Mar 13, 2026
On February 27, The Capitol Forum held a conference call with Todd N. Tucker, Director of Industrial Policy and Trade at the Roosevelt Institute, to discuss the Supreme Court’s recent decision striking down the use of the International Emergency Economic Powers Act (IEEPA) to impose tariffs and the broader implications for U.S. trade authority, industrial policy, and global economic strategy. The full transcript, which has been modified slightly for accuracy, can be found below.
TEDDY DOWNEY: Hello everyone and welcome. I’m Teddy Downey, Executive Editor here at The Capitol Forum. And today, I am very pleased to be joined by Todd Tucker, Director of Industrial Policy and Trade at the Roosevelt Institute. Todd is a leading expert on trade law, industrial policy and the intersection of economic governance and competition policy. Todd, thanks so much for doing this today.
TODD TUCKER: So, glad to be with you. Thanks for the invite.
TEDDY DOWNEY: And obviously, the topic on everyone’s mind is the recent Supreme Court decision striking down the use of IEEPA to impose tariffs by the President. Maybe we could just start off, you could walk us through that decision and at a high level what that means for trade policy going forward.
TODD TUCKER: Yeah, I mean, so the top line thing here is that the Supreme Court last Friday ruled by majority that the International Emergencies Economic Powers Act or IEEPA does not allow for the imposition of tariffs. The IEEPA has been the source of a lot of Trump’s tariffs, especially going back to Liberation Day where he was saying we have sort of these global emergencies that we need to deal with them and instituting tariffs of anywhere from 10 to 50 percent on different trading partners. A lot of businesses have been paying those tariffs over the course of the last year. The court now sort of says those were illegally collected because IEEPA does not allow tariffs to be collected. It doesn’t allow for a basis to impose tariffs.
So, in a sense, that’s a very clear ruling. There was some messier rulings that were made at the lower courts that we can get into if you’re interested. But it actually still leaves a lot open, which is that there’s not a lot of clarity on how the refund process is going to work, what kind of roadblocks the administration might still be able to throw in the way of getting those refunds. It still allows IEEPA to be used for diplomatic bullying or sort of other diplomatic purposes just not using tariffs. So, they now have to use nine other tools they have under IEEPA, including things like sanctions.
And then it also doesn’t really shut down the many other ways that Trump can essentially reconstruct identical tariffs from a kind of economic perspective using other authorities that Congress has already delegated. And we’re already starting to hear, learn the names of these. I mean, some of these have never been tested or never been used in court before. So, we have 122, 338, 301, 232. I mean, there’s all these things that I think a lot of us are going to be getting more familiar with, even if you’re not a trade expert, over the next few months. And I think Trump is going to be showing that he has the motivation and willingness to use those authorities to the fullest just as he did with the IEEPA tariff. So, the end result from kind of an economic perspective may not be all that much different than what we had before last Friday.
TEDDY DOWNEY: Let’s talk about the refunds. Because obviously, that is a big deal that all that money is in play. Obviously, we’ve got the tariffs going forward they can reconstruct. But if we can focus on the refunds for a second. It’s up in the air, as you point out. How should we think about that? We’ve got a listener question that specifically asks whether parties should file suit in the CIT. What do you expect companies to do? How can we follow this going forward to see how these refunds play out?
TODD TUCKER: So, the short answer to your listener question is yes. Go ahead and file suit in the Court of International Trade. And in fact, I mean, one of the sort of housekeeping type results of this year of litigation is that it has clarified and reaffirmed sort of the primary role of the Court of International Trade as the trade court. I mean, that’s in the name. But I think over the course of the last year, you saw some confusion there where you had parties filing suit outside of that court including the D.C. Circuit and the Ninth Circuit and others. So, I think now going forward, there will just be more clarity that companies that have trade exposure do need to get really familiar with the Court of International Trade, and that’s where you’re going to be able to get your refund.
So, I mean, that’s one thing that the company should do. I think the other thing is that it still is worth lobbying Congress and making clear what your views are there. I mean, Congress could, with a stroke of a pen, make this a lot easier as well. I mean, they could set up something like they have done for mass claims commissions in the past, after 9-11 or sort of like other past cases where you just kind of streamline and create like a one-stop shop for getting a refund.
So, Congress could do that. By that matter, the executive branch could do that. So, I mean, if Trump decided to, and the DOJ instructed them to, they can set up a pretty straightforward process for getting refunds as well. So, it’s worth, I would say, sort of having an all-three-branches-of-government strategy as you’re thinking about how to make the refund process clearer. And I’ll just kind of say that may resolve one of those avenues. The judicial, congressional, or executive may resolve the refunds for duties that were incorrectly or illegally collected over the last year.
That doesn’t resolve the problem of the ultimate consumer, right? And I think that’s a key point here. Which is that you had studies from the Federal Reserve and from the Congressional Budget Office over the last few weeks that have been controversial because the administration went after their authors. But it basically said that the vast majority, 90 percent, of the cost of the tariffs was passed through to U.S. consumers and businesses, the vast majority of that to consumers rather than the businesses. And this increased inflation by about 0.7 percent is the estimate.
