Trump tariffs ruled illegal by US appeals court

0:05Hello and welcome to Business Matters. I'm David Harper. Coming up on the programme in just a moment will bring you more on the breaking news that a court has ruled most of President Trump's tariffs could be illegal. What could it mean for the import charges that have been a key part of the President's economic policy so far? This also comes in a week when Donald Trump faces a legal challenge to an attempt to remove a governor from the Federal Reserve. We'll hear more about that from someone tipped to potentially be the next chair. And if you have an experience in this space, we'll start a dialogue to see if we can get into alignment with a critical analysis in the silos of workplace jargon.

0:39We'll circle back on that one within the next hour. Hoping to make sense of that, if anyone can make sense of that, we'll be joined throughout the programme by two guests on opposite sides of the world. Alexander Kaufman is a reporter and author of the newsletter Field Notes on Substack, and he joins us from New York. A very good evening to you, Alexander. Good evening. Thank you for having me. And Jyoti Malhotra is editor-in-chief of the Tribune and joins us from Chandigarh in India. And it's a good morning to you. Hi, good morning to you. Great to have you both with us. We will come back in just a moment because I want to move on to some news that's broken in the last few hours, which could be catastrophic for the waves of tariffs, which have been a key pillar of Donald Trump's trade policy.

1:19Put simply, a court has ruled that the president does not have the ability to use emergency powers to introduce tariffs or taxes. And that would include the majority of the tariffs that he's introduced so far. It's not the final word, though, as the case can now head to the Supreme Court. And Donald Trump has already called the ruling incorrect. Correct. Let's get some more detail on this with our North America correspondent, Peter Bowes, who joins us now. Peter, I'm going to start by asking you, what exactly does this court ruling mean? Well, this means for now that the tariffs continue and the court was a pain to point that out, that it won't change because they want to give Donald Trump the opportunity to appeal to the Supreme Court.

1:59So essentially, that's what it means that the Supreme Court, assuming Donald Trump goes down that route, and it's difficult to see why he wouldn't do that, that it will be the left of the highest court in the land to decide whether President Trump had the powers to impose these tariffs. And essentially what this appeal court is saying is that he was wrong to use the Emergency Economic Powers Act to justify imposing these tariffs, these duties or taxes on other countries. And the fact that Donald Trump did that, of course, was not unexpected, and nothing new. We've known for decades that Donald Trump has believed in tariffs as an important tool to, in terms of negotiate with other countries to get the best deal possible as he sees it for the United States.

2:46So if they are eventually overturned, it would, of course, be a major blow for this president because it really does go to the heart of his international economic policy. Also a president, certainly not unknown to use different powers to sidestep the process to get things done. How has President Trump responded? Well, he was very quick to respond in quite a lengthy post on his social media site, Truth Social, starting in all capitals. All tariffs are still in effect, which is correct. As I just explained, the court has said that they'll stay in place until October the 14th. The middle of October is the president's deadline to go to the Supreme Court.

3:29But Donald Trump says that, as far as he's concerned, The United States of America will win in the end. He said it would be a total disaster for the country if the tariffs went away. It would make the United States financially weak. And he said we have to be strong. And then perhaps his strongest statement of all in this quite lengthy post is, if allowed to stand, the decision would literally destroy the United States of America. And then he goes on to talk about Labor Day, which is this coming weekend in the States, It's a national holiday designed to celebrate the country's workforces. And he said we should all remember that tariffs are the best tool to help our workers and support companies that produce great made in America products.

4:16I just wanted to ask quickly as well. Let's assume for a moment that this decision is upheld and it is ruled that most of these tariffs are not legal. There's already a difficult relationship between the president and the judiciary. This is just going to inflame this even further and probably motivate him to push this as far as he can. And if it is upheld by the conservative majority Supreme Court, and then that is a big if. But if that happens, yes, we wait to see Donald Trump's response because it would really, I think, destroy his credibility in a big way as a dealmaker in terms of the policies that he's espoused.

