Trump Takes Over DC & Tariffs on Drugs

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1:42This is Bloomberg Law with June Grosso from Bloomberg Radio. I'm announcing a historic action to rescue our nation's capital from crime, bloodshed, bedlam, and squalor, and worse. This is Liberation Day in D.C., and we're going to take our capital back. We're taking it back. Even as official Washington, D.C. police data shows violent crime reached a 30-year low last year and is down 26 percent this year, President Trump declared a public safety emergency today and invoked a never-before-used power in D.C.'s Home Rule Act to take over its police department. They love to spit in the face of the police as the police are standing up there in uniform.

2:34They're standing and they're screaming at them an inch away from their face. And then they start spitting in their face. And I said, you tell them, you spit and we hit. and they can hit real hard. Trump is also sending 800 National Guard troops onto the streets of the nation's capital. My guest is George Derek Musgrove, a professor of history at the University of Maryland, Baltimore County. Does the president have the power to do this? The president actually has a tremendous amount of power under the Home Rule Act, and he's going to operate within that realm. So he's going to send out National Guard troops onto the streets of D.C., as well as a smattering of federal agents from other agencies.

3:20That's all within his legal purview under the Home Rule Act of 1973, which gives the president control of the D.C. National Guard and in emergency situations, allows him to take over the Metropolitan Police Department for up to 30 days. Tell us a little bit more about the Home Rule Act. So the Home Rule Act, which was passed in 1973 by Congress, gives the city a local government, a mayor, a 13-member council, and a number of other local offices. And it does that for the first time in about 100 years. So in 1874, Congress ended local governance in the District of Columbia and initiated one century period where the president basically ran the city through three appointed commissioners.

4:09That became an embarrassment after World War II, and so Congress moved to slowly but surely return certain elements of democracy to the district. The capstone of that process was the Home Rule Act. What the president cannot do is simply wipe that law away. If it was passed by Congress, it has to be repealed or altered by Congress. But again, within the purview of the law, the president actually has a significant amount of power over law enforcement in the city. And that was done intentionally by Congress. And so aside from his control of the National Guard and his ability to essentially bring the Metropolitan Police Department under his control, he also appoints the U.S.

4:52attorney who is the chief law enforcement officer in the district. So we don't have district attorneys here in the nation's capital. And so the U.S. attorney prosecutes pretty much all adult crimes, all felonies. And how long can he take over the D.C. Police Department? He can do it for a period of up to 30 days. After that, the assumption is that any emergency that the president would need to take over the police department for would have passed. But he is capable of doing that. He was talked off the ledge of doing that back in 2020. during the Black Lives Matter protests outside the White House, again claimed, as he's doing now, that there was an emergency in the district and that he should take pretty radical measures in order to address that emergency.

5:37And so he very closely considered taking over the MPD then. He was dissuaded from doing so by local elected officials, as well as some of his advisors. And instead, he just deployed the National Guard and several other federal assets in order to clear Lafayette Park, which I think many people at the time, in hindsight, saw as a pretty robust violation of the First Amendment rights of the people protesting there. Are there any restrictions on the president's use of the National Guard? There's not restrictions in the law. There are, however, larger problems with using the Guard in urban policing context.

6:18I mean, the Guard is not trained for urban policing. It's not even particularly well-equipped for urban policing. And the other problem that he has, which he's really not addressing in any way, shape, or form, is that the National Guard regularly collaborates with the Metropolitan Police Department pretty much on every inauguration. Back in the late 1980s and early 1990s, the National Guard actually helped the police with crime suppression. At that point, the D.C. did have a pretty robust crime crisis. But the National Guard, understanding its limitations and MPD understanding the problem of putting uniformed soldiers on the street made sure that the National Guard during that period pretty much only did support work.

7:02And MPD stuck with all the law enforcement work and interacting with the public. And that's because in all of those examples that I just gave, the National Guard was cooperating with local authorities. The federal authorities were coordinating with the mayor and with the council. What's unique about the deployment in 2020 and also the one that we announced today is that the White House is not just not coordinating with local authorities, but is actively seeking to undermine through its deployment of federal assets. Is this similar to Trump sending troops and the National Guard into Los Angeles?

7:41And the legality of that is going to be decided at a trial this week? Yes. I mean, this is very similar, not just to Los Angeles, but I would also argue New York. And so the president has pretty consistently, not just during his first term and now into his second, but for much of his adult life, attacked large democratic cities as crime ridden, as filthy, and as a place that were he in charge of them, he would clean up with an iron fist. And that rhetoric has become more focused and more specific once he got into elected office. And so he's gone after those places once he got official power. You can see this in Los Angeles with the ICE raid, where he's essentially going around the local government, creating a crisis and then sending in the National Guard to try and address that crisis.