So, for those folks, the end result of this could be an upward distribution of income from consumers to importers, right? Just as sort of the original tariff was an upward redistribution or a different distribution from consumers to the government. So, I think that from a kind of political perspective or sort of a bigger public policy perspective, the refunds aren’t resolving that much.
Unless companies kind of go the extra mile and say we’re going to find some kind of way in our sort of private system to pass on the benefits of those refunds to consumers. And I think you’ve seen a few companies suggest they would do that. But there’s certainly nothing legally requiring them to do that.
TEDDY DOWNEY: Wouldn’t involving Congress create a bit of a tension on that point? That they would be more interested in figuring out how to get the refund to the consumer rather than the customer, the business, which has probably already passed on the increased costs to the consumer?
TODD TUCKER: Yeah, I mean, all of these options are messy. So, I mean, yeah, involving Congress would be messy too. But I think that ultimately if companies are concerned about the impact of the various trade wars that Trump’s launched, there’s no shortcut to involving Congress. Because it’s ultimately Congress that has to use sort of all the levers in its toolbox to be able to exert pressure on the administration. I mean, we were actually starting to see some waking up in Congress where they were doing what they were allowed to do under IEEPA, which was actually pretty straightforward, which is by a majority vote say they disagree with him, disagree with Trump, on the existence of an emergency.
So, they the House had just voted to suspend the emergency with Canada. You’re going to need to see more kind of congressional action like that if you want to foreclose the very many avenues that Trump has at his disposal to impose tariffs going forward.
TEDDY DOWNEY: And your title, you have industrial policy. You work at the intersection of economic governance and competition policy. I would love to get your thoughts on why the tariffs have not resulted in more manufacturing domestically, higher wages, all the things that I think if you’re looking at Trump with a good fake lens and you’re saying, hey, this person actually wants to do trade, wants to reverse 45 years of neoliberal trade and actually incentivize making things here again, why has that not happened? Why are tariffs, the ones that he did, not worked in that way? To your mind, what has been the result? And is there any recognition by anyone that maybe we should try a different approach if we actually want to do those goals rather than just recreating the exact same thing with other authorities?
TODD TUCKER: Yeah, I mean, the short answer is that trade alone is not a very good industrial policy, trade tools alone. I think you saw with the Biden administration, there was a combination of using tariffs, including some that have been imposed by the Trump administration, and pairing that with industrial policy, industrial subsidies, support for research and development, support for communities that are trying to attract manufacturing investments. I mean, it was kind of a full spectrum, like using a dozen tools of industrial policy at once. And that was starting to bear fruit.
So, we saw the highest rate increase of manufacturing construction in U.S. history. You were seeing factories being built across the country. A lot of those were five-year projects. So, you were seeing the construction of the factory, not necessarily the making of the product yet. That takes a while.
And unfortunately, a lot of that progress has been stalled because Trump, through the one big beautiful bill and also through some of the Doge era shenanigans, was taking sort of an ax to all of the more sort of carrots part of the industrial policy, including things like through the Greenhouse Gas Reduction Fund stopping the correspondent bank from dispersing already agreed funds, for instance.
That’s the kind of thing that just casts a real chill on business. It’s creating such a level of uncertainty on the subsidy side that a lot of projects have been stalled. And then you add to that the uncertainty on the tariff side, it makes it very hard to plan.
I mean, we have seen—I will say sort of to the Trump administration’s credit, there has been a few announcements of things that I think you could plausibly say are connected to the tariffs. I mean, one is that you’ve had about a trillion dollars of investment commitments from South Korea and Japan as part of these—basically as a way to get out from under some of the tariffs that Trump had imposed. They’d agreed to these agreements on reciprocal trade. I think some of these agreements on reciprocal trade, like for instance, with Europe, a lot of people have pointed out the European Union doesn’t have some sort of centralized mechanism to make investments in the United States. So, it’s wishful thinking. It’s hoping that some of the companies in the EU will make investments in the U.S. But I think Japan and Korea actually do have the policy instruments where they could greenlight a significant amount of investment into the U.S.
So, that’s possible. I mean, I think we can get to a little bit later, like what the state of some of those trade agreements are. But that was something that was, you can kind of draw a direct line from Trump’s tariff threats to those investments.
And then the other point in Trump’s favor, I would say, is that there has been some big expansions in the U.S. auto sector, some reopening of factories, that I think probably—from what I hear from insiders in the industry—those investments, billions of dollars of investments, would not have taken place were it not for the tariffs. And I should point out, those are tariffs that were not affected by last Friday’s decision. These are Section 232 tariffs on the auto industry, which I think most legal observers think are going to be really hard to overturn in the courts.
TEDDY DOWNEY: And maybe we could stay on those kind of international agreements because you’ve seen EU already back off. You’ve had the whole Greenland backlash. EU is now saying, hey well, since your tariffs were illegal, maybe we’ll rethink this agreement. What’s to stop all countries from doing something similar?
TODD TUCKER: Yeah, I mean, I think that in some ways that the EU was not unexpected. I mean, they tend to be kind of the world’s sticklers for following international trade rules. And so, the whole existence of the Trump administration has kind of been an affront to their like founding ethic. So, I think that it was not surprising they would try to revisit some of the deals there.
