayers Union Foundation in support of the small businesses challenging the legality of President Donald Trump's tariffs.
This is probably not the most critical legal issue upon which the tariff case will be resolved. But the glaring contradiction reveals a few important things.
First, it once again demonstrates the incoherence of Trump's tariff strategy. Does the administration want more foreign investment or less? It's not sure! You can add that to the list alongside such questions as "Are the tariffs meant to generate revenue for the government or serve as negotiating tools for better trade deals?" It can't be both, since tariffs meant as negotiating tools would have to be lowered or eliminated eventually, thus rendering them useless for producing revenue.
In a similar vein, Trump has argued that higher tariffs on legal imports from Canada, Mexico, and China will be a useful tool for combating the flow of illegal drugs. This makes little sense. Taxing maple syrup and avocados seems about as likely to stop the flow of fentanyl as taxing beer would be effective at reducing the use of cocaine.
Second, the confusion about foreign investments in the U.S. points to Trump's ongoing misunderstanding of the trade deficit. A trade deficit is the difference between the total value of all imports and all exports, and America indeed runs a sizable trade deficit—in other words, we import more than we export.
As economists who understand global trade would tell you, America's trade deficit is offset by an investment surplus. In other words, "the US is able to sustain a large trade deficit because so many foreigners are eager to invest here," as the Boston University economist Tarek Alexander Hassan wrote in April. The Trump administration sees that routine, trade-balancing foreign investment as a problem that demands a muscular executive response. It's not.
Finally, the fact that the administration's attorneys take a very different view of foreign investments secured by the president's negotiations ought to tell us something, too. The administration is not really making an argument against foreign investment here; it is making an argument for top-down, centrally planned foreign investment that meets the chief executive's political needs.
When the administration says that striking down these tariffs would jeopardize "trillions of dollars" in foreign deals, what it means is that America's investment surplus would be determined by market forces rather than the whims of the president. But as the Supreme Court will hopefully soon remind it, the Constitution plainly does not give the president unilateral power to control foreign trade or to decide which foreign investments are good for America.