8:30You can see this in New York, where he is really using the Justice Department in a criminal manner to get the mayor, Eric Adams, in his pocket so that he can have relatively free reign in the city. And the one place where he's already allowed to do this stuff without having to go around or budge the law is Washington, D.C., because he already has a significant amount of power in the city. And so he appears to be planning to use at least a portion of that power. So any ruling in the L.A. trial won't apply to D.C. then? Correct. The president has way more power in the federal district than he does pretty much anywhere else in the United States.

9:12And that's specifically enshrined in the Home Rule Act. But again, there is what's legal and there's what's right. And I think the president is towing the line, at least when it comes to what's legal. He is not doing that when it comes to what's right. This move apparently stems from a carjacking of a former Doge employee and the president declared a public safety emergency. Is he the final word on whether there is an emergency? Well, I mean, it wasn't even a carjacking. It was an alleged attempted carjacking that was actually stopped by an MPD officer. I mean, the whole reason we have a clear record of this is because an MPD officer saw the alleged crime taking place, intervened, and probably saved Mr.

10:00Corstein from a much worse beating in perhaps the loss of his property, which speaks to me to a relatively good policing regime here in the city. But the answer to your question is, unfortunately, no. The Home Rule Act, like most laws in this country, was written with the assumption that the person carrying the mouse, in this case the president, would be a gentleman in the statesman and wouldn't just lie to get their way. And so the Home Rule Act is written to say that if the president determines that there is an emergency, he is able to take emergency control of the Metropolitan Police Department.

10:37That leaves the determination with the president, unfortunately. And so that's where we are. Trump has also threatened that if Zoran Mandami wins the mayoral race in New York City, he's going to take over that city. The president does not, to my mind, have legal authority to take over an American city. D.C. is a unique case because it is the federal district. But that sounds like bluster and misdirection to me. Looking at history, have any other presidents tried to do something similar in D.C.? Yes and no. There was a push primarily by Congress, not by the president. In the 1870s, the district of democracy entirely, and that was successful.

11:22And so in 1874, Congress repealed all democracy in the district and then gave the power to the president to administer it directly. There was also a pretty big push by the Nixon administration to campaign against the district in 1968 as the quote unquote crime capital of the United States. And when he got into office, he put together a very robust anti-crime package that D.C. residents roundly rejected. The difference between then and now, though, is that the district didn't have a home rule government in 1969 when Nixon began to implement these policies. And the other is that there were liberals in Congress with power who were willing to push back against the president's initiative.

12:08We don't have those circumstances now. If the president takes these powers, it is a violation, at least of the spirit, if not the letter of the law of home rule. And when it comes to Congress, you really don't have people in power in the Republican majority who have any intention of checking the president's whims when it comes to these situations. But it does appear that what Trump is doing here is all legal. The only thing I'd underscore is that I think that we've become quite numb to the president's many and varied efforts to violate the rights of those Americans with whom he does not agree.

12:47So when he began speaking of federalizing the district, the question that many people asked was not should he do it, but can he do it? And I think it's important to not only ask, can he do it, which unfortunately he can, but should he do it? To remind folks that this is not a violation of the law, but it is a violation of our principles, of our principles of no taxation without representation, of our principles of every citizen has a specific set of rights that other citizens shouldn't look to violate. And the president is violating those principles in a very robust and unfortunate manner. Thanks for joining me on the show.

13:28Thanks so much for joining me on the show. That's George Derek Musgrove, a professor of history at the University of Maryland, Baltimore County. Coming up next on the Bloomberg Law Show, Trump is threatening to impose tariffs of up to 250 % on pharmaceutical imports. What are the potential consequences? I'm June Grosso, and you're listening to Bloomberg. This is the Bloomberg Tech Minute brought to you by ChatGPT. Now with ChatGPT work. I'm Carol Masser. DoorDash, the largest food delivery company in the U.S., is building its own delivery drones and has gained the necessary FAA approvals to operate them commercially.

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15:58President Trump is threatening to impose tariffs of up to 250 % on pharmaceutical imports. He said there would be an initially small tariff and then in a year or at most a year and a half, the tariffs will go up to 150 % and then up from there. It's not the first time that Trump has threatened to impose steep tariffs on pharma. Here he is at the National Republican Congressional Committee President's Dinner in April. We're going to tariff our pharmaceuticals, and once we do that, they're going to come rushing back into our country because we're the big market. Trump wants more pharma companies to manufacture their drugs in the United States.

16:41Joining me is health care attorney Harry Nelson of Leach-Tishman Nelson Hardiman. Harry, start by telling us about these threatened tariffs on drugs. President Trump is threatening these tariffs up to 250 percent on pharmaceutical tariffs. He's using this Section 232 right to claim a national security interest under the theory that the shrinkage in U.S. production of drugs is a national security risk and that these tariffs will sort of force drug companies to build infrastructure in the United States to ensure access to the drug supply and prevent disruption. So that's the theory behind this plan.

17:24But in the short term, he's planning to essentially significantly increase the price of all imported drugs to create the incentive to make that happen. Why do you think he's targeting pharmaceuticals in particular? I think the pharmaceutical industry