I think that for a lot of other countries, especially Asian economies that are very export dependent, export dependent in general, but export dependent specifically on the U.S., I think they know that there’s a lot of other ways that Trump can reconstruct his tariffs in a more legal and more sustainable footing. And so, they want to lock in that benefit of being in some cases only a few percentage points better than their nearest competitors. But the countries that can get say a 10 percent rate instead of a 15 percent rate or a 15 instead of a 25. I mean, that’s real money and that’s a real competitive advantage for their countries. So, I think that you’ll see probably the majority of these agreements still kind of go forward in some fashion.
TEDDY DOWNEY: You’ve heard from Jameson Greer recently that he is adamant that trade policy tariffs and antitrust go hand-in-hand. This administration has been just pretty widely recognized as laissez-faire when it comes to mergers and has launched no new conduct investigations to anyone’s real knowledge—that’s not true. They have not brought any new monopolization cases since the second Trump administration started. There’s no real aggressive antitrust enforcement going on to sort of pair with trade. How necessary is that?
I mentioned auto and steel because the New York Times, surprisingly I thought, did an interesting article on how tariffs in steel and aluminum, maybe on the margins, have created a few more jobs in those sectors, but they really haven’t been producing anymore. We had Chuck Benoit on here saying, hey. They can’t get any more smelters to be made to make more aluminum because it’s a duopoly industry. You sort of hear something along those lines in all these big important markets, the ag markets. You hear that from farmers who were sort of happy about tariffs, but it didn’t really amount to much. Subsidies also haven’t amounted to much. How can you do industrial policy with tariffs without having a competitive domestic industry?
TODD TUCKER: Yeah, I mean, this was one thing when one of the first actions that Biden took in 2021 was to commission all of the federal agencies to do a big supply chain report. And so, DOD, for instance, that has a lot of experience, both encouraging and in some cases discouraging competition, had flagged that, if you’re going to try to build like a national industry in batteries or in chips or in some of these other sectors that were important to the Biden administration, pay attention to like there being more than a single source domestically for these products. And that was kind of the warning they made.
I wouldn’t give the administration super high marks for fully integrating kind of that antitrust, anti-monopoly, into its clean energy thinking and in some of its industrial policy thinking. But I think that you’re absolutely right that some of these key sectors that are benefiting from Trump’s tariffs are highly concentrated and the administration has shown no desire to use its leverage to break them up.
I mean, steel, as an example, as you pointed out, is a duopoly. The administration, I guess you could argue, made a little bit of expansion and competition to the extent that it—well, I should say, the fact that it greenlit some of the Nippon investment in U.S. Steel allowed those factories to be kept open and sort of avoided the scenario that I think would have been the most likely backup plan, which is that Cleveland Cliffs would have bought those facilities. And then you would have had Cleveland Cliffs as the all sole producer of primary steel domestically in the U.S. In that sense, they kind of maybe avoided some of the worst impacts that could have happened from a concentration perspective.
But that was sort of a one-off. So, now the Trump administration has, for instance, a golden share in U.S. Steel. In theory, it has sort of representation on the board as well. Are they using that golden share as a tool to encourage U.S. Steel to be more competitive and less anti-competitive? I have seen no indication whatsoever they’re using that or the equity stakes they’re taking in other companies to promote more competition.
So, yeah, I think we could see the net result of some of these tariffs as more concentration. Like the companies that have the capacity to take the hit from the tariffs will do fine. Whereas, those that operate on thinner margins are going to suffer.
TEDDY DOWNEY: If you haven’t addressed competition in a lot of these markets, isn’t that where that inflation number comes from, that one percent? I mean, if you were putting a tariff on a market that was competitive domestically, you would just make more of that stuff here. Or if you had some kind of coherent industrial policy, maybe with quotas or something like that, you would be able to more clearly support a domestic market. But if you don’t have a coherent policy, aren’t you just going to end up with inflation? Let me ask that and I have a follow-up there as well.
TODD TUCKER: Yeah, I mean, if you’re doing tariffs to increase prices without sort of expanding the productive capacity of the industries that you’re trying to promote, then you’re just going to see inflation. And so, they don’t have any real policies outside of, say, the critical mineral sector or a few others to really expand capacity.
So, that’s important. I mean, the critical investing in capacity in the critical mineral space is super important for the long-term health of the U.S. But, I mean, that’s not going to do anything to bring down inflation in the near term. That’s kind of more of a bet that if you have more energy security over the next 50 years, then energy prices will be less volatile. And so, that’s a good goal. And that was the goal of the Inflation Reduction Act as well under Biden.
But yeah, as a short-term matter, there’s just a lot of risk on increasing prices. Which is, I think, part of the reason that you’ve been seeing some renewed interest in democratic policy circles around things like price controls as kind of a short-term palliative to some of the price increases. So, yeah, absent a robust all-of-the-above industrial policy, all of this is just going to be inflationary.
Now, I will say that part of the objective—and I actually think it would behoove the administration to just be a little bit more transparent about this—the goal of a tariff is, in fact, to raise the price of the product sold domestically. And the idea being that’s a good thing because that especially unfair competition is what’s causing the low price, then restoring a tariff can help return domestic industry to profitability and to capacity.