4:56and the weight that he's put on these tariffs, the so-called Liberation Day back in April, it will be a major deal. But I think it is a big if that the Supreme Court is going to agree with this decision. It may well go the other way. I think most people, most legal experts looking on at this, if they were betting right now, would say that the Supreme Court is perhaps more likely to support the president in this than it is to support the lower court. We'll have to wait and see what happens. Peter Bowes, our North America correspondent, thank you very much for joining us. Apologies for a bit of the breaking up on Peter's line there.

5:33I think we could hear most of what he had to say there. So, Alexander, let's turn to you for a moment. This is an interesting development that we've seen this evening. Remains to be seen exactly where this will end up, but it certainly has knocked the series of tariff announcements that we've seen. It has indeed, but it wasn't unpredictable. So just a few months ago, I was talking to Wilbur Ross, the billionaire who served as the Commerce Secretary during Trump's first administration. And Wilbur was very candid in the interview and had warned that Trump's approach was a high risk, high reward one, that he was pursuing this policy that may indeed allow him to make this very severe and lasting impact as he's looking to make, but that there were serious legal gaps in the logic behind what they had done and that in the first administration, when they had implemented tariffs in his agency, they had spent many months combing over the laws and putting together potential legislation in Congress that they'd be able to pass to justify these things.

6:43So even somebody who was close to him and is certainly rooting for him right now, was able to identify the risk of what we're seeing come to fruition. Jotty, you're speaking to us from India now, one of many nations that have been on the business end of these tariffs. I presume people aren't going to be holding out a great deal of hope for this being overturned. From what we hear, most nations around the world have tried now to adapt to a new normal baseline for this. you know um i i think this this news is so incredible because india is one of those nations which are most affected by trump's tariffs and which kicked in only a couple of days ago india has 50 tariffs applied on its on on its goods now i think we don't exactly know what this means because the news is broken overnight.

7:39But if it is true that these tariffs are illegal, assuming, of course, that Trump doesn't go to the Supreme Court, as he just said, and then, you know, whatever happens in the future, this is the best news that I think the Indian government has heard so far. Now, what this means is something that we will have to read the fine print this morning, and the government will have to sort of examine what happens. Does this mean that the tariffs will be in abeyance? Does this mean that normal trade will be carried on? What does it all mean exactly? Well, from what we understand so far, I think everything sort of stays as it is now for the next couple of months at least, pending this kind of potential appeal to the Supreme Court.

8:24So for the moment, as I understand it, nothing actually changes. But the potential down the line is that if these are ruled illegal, then there could be some change. I think that's the best news that the Indian government would have heard this morning. Prime Minister Modi is in Japan. Even as we speak, he's on his way to China for the Shanghai Cooperation Organization Summit, where he will meet the Chinese President Xi Jinping and the Russian President Vladimir Putin. There's been a real overhaul in India's foreign policy relationships in the last few weeks, because both Trump and Prime Minister Modi have had not very pleasant conversations with Trump's advisers actually being extremely rude to the Indian government, accusing both the prime minister and the Indian government of instigating the Ukraine war.

9:19I'm not sure if you know some of this, but it's been a big, big story here in India. accusing the Prime Minister of instigating the war by Ryan Grush. Anyway, I think the whole thing is going to be quite crazy because if these tariffs are now going to be held in the bairns, then that... I think we've lost Jyoti there for a moment. And that is going to be a big boost. I think we lost you for just a second. We'll try and reboot our Wi-Fi or something and get it back going. But yeah, a very valid point that these tariffs are going beyond just trade and being used for all manner of kind of other reasons as well at the moment.

10:02We'll come back to you both in just a moment because I want to look at something else that has come out of the US today. The relationship between the White House and the Federal Reserve has been far from smooth in recent months with President Trump and the chair, Jerome Powell, clashing repeatedly over interest rate decisions. and this week the stakes were raised further still as the President made an attempt to remove Governor Lisa Cook. He has made allegations that she committed mortgage fraud which she has strongly denied. This is now being challenged in the courts and the outcome could have a significant impact on the ability of politicians to control the Fed.

