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Tariffs

Prof. Michael McConnell on the Tariff Lawsuits

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Prof. Michael McConnell at the Stanford Law School, a leading constitutional law scholar (and former Tenth Circuit judge), passed this along, and I'm delighted to be able to post it:

As of this writing, seven lawsuits have been filed challenging the legality of President Trump's unilateral imposition of tariffs. The briefing is farthest along in V.O.S. Selections, Inc. v. Trump, pending in the Court of International Trade. That court has scheduled a hearing for May 13 on all pending motions, including a motion for a preliminary injunction. Appeals from the Court of International Trade go to the Federal Circuit. Arguably, of all the cases challenging Trump administration actions, the tariff cases have the greatest consequence for the national economy as well as the division of authority between Congress and the Executive.

Both sides agree that the President has no inherent constitutional authority to set tariffs. President Trump's power, if it exists, must come from statute. The government relies on the International Emergency Economic Powers Act of 1977 (IEEPA). IEEPA gives the President power to take certain actions upon declaration of an emergency. The statute does not contain any reference to a power to impose, raise, withdraw, or alter tariffs or any other taxes. Until President Trump, no President ever asserted a tariff power under IEEPA.  Instead, IEEPA has always been used to impose non-tariff economic sanctions, such as the freezing of assets. The government contends, however, that the statutory phrase to "regulate … imports" is broad enough to include the power to set tariffs.

I thought it would be helpful to quickly summarize the arguments on both sides (note that I am a signatory to an amicus brief supporting the challengers). Boiled down to its essentials, the government's argument on the merits is as follows:

  1. Tariffs are an important instrument for the conduct of foreign affairs, which is squarely in the domain of presidential authority. Delegations of power in this area should therefore be read broadly.
  2. IEEPA is a successor statute to the Trading With The Enemy Act (TWEA), passed during World War I, which gives the President power to "regulate … imports" from certain countries.
  3. In 1971, President Richard Nixon declared a 10% tariff surcharge under the authority of TWEA. The purpose of the surcharge was to reduce the balance of trade deficit. The surcharge was temporary, lasting less than five months.
  4. Although the Customs Court held that Nixon's tariff surcharge was not authorized by TWEA, the Court of Customs and Patent Appeals (the predecessor court to the Federal Circuit) reversed, holding that the power to "regulate … imports" is "broad indeed," and sufficient basis for Nixon's order. United States v. Yoshida International, Inc., 526 F.2d 560 (Cust. Ct. 1975).
  5. Two years later, Congress repealed the TWEA, replacing it with IEEPA. The new statute contains the same language, "regulate … imports," that the Yoshida court held authorized the Nixon tariff surcharges.
  6. Therefore, IEEPA should be interpreted as authorizing the imposition of tariffs by President Trump.

Challengers to the tariff power counter:

  1. Tariffs are taxes, and the taxing power is reserved to the legislative branch. Congress does not delegate discretion over taxation lightly, or by silent implication. As a textual matter, the power to regulate does not subsume the power to tax. Congress may use its plenary taxing power to achieve regulatory ends, but the converse does not follow. IEEPA does not mention tariffs, or any other powers of taxation, and they should not be read into the statute, which is focused on a different set of authorities.
  2. The government's argument based on Richard Nixon's imposition of a 10% tariff surcharge under the TWEA is backwards. No President until Nixon ever interpreted the TWEA as delegating tariff-setting power, and when Nixon did so in 1971 – over 50 years after enactment of the TWEA – this aroused opposition in Congress and the courts. The Customs Court ruled that the tariff surcharges were unlawful. While that decision was on appeal, Congress enacted the Trade Act of 1974, which gave the executive express authority (for the first time) to "proclaim an increase in, or the imposition of, any duty on the imported article" in response to trade imbalances, but subject to tight substantive, procedural, and temporal limits. The Act capped tariff surcharges at 15%, limited them to 150 days in the absence of "affirmative authorization" by Congress, and required specific findings of unfair trade practices by the nations subject to the surcharges. The Trump tariffs do not satisfy those limits, and the government does not claim they do.
  3. Only after the Trade Act was passed did the Court of Customs and Patent Appeals hold that the Nixon tariff surcharge was authorized under the TWEA. Basing its decision on the logic of Justice Jackson's three-part framework for separation of powers analysis in Youngstown, the court concluded that the presidential order was lawful "in the absence of any statute 'providing procedures' for dealing with a national emergency involving a balance of payments problem such as that which existed in 1971." Yoshida Int'l, Inc. v. United States, 526 F.2d 560, 574-75 (C.C.P.A. 1975). Once Congress had enacted a law "providing procedures prescribed by the Congress for the accomplishment of the very purpose sought to be attained by Presidential Proclamation," it would be that law, not the general authority of TWEA, which would govern. Id. The effect was to approve Nixon's order retrospectively, while denying the executive any power to increase tariffs unilaterally in the future without following the procedures of the Trade Act.
  4. Congress then enacted IEEPA, with no mention of tariffs. At that point, the Yoshida court had held that legislation (like the Trade Act) setting "specific procedures" for the imposition of tariffs would displace any more general authority under the TWEA. That would have been Congress's understanding when it enacted IEEPA.
  5. Far from reenacting the relevant authorities from the TWEA as interpreted by President Nixon to allow tariff increases, the House Committee Report explains that IEEPA was designed to provide "a new set of authorities for use in time of national emergency which are both more limited in scope than those of [TWEA] and subject to various procedural limitations." H.R. Rep. No. 95-459, at 2 (1977) (emphasis added). The Report also expressed Congress's view that President Nixon had used the TWEA for purposes "which would not be contemplated in normal times." Id. at 5. The government is thus wrong to claim that IEEPA reaffirms the very power that Congress had criticized and sought to limit.
  6. The government's interpretation of IEEPA violates three important principles of statutory interpretation. First, if the government's interpretation of IEEPA is accepted, it would implicitly repeal the limitations on presidential tariff authority that had just been enacted in the Trade Act of 1974. Repeals by implication are disfavored. Second, in matters of vast political and economic consequence, the Supreme Court insists on clear statements of legislative authority before allowing the Executive Branch to act. IEEPA contains no such clear statement. Third, if interpreted to give the President carte blanche to set tariffs whenever he declares an emergency, the statute would violate the nondelegation doctrine for lack of any "intelligible principle." J.W. Hampton, Jr. & Co. v. United States, 276 U.S. 394 (1928) (upholding an express delegation of tariff-setting authority only because it was governed by an "intelligible principle" and confined to narrow bounds).
  7. President Trump's claim of "emergency" is refuted by his own statements that his tariffs are necessary to remedy long-standing trade imbalance and to raise revenue.

Readers will draw their own conclusions, of course. But I think there is a substantial probability that the Court of International Trade will hold the Trump tariffs unlawful.