Basically, they should just be making the argument that the price increase is worth it from a domestic resilience perspective. But that’s not the argument they’re making. Obviously, affordability is the number one political concern right now. And so, it’s not a great time to be making an argument for sacrificing some for the “greater good.”
TEDDY DOWNEY: But you can’t even, yeah, it’s just hard because there’s a huge lag between when you’re going to come up with a more equitable price for the thing, and then you don’t really know what the price is going to be until you have a functioning domestic market, right? You actually don’t know what kind of ingenuity and creativity the U.S. domestic manufacturing base is going to have because it doesn’t exist, right? We’re talking about markets where there’s zero percent, or it just doesn’t exist.
You mentioned critical minerals. Do you see that as really the template? And what are the tools they’re using to create and protect a domestic market there? And is that how we should look at industrial policy going forward? Hey, China has a choke point. There’s going to be an interest domestically to create and protect a market and kind of think about things in a one-off, sort of market-by-market in that respect. And this is a bit of a test case for not doing neoliberal sort of global trade. Or how do you think about those test cases, critical minerals, gallium? forget the other ones.
TODD TUCKER: Yeah, well, I mean, one thing, and then I’ll speak to the critical minerals question. But one thing on your earlier point about, we don’t know what type of ingenuity the American people could have if you actually pursued and dedicated and committed in long-term industrial policy. I want to totally co-sign that statement. I mean, I think that even tariffs alone, if there were some clarity they would be long-term and predictable over time that would unlock American ingenuity and allow sort of smart people with smart ideas that currently can’t compete against China to figure out how to have a leg up in the U.S. market.
So, I think that’s totally true. I think part of the reason that Trump’s tariffs to date haven’t yielded that result has been because of their unpredictability and often their complete disconnection from any type of economic rationale. It’s more like did the president of a given country speak in a not nice way to me? Then I’m going to raise tariffs, right? So, I think that is the opposite of sort of a rational use of tariffs. But tariffs used correctly can absolutely unlock that type of ingenuity that you’re talking about.
TEDDY DOWNEY: Is it just hard to say what the cost structure would be for an industry? Like the startup, the initial costs are higher because you need to create that expertise. That’s why subsidies and supporting the market is important. It’s equally as important. You need the labor. You need the expertise. You need the, like you said, some of the confidence and that cost structure, right? That if you’re relying just on tariffs for that, the price is going to have to be really high because you need a lot of startup investment at the outset to really find what is that equilibrium cost structure going to look like later on once you do have a domestic industry? So, you’re relying on the tariffs to do so much in that respect. It’s not really the price point that it would be if you already had a functioning robust, competitive domestic market.
TODD TUCKER: Yeah, that’s right. And I think that this is where there actually have been I think some positive points in the Trump administration’s approach. The MP Materials investment I mentioned earlier and critical minerals. I feel like to me that is in some ways kind of a gold standard, at least on paper, of how you can support and develop a domestic market.
So, you have an equity stake in the company, a board seat that enables you to sort of be overseeing and influencing operations on a long-term basis. You have a price floor that you’re guaranteeing that the company will be able to break even and make a profit on. You have procurement commitments. You have you have this incentive to be able to sort of break some of the contracts they have with major Chinese processors. You have, as a condition of the equity stake, a ban on the company engaging in stock buybacks, which is a great way to ensure that there’s more money going back into productive capacity and not just to extraction.
So, I mean, I think all of those tools operating together with sort of like some of the tariffs on critical minerals, that’s kind of an all of the above strategy that I think is maybe sort of one of the better examples from the Trump years of them trying to sort of do market structuring at home.
And then I would also say that—I mentioned sort of the Nippon Golden Steel and U.S. Steel. I think that’s another example of how to do industrial policy in a tight fiscal environment, for instance, which I think is going to be very important going forward. The IRA was a system of uncapped tax credits that went to any company that could qualify for them. I think that was possible in the world of sort of the COVID economic shutdown, where there was room in the economy to sort of promote stimulus. I think going forward in 2029, it’s going to be a different fiscal environment, interest rate environment, altogether.
So, I think policymakers need to be thinking about tools like that, that are not costly at all. I mean, the golden share literally cost the U.S. government nothing. But allow it to have a bit of leverage in the operations of sort of a major industrial company.
TEDDY DOWNEY: Well, it did cost allowing a foreign company to own critical infrastructure in the U.S.
TODD TUCKER: That’s true.
TEDDY DOWNEY: So, there was a cost, I think, at some level. But are there any industries where we do have—besides autos, you mentioned autos—where we do have a competitive manufacturing base that can absorb. So, it can sort of, not necessarily quickly, but can create more capacity, has capacity to create more cars. Now, obviously, some of that is intertwined with Mexico and Canada. But are there other industries where we, maybe U.S. or North America does have a competitive ecosystem where the tariffs have led to more successes, more manufacturing? Or are we really stuck with just autos here?
TODD TUCKER: I mean, autos is the best example, and maybe steel. Although, we haven’t seen sort of the same investment in new factories there. I mean, I think that any industry where you have a lot of recently shuttered capacity, where if the price point is just slightly more favorable, it makes economic sense to bring that factory back online.
I mean, that’s exactly what happened with Stellantis and with GM. I mean, they had factories they had recently shuttered. They could bring them back online relatively quickly. And now, with sort of all the other favorable regulatory treatment that the administration has been handing down in terms of relaxing some of the pollution controls and things like that, the price point makes sense for them to reopen. Unfortunately, there’s not a whole lot of industries in that camp. I think that in a lot of these cases, some of the industry has offshored long ago.
So, you’re kind of almost talking about restarting from scratch. And that gets to sort of sectors like the semiconductor firms, where I think that (1) again, sort of success point that sort of both somewhat both a Biden and a Trump story at this point is the CHIPS Act, which was bipartisan. And we now have the leading five companies either producing domestically or on the course to be producing domestically.
But again, that’s kind of not just a tariff only approach. That’s a full sort of spectrum everything ranging from grants to tax credits to under Trump equity investments as well. And that’s something that has bipartisan support in the U.S. Senate.
So, that’s on a fairly stable footing. And I think that’s why you still see some of those investments going forward in a way that maybe is not true for some of the, say, solar or wind investments, that got sort of caught up in the One Big Beautiful Bill Act problem.
TEDDY DOWNEY: One thing that’s come up pretty frequently when we’re talking about trade is people hoping that Congress will get more involved. Obviously, the Supreme Court keeps saying, not as much to Trump, but that certainly during the Biden administration, hey, this is a congressional authority. They weren’t clear about handing this over to the executive branch. I mean, obviously, trade is supposed to be a congressional power.
And this is complex stuff. You mentioned all these different tools that are required. And you mentioned semiconductors, critical minerals. A lot of this was done with congressional support or congressional investigation at a minimum, congressional sort of consensus on, hey, this is important. What is the role of Congress? And if we have had this Greenland moment where we’re not going back to globalization, what are the Democrats talking about in terms of what—assuming they win at least one chamber of Congress in November – what does that trade conversation look like?
Because I can imagine there are things—obviously, there’s going to be a disagreement on what kinds of autos to make, right? Like the Democrats want EVs. Republicans want fossil fuel. Republicans don’t want batteries. They want gas and drilling. So, there’s going to be some disagreement, but maybe there is room for more agreement on semiconductors. We’ve done some reporting on a memory chip oligopoly that is supply constrained and the companies are not rushing to make more of it. What about markets like that where there isn’t as much political polarization? How might Democrats be thinking about getting involved in Congress on the trade front going forward?
TODD TUCKER: Yeah, well, I mean, to dwell on kind of the first part of your point for a bit, I mean, I think that one of the reasons that I’ve been critical of the Supreme Court decision is precisely because you had the majority effectively, either explicitly or implicitly, endorsing the so-called major questions doctrine. Which is this sort of Gorsuch libertarian fantasy that not only can Congress not delegate certain things to the executive, but even when it does, and even when it does pretty explicitly, it has to be exhaustive in sort of micromanaging the executive branch. And I think that is just not playing to Congress’ strengths at all.
I mean, even under sort of the most activist, good capacity, Congress, it’s going to be hard to ever meet sort of the Gorsuch standard of the level of specificity that you would need to have for independent regulatory agencies, for the EPA, for others to be executing on their missions in a nimble way.
And then the liberals did not endorse that. That was sort of like what Gorsuch, Roberts and Barrett endorsed. The liberals very much protested that they were not agreeing with the major questions doctrine. But effectively, they disregarded a lot of the legislative history. They interpreted the concept of regulated importation very narrowly. When I think that the history of like, say, going back to President Nixon, who imposed a ten percent tariff under IEEPA’s predecessor authority, I think there was a lot of argument there for them, for the liberals, being more consistent with their past, skepticism of the major questions doctrine, and basically allowing Trump to continue to impose these tariffs. Now, I mean, whether or not you agree with that from a policy perspective, I think that that would have been the one that was more historical.
So, we’re kind of in this jam now where, for sort of three different reasons, including in the dissent in the court, they want Congress to sort of speak more authoritatively and be more sort of micromanaging of the executive. And I think that I’m worried that Congress really will ever at any time soon have the capacity to be able to do that.
So, that’s sort of the first part of your point. But I think, as to what is in the works going forward on Capitol Hill, I think that there is a lot of appetite for ideas like what Senator Coons from Delaware has introduced in the past for an industrial finance corporation. This was something that actually had some bipartisan support, including at one point the Vice President, J.D. Vance, when he was a Senator. And the idea here is that you would basically create a federal reserve, but for industry, that would sort of go around and identify places where there are supply chain choke points, industries where we have declining capacity but that are important to national security or economic security, and that have a hard time getting financing from Wall Street. Make it available on a very generous basis to rebuild American manufacturing.
So, I think that that kind of idea has a lot of support. I think for better or for worse, some of the reaction to Trump’s tariffs has been for the Democrats to kind of seesaw back—like there was sort of a period in U.S. history where sort of Democrats, from the South especially, were sort of the “free trade party.” Over the course of the New Deal era and into the 60s, you sort of had more support for fair trade and that’s kind of waffled. Obviously, Clinton sort of took the party in a different direction. But I would say certainly under Biden, you had kind of a different consensus that was less scared of tariffs, more in favor of having tariffs be one of the tools in the toolbox, alongside other industrial policies.
And I think that you will see, and you are seeing, Democrats in Congress now attempt to sort of really radically restrain the ability of the executive to use tariffs under different contexts. And I think that you’ll probably see something like that, some attempts to have significantly more guardrails, if not eliminating, some of the ability to use tariffs in future administrations. Coupled with a problem that I think is actually—and this maybe is another part of the conversation. But I think that now that Trump is going—now that the IEEPA tool has been taken away from him, I think he’s going to sort of make use of all these other trade statutes, like the three number statutes that I’ve mentioned, like 301 and 232, which previously courts have been pretty willing to go along with. I think he’s going to wreck a lot of those other statutes as well by sort of using them in such a shambolic fashion that it really is going to tempt the courts to rule against those authorities as well.
In which case, at some point, you’re going to get to a place where you kind of need to almost reconstruct the entirety of the U.S. tariff statutes. And so, how that’s going to balance against the desire to sort of restrain arbitrary executive power, while also creating some type of alternative set of say market shaping or anti-dumping tools that are kind of appropriate for the 21st century environment we find ourselves in. I don’t know how that’s going to all square. But I think it does create at least the possibility of some type of grand bargain where you put a little bit more guardrail on executive authority in exchange for updating some of the anti-dumping and other tools for addressing China, addressing climate, et cetera.
TEDDY DOWNEY: I just want to solicit questions. If you have questions, please put them in the questions pane. Or you can email editorial@thecapitolforum.com. Would you mind sharing a little bit why you think the other authorities—because here we’ve written stories that say, yes, Trump can recreate these tariffs. But really, there’s more process. There’s less flexibility. There’s more research that is required, more evidence. It takes longer to implement them. Is that not right? I mean, certainly there are some broader authorities that, like you said, could try, and those might get shot down as well. Which are the ones that you think are money good that they can use? And which are the ones that you think they’re going to get—if they use them—in trouble with the courts? Or are there any that we should look to, to sort of back up what you just said in terms of they’re going to use it in a shambolic way and end up back in court?
TODD TUCKER: Yeah. So, I guess I’ll run through the four main ones in order. Like they’re currently using the Section 122, which is from the Trade Act of 1974. It is a tool that Congress designed to try to address one of the problems—and this was a big issue in the IEEPA cases as well. Like, basically, Nixon had this balance of payments problem in 1971. How can Congress give a tool that’s specifically designed to address those kinds of problems? And it’s very quick. I mean, the President can and did impose it overnight basically. But it has a limit, which is that you can’t go over 15 percent. And it can only go for 150 days.
So, I think that what most observers think is that this is going to be sort of a bridge authority to develop some investigations under other statutes to be able to impose after the 150-day mark. And so, those other tools are Section 338, which is also something that’s never been used. And that allows tariffs of up to 50 percent for any countries that are discriminating against the U.S. in various factors. And that’s also never been tested in court. That will definitely attract some litigation if he uses it. But notably, with the exception of China, I think most of the tariffs that he was imposing capped out at 50 percent anyway under his Liberation Day tariffs. So, he could reconstruct those pretty quickly. No requirement for significant reporting or justification.
Although, I think that, for what it’s worth, they do have this annual report that the U.S. Trade Representative does, going back decades, where they sort of catalog in detail all the ways that specific countries are affecting negatively U.S. companies. And so, you could just literally cut and paste that into any of those countries’ specific tariffs that you want to do. But like I said, that could attract litigation. So, I think both of them will attract litigation.
So, then that gets us to 301, which is country-specific tariffs that both Trump and Biden have used, or 232, which is product-specific tariffs. And I think you’re right that there is at least, you know, Congress did envision a bit more process with each of those. And in the past, the administrations have done quite a bit of homework to kind of show why they were imposing them.
But it’s important to note that those largely procedural requirements that are there are maximum requirements, not minimum requirements. So, in some cases, USTR could take up to say 90 days to complete a report. But that doesn’t mean it has—it could take a lot less than 90 days as well. And so, that’s why I think you’re going to see a little bit of a degradation in the Section 232 and 301 process relative to past practice, which means they’ll also be litigated over. Which just kind of means that there’s a lot of unexploded ordinance laying around. And if you want to sort of put some rationality onto it, it’s ultimately going to be up to Congress to fix some of those authorities by conditioning appropriations on a better process than what the administration is likely to follow.
TEDDY DOWNEY: There is at least enough legal support here that industry should expect that the tariffs will go back on. Or could they start operating? Well, Trump lost in court once. He could lose again. He’s about to get walloped in the midterms. Maybe he’s a lame duck president. I’m just going to ignore this stuff. It’s going to go away.
TODD TUCKER: I mean, it would be a gamble, you know? I mean, it would be a gamble for a company to sort of say with any confidence they believe that the tariffs are gone, you know? I think that’ gone or likely to come off anytime soon.
I think so long as Trump is not like extremely callous and ridiculous in the way that he unrolls new 232 or 301 tariffs, I think they are likely to survive court review. I think that if you’re looking specifically for would there be five votes in the Supreme Court for overturning tariffs under these other statutes, I would have to advise on the basis of my reading of this 170 page decision that there would not be five votes in the court against tariffs under these other statutes. And that’s because you basically have this weird kind of overlap between sort of a right-wing faction that wanted to make the major questions doctrine apply not only to Biden, but also to Trump. It’s not only the liberal priorities, but also MAGA priorities. That was three votes. And then you had three votes with the liberals where I think they could have easily gone the other way. I think they could have easily sided with Trump on these. And it was a set of various facts, specific reasons, they didn’t. Which basically all had to do with that IEEPA was not these other tariff statutes, that have tariff in the name, that have traditionally been used for trade purposes. So, I don’t think you can guarantee that the liberals would vote against Trump’s use of Section 301 or 232, because there the statute is just pretty clear that it is a trade statute.
So, I think that those are on firmer footing. And I think that’s why it’s no coincidence that the industries that have been subject to section 232 tariffs are already on more legal solid footing. And that’s why you’ve seen sort of the auto companies, I think, be willing to rely on them a little bit more.
So, I think that those are, again, sort of—it already seems like Trump’s lawyering on the Section 122 is a lot better than it was on IEEPA. And so, if they continue to do that, which is just like literally checks the right boxes in their executive orders, I think they’re going to be in a strong position to be able to hold onto some of these sectoral and country specific tariffs.
TEDDY DOWNEY: And then I guess my last question—we don’t have any additional questions here that I see. What do you think of how to think about free trade agreements? I’m sort of ignoring them, to be honest, with our coverage for the foreseeable future. Just after the whole Greenland thing and just how willy nilly everything seems to be with Trump and tariffs and the Carney speech where he said, look, we’re going to cut deals, strategic deals, with other countries, create different kinds of alliances on specific issues.
It just seems like it really is over, this idea that you sort of have this international policing system of free trade. It just seems dead as a doornail. But I want to get your thoughts on what is the right way to think about how countries are going to do trade? What kind of agreements really matter? How is this going to play out from, not just a foreign policy, but how countries work together? Historically, they promoted democracies, have supported democracies. Obviously, there’s a bit of a question about what we have here currently.
TODD TUCKER: Yeah.
TEDDY DOWNEY: So, you have these shared goals. And then you have wanting to protect yourselves from your enemies and not be subject to their choke points and what have you. We’ve identified China. Obviously, Russia might be another. But other countries might be—are now saying we’re one of those types of countries. They want to create some independence from us on a number of things, not just weapons, but tech. And now you might see more of that.
How does that play out strategically from an agreement standpoint in the wake of these sort of big free trade agreements, super complex things? Are we going to look for simpler bilateral or smaller groups? How does this all play out?
TODD TUCKER: Yeah. So, I think that you’re exactly right. Like the area of the global world trade organization is effectively over. I mean, the foundational idea in the World Trade Organization is that every country has to be treated equally to every other country under Most Favored Nation rules or MFN. That’s kind of the core, almost like religion, of the WTO. And that’s out the door. I mean, I think that in a world that has China kind of flagrantly flouting market norms, that’s just not viable anymore.
And in fact, I mean, as an example of how dead the WTO is, there was a ruling a couple of weeks ago against Biden’s Inflation Reduction Act. And as far as I can tell, almost no one covered it. It was like in the 90s or something, this would have been a huge story or even in the 2000s. And, I mean, literally even the trade press did not cover this ruling. So, it’s kind of a non-entity at this point.
I think similarly, economy-wide deals like the Trans-Pacific Partnership are unlikely to be something that the U.S. at least is going to pursue going forward. And so, I think that what that leaves is sector-specific, industry-specific, deals. And there I think you still have a lot of appetite.
Biden tried to do one with Europe on steel and aluminum. That didn’t get very far because Europe basically wasn’t willing to play ball. I think that Trump has effectively done at least half of what Biden was trying to do there because he’s opposed these 50 percent steel tariffs. And then the rest of the advanced economies have gone along with that and imposed their own tariffs.
And so, basically now you have kind of this advanced democracy fight against overcapacity in the steel sector that happened just basically by the U.S. acting unilaterally. I think that a future president with a little bit more diplomatic chops could maybe actually turn that into a formal agreement rather than it just be a bunch of countries doing something unilaterally and maybe add a climate dimension to that. I mean, that would be worth pursuing, I think.
I think the one example of a sectoral deal where the Trump administration seems pretty serious is the idea of a critical minerals agreement between advanced democracies. And that would involve everything from trade cooperation to subsidy cooperation and sort of giving each other’s firms certain benefits in each other’s markets. I think that could happen. And I think that could be a template idea for trade agreements going forward that are kind of more sectoraly focused rather than economy wide.
TEDDY DOWNEY: And I guess my last question, assuming that it’s like 80 percent in prediction markets that Democrats win the House. Do you think—this is kind of maybe too speculative—but how does that change, in your mind, the incentives that Trump does change, in your mind, the incentives for how Trump does trade policy, if at all? Does it make him become more aggressive or just continue on the same path? Or does it change the calculus at all to you?