10:35Michelle Fleury is our business reporter in New York and has been across this case and explained one of the main sticking points here. The way the Federal Reserve is set up the President can only fire someone if there is cause. And so there's a lot of questioning about what does that mean? What does that look like? Now, the kind of grounds, if you like, under which Lisa Cook's lawyers are challenging all of this is to say, at this point, these are allegations. She has not been found guilty of anything. She has also not been given a chance to, she wasn't given advance notice, and she wasn't given a chance to respond.

11:12So they're saying her due process has also been removed. These obviously will be decided in court. But in the meantime, it's just what happens whilst that process plays out. Will be decided, but haven't been decided yet. Today, a court in Washington has been considering a request from Cook for a temporary order declaring President Trump's attempt to sack her as unlawful, which would allow her to carry on for now at least. That session closed without a ruling, so we'll have to wait until Tuesday at the earliest to hear more on this. Jim Bullard is Dean of the Mitch Daniels School of Business at Purdue University and is a former president of the Federal Reserve Bank of St.

11:50Louis. And a little earlier on, I asked him what impact this current case is having on markets. People have been commenting that the market impact hasn't been as much as they would have thought. Markets feel that as this current case winds through the courts in the US, that ultimately the Supreme Court will back the intention, I think, of the Congress, which was to make it very hard to change personnel at the central bank based on political whim. And so they're going to set a high standard on the for cause feature of the Federal Reserve Act. We'll see how it all comes out. But I think markets are betting that the Supreme Court will sort of back the independence to the extent it's in the Federal Reserve Act.

12:36When we look at that conflict between the Fed and the White House, it leaves everything in a slightly unenviable situation. You've been talked about as a potential for the list of Fed chair replacements in the past. Is it something that you would take on again? Yeah, I haven't had my interview yet, but I'll take the job as long as it's set up for success. I think if you want to set up the job for failure, then you should go with someone else. I'm the most experienced person. I've been on the FOMC for 15 years before I left the St. Louis Fed. So I think we need to protect the reserve currency status of the dollar.

13:15We need to be aiming for low and stable inflation. And we need to protect the independence of the central bank. So as long as those conditions are in place, I might be a good choice. Like I say, I would bring a lot of credibility to this position. Do you think you'll be able to manage that relationship with the White House? Absolutely. Do you think we're in a situation where whoever does take that job can be fully independent of the political system, given the situation we're in at the moment? Yeah, even though we've been using the term even right here of central bank independence, I try to steer away from that a little bit and say that the central bank is arm's length from politics, day-to-day politics.

13:55politics. The Fed has political appointees on it and lives under the Federal Reserve Act, which is a creature, you know, so the Fed is a creature of Congress. And so you have to keep in mind that, of course, there are political factors around central banking. But what you don't want is the day-to-day fray in the political maelstrom of inside the beltway politics. You don't want that to feed into volatility in actual financial market pricing, because that volatility would be unnecessary. So by keeping the central bank at arm's length from politics, you avoid some of that. Let's talk about interest rates.

14:36I believe you've said that you expect there to be a modest cut in September. Is that something you still believe? Yeah, markets are pricing high probability of a 25 basis point reduction in the policy rate at the September meeting. I agree with that. And I think the main issue will be how the committee sets up the rest of this year and the first half of 2026. Jim Bollard there, former president of the Federal Reserve Bank of St. Louis, just reacting to a little bit of what we've seen there. Let's return for a moment to to trade in the US and import charges in particular, because it's been a significant day with many trading partners around the world as well.

15:19We've seen the end of the de minimis rules on low value imports. Now, put simply, de minimis meant that shipments valued at$800 or less were exempt from import duty. The thinking behind it being that it just wasn't cost effective to collect such small amounts of duty. This is a rule that's been in place with some changes to the thresholds since 1938. and last year it applied to 1.4 billion packages. Imports from China and Hong Kong have already seen this rule scrapped back in May and it now applies to everywhere else in the world as well. It's obviously going to affect a lot of businesses, not least those selling cut-price goods online.

15:54Deborah Elms is a trade and industry policy expert at Heinrich Foundation in Singapore and contrary to what you might think, she believes that the suspension of the de minimis rules for the whole of the world might actually prove an advantage to companies such as Timo and Shein, who are based in China? Yeah, there's a couple of reasons for that. I think the most important is that they have a scale and a platform that provides a lot of services in general, and they've had time to get organised. And as a result of that, they are actually well positioned to deal with the end of de minimis, which is the full payment of tariffs and customs paperwork for every package into the United States starting today.

