Trump's Tariff Conundrum: A Threat to the Global Economy

The US President's trade policy has swung wildly in recent times, but recent reactions to his tariffs have been more muted. Economist Justin Wolfers notes that tariffs are now a sideshow to a greater concern for the international community. The Constitution grants tariff powers to Congress, not the White House, and the President's recent actions have raised constitutional questions.

Key Takeaways:

• The Trump administration has filed an appeal with the Court of Appeals, which has agreed to hear the case, potentially reinstating the tariffs.
• If the Court of Appeals finds the tariffs unconstitutional, they will be lifted, and the case will likely go to the Supreme Court.
• The White House has other ways to impose tariffs, as Congress has delegated some powers to the White House, which could be used to impose further tariffs on semiconductors, pharmaceuticals, and other goods.
• The financial markets have reacted modestly to the court's decision, with the S&P 500 rising by 1.5% compared to a 9% increase when the President announced a 90-day pause on tariffs.
• Markets may be betting that the tariffs will be overturned or that the White House will find other ways to impose tariffs despite the constitutional issues.
• The original policy announcement was so incoherent that it signaled an administration out of control, which may have contributed to the muted market reaction.

Statistics:

• 1.5%: The S&P 500's rise in response to the court's decision.
• 9%: The S&P 500's rise when the President announced a 90-day pause on tariffs.
• 3: The number of judges on the three-judge panel that ruled the tariffs unconstitutional.
• 2 weeks: The expedited schedule for the Court of Appeals to deliver its decision.

Sources:

• Samantha Donovan and David Taylor, ABC Radio National.
• Justin Wolfers, Professor of Economics and Public Policy at the University of Michigan.