TODD TUCKER: I don’t think it’s going to change things a lot. I mean, obviously, just on every topic area, not just trade, like there will be a lot more oversight. And so, I imagine that it will force them to do kind of what they already seem to be doing on trade, which is become a little bit more buttoned up, a little bit more professional, like do the good lawyering before—or at least passable lawyering—before you announce major new initiatives.
So, I think that there’ll be some of that. But I don’t know that you would have a majority in either chamber for sort of significantly dialing back some of the authorities that Trump has. Because I think that if you combine the sort of labor Democrats that are interested in sort of promoting the industrial heartland here at home—and so, like basically those authorities. I mean, labor unions are huge fans of Section 301 and 232. I mean, they use them. They applaud the use of them. And so, I think they’re going to be a strong voice in keeping maybe at least half of the Democratic party in favor of, yes, doing oversight, imposing guardrails, but basically keeping that authority intact. And then I think you’re going to have at least some percentage of the Republican caucus that is committed to Trump as a leader, are fairly MAGA oriented, that are going to be in sort of the same boat.
So, I mean, it’s possible. It’s possible we could see something. But I think any attempt in that would be sort of pretty divisive. I would say for both political parties to try to do it. So, like whether Hakeem Jeffries wants to go down that road, who knows?
TEDDY DOWNEY: So, this is very interesting. Because my initial instinct would be that the Democrats would basically be okay, or more unified, in stripping executive authority after what we’ve seen from the first year of the Trump administration. Just obviously, the Supreme Court gave him what do you want to call it? King-like powers, whatever you want to call it. Corruption law has been massively undermined, which is factored into behavior in the executive branch.
Wouldn’t that mean that they would want to distribute power back to Congress? I mean, that just seems like the most obvious thing to me. It seems a little too myopic, almost in some respects, to be like we need this authority because the next time we’ll be President.. Well, you’re sure that’s going to happen? I don’t know. I’m just curious to get your reaction.
TODD TUCKER: Well, I mean, so I think that one thing is that by the end of this 150-day period, the Section 122s are going to come off. So, we kind of in some ways don’t know what’s going to happen after that. So, I think a lot depends on basically what Trump does between now and the midterms in terms of does he professionalize the use of this? Does he sort of return trade policy to sort of a more economic orientation and less of a geopolitical one? Or rather, I should say like an arbitrary geopolitical one of like I don’t like Greenland today. I don’t like Denmark yesterday, whatever.
So, I think if he just kind of does stuff that’s a little bit more like normie trade law, even if it’s kind of aggressive, then I think that he could be in a good position to actually get some bipartisan support. If he just kind of keeps going down a road that is not strategic, that is changing by the day, that is super inflationary, then I agree with you that in that situation, Democrats would probably be willing to rein him in, even if it means sort of narrowing their options down the line.
TEDDY DOWNEY: It does seem that—you mentioned this point—it does seem that foreign policy really gets in the way of this economic vision, right? Like, oh, he wants to support Argentina because they’re just like ideologically aligned. Same thing in Europe, Turkey, et cetera. And it has these really weird economic ramifications, right, you’re importing more beef, undermining your cattle industry. You’re taking tariffs off of soybeans and that’s crippling the soybean farmers. That seems unlikely to go away.
TODD TUCKER: Yeah, I mean, Robinson Meyer calls Trump de-growth Donald. Because in some ways he’s like doing things that like almost like a radical environmentalist would love, like making it more expensive to drive a car and stuff like this. Yeah, I mean, I think that there’s these competing impulses within the administration. I think there is kind of one view that is quite authoritarian, not as focused on economics, is kind of wanting to like harass other countries, basically just because we can. There’s others that I think have a view of like shipbuilding, semiconductors, autos, like certain sectors where they actually do want to prioritize and sort of believe in using the tools at their disposal to get there.
So, I think a lot of it’s going to depend on just kind of what Donald Trump we see, like which faction ends up sort of asserting more control. I think that one thing that the Supreme Court has possibly done here is give a little bit more leverage to sort of the adults in the room in the administration of which I would sort of say Jameson Greer is probably one.
So, if this will give him sort of an ammunition internally in administration debates to be able to kind of say, okay, we’ve tried it the ad hoc way. Let’s do it sort of the adult way. And I think if they do that and inflationary impact is limited and there starts to be some more announcements like we’ve seen from Stellantis and GM, then I think a future administration is going to have a hard time getting rid of some of these tariffs. I mean, tariffs do tend to be kind of sticky over time. And so, I think that one outcome is just that we sort of see after Trump two, a little bit of what we saw with Trump one, which is that despite criticizing Trump’s tariffs in 2019, 2020, Biden did end up keeping most of them.
TEDDY DOWNEY: That is really interesting. I think it’s really interesting that if you’re looking at Greer’s potential sort of increasing leverage in the administration, that is definitely something I’ll be keeping an eye out for. Todd, this has been an amazing wide ranging conversation. You’ve got a big brain. You’ve got a huge brain. I’m very happy that you were willing to share it with us today. And thank you so much for doing this.
TODD TUCKER: Absolutely. Glad to join you. Thanks.