16:33they're in a position to be able to deal with that where many firms, including firms that work on other platforms, are really not prepared for what that looks like in terms of having to pay and remit tariffs and deal with paperwork, which requires you, among other things, to have a 10-digit code for every item that you send. That's not something that especially small businesses are used to keeping track of. You say they're prepared for it in an administrative sense, but it doesn't change the fact that it is introducing extra charges. And there are a lot of consumers in the United States that have got used to buying some very, very reasonably priced goods from China.

17:09Those prices are going to have to increase. They are. But if you think about what are the prices of a lot of goods on Xi 'an and Timu in particular, they're very low. So, you know, if you had a t-shirt or a, you know, handbag or whatever, that was$3. And it has a crazy amount of tariffs now applied to it, the price goes to what,$5? I mean, the point is that you are not jumping up so high in price that many consumers will simply say, no, I can't afford that anymore. They may buy a bit less even from Sheehan and Timu, but they're not likely to stop buying altogether from these two companies because their price points are low and because they have a fairly seamless process in place for you to get goods.

17:51Now compare that again to other firms in other areas or other firms that are trying to work with different platforms, their prices to begin with are higher. And then when you add tariffs on top of that, those tariffs can be quite substantial. And they're having increasingly now, these firms are going to have to pay someone to help them with their paperwork and remit their tariffs. And that's going to add to the cost overall. And the net result of that is either they sell nothing to the United States or they sell significantly less to the United States. Does anybody gain from this? Clearly, customs brokers are going to do very well.

18:25And in fact, there's one company now that has been put in charge of all postal service operations for Canada, Australia and New Zealand, one private company. But for the rest of us or for the rest of consumers and especially for small businesses, it mostly is about higher prices ahead and an additional tax on American buyers and American consumers. Presumably, American consumers haven't yet felt the effect of this. There's going to be a change over the next weeks and months. There was some discussion early on when de minimis was removed about showing consumers the cost of tariffs. And that was quickly shot down by the Trump administration and many firms backpedaled and then stopped providing information about tariff costs.

19:11But now that De Minimis has gone globally, increasingly firms globally are putting out De Minimis and tariff numbers for their customers so that they understand why the prices have suddenly gone up. Deborah Elms from the Heinrich Foundation in Singapore. Jyoti Malhotra is still with us from Chandigarh in India. I just want to expand on that a little bit because I do see Deborah's point that large companies like Timu and Shein will have a big administrative operation. It won't necessarily be a great pain for them. But for a lot of the smaller people, small artisan businesses around the world who are selling small items to the United States, this is going to be hugely significant.

19:54I think so. I think you're absolutely right, or Deborah is absolutely right, because I'm just looking at the data. And India and Vietnam, I think, are among the largest suppliers, which are part of the small package trade. I think China and Hong Kong dominate the trade, but India is very much part of this. So I think you're right. You know, I think India's sort of a lot of Indian exporters do deal with this sort of small package exports, whether it's in the handicraft business or sort of, you know, handmade goods. And I think this will impact these exporters or these traders. So I'm not sure that it's very good news, but I think we'll have to wait and see just like we'll have to wait and see what happens with the Fed, with the court appeal on the on the Trump tariffs.

20:52It's been quite an interesting overnight, hasn't it? There's a lot of wait and see today, isn't there? Yes, absolutely. Alexander, Alexander Kaufman, who joins us from New York. The other factor, and we've sort of seen this in the UK after Brexit, that once you start putting obstacles in the way of exporting items to a particular country, there's going to be a lot of small retailers who can say, well, actually, it's not worth it. I'm just not going to sell to the United States anymore. And, of course, that has the effect of really lowering choice for American consumers. I think that's right indeed.

21:27You know, I think that this is certainly going to start to pinch much more. I was checking the statistics cited on CNBC prior to this. And, you know, this is now extending these tariffs to 92 % of imports to the United States. So, you know, if beforehand we were starting to feel the effects of this, at least downstream and, you know, the cost of electricity because, you know, the equipment for, you know, building up the electrical grid. right now is becoming more expensive, then I think we're going to start to feel that much more at the shelves. And keep in mind that in the United States, a perennial political football, if you will, is the price of gas, you know, which goes up and goes down and is hyper focused on, obviously, because most Americans drive cars.

22:16And so I think when we start to feel that even more in retail shelves, it's going to have a real impact. We're going to have to watch this very carefully. As we said before, a lot of the impact from a lot of the things we're talking about is going to take time to bed in as people adapt to new normals as different tariffs and different trading rules kick in and the whole networks of global trade sort of realign themselves to cope with that. You are listening to Business Matters on the BBC World Service. We will return in just a couple of minutes while we're examining the rather intricate world of workplace jargon.

22:50I'm sure everyone has a bit of an experience of that. We'll be picking over it very shortly. Stay with us.

23:00You are listening to Business Matters from the BBC World Service with me, David Harper. And coming up in the next half hour, we're looking at the meteoric rise and then catastrophic fall of the Chinese property giant Evergrande. Also, let me drop this into your toaster and see what pops up. To get on in business, do you need the correct workplace speak? We'll put an analytical lens on that as we circle back in just a moment going forward. All of that after the latest world news.

23:29BBC News with Eileen McHugh. An appeals court in the United States has ruled that most of President Trump's tariffs are illegal. But the court said the tariffs can remain in force until mid-October, while the case goes before the Supreme Court. President Trump said the ruling was incorrect. Earlier, the President said he would withhold almost$5 billion of US foreign aid funding already approved by Congress. Opposition Democrats have warned that any unilateral cuts could harm talks aimed at agreeing new government spending. The former chief medical officer of the US Centers for Disease Control and Prevention has told the BBC she fears the childhood vaccination schedule in the United States could be dismantled.

24:14Deborah Howery said that could lead to a rise in vaccine-preventable diseases. The US State Department has confirmed that the Palestinian President Mahmoud Abbas has had his visa revoked for what Washington said were national security concerns. Mr Abbas will now be unable to attend the UN General Assembly in September when several Western nations have said they'll recognize Palestinian statehood. The United States has approved the sale of military equipment and services requested by Ukraine that will enable Kiev to maintain its Patriot air defense systems. Washington has agreed to increase military support for Ukraine by selling to its European allies arms they can pass on to Kiev.

25:00A judge in Brazil has ordered Volkswagen to pay$30 million in damages to workers employed in slave-like conditions on one of its farms in the 1970s and 80s. The alleged abuse happened during Brazil's military rule. And the BBC proms concert on Friday has been disrupted by pro-Palestinian protesters. A performance by the Melbourne Symphony Orchestra had just begun when the protesters stood up holding banners. BBC News.

25:34Welcome back to Business Matters with me, David Harper on the BBC World Service. Now, this week, Chinese property giant Evergrande's shares were taken off the Hong Kong stock market after more than a decade and a half of trading. It marks a grim milestone. Let's not forget that the company was once China's biggest real estate firm with a stock market valuation of more than$50 billion. That was before its spectacular collapse under the weight of the huge debts that had powered its meteorolic rise. Jennifer Pak in Shanghai has been looking at where this leaves China's property market. Evergrande started in 1996, when the golden era of China's real estate market was getting underway, says financial writer Chen Xi.

26:14Evergrande seized the moment when China was urbanizing and had explosive demand for housing. But Evergrande's success, he says, was based on a vicious cycle. Evergrande kept expanding by using newly borrowed money to pay off old debts. The survival of the business hinged on housing prices rising forever and that there is always liquidity in the market. Other developers followed suit. At its peak, real estate accounted for 20 to 25 percent of China's GDP. Not many people said, hang on a minute, because speculative homebuyers, investors and overseas bondholders were all making money, says Deloitte's Asia-Pacific contingency planning and insolvency leader Glenn Ho.

26:57Being greedy, then they lost their independent, critical thinking. Everyone sobered up in 2021 when housing sales slowed and Beijing capped borrowing capacity. Evergrande couldn't pay, not suppliers, creditors or staff, leading to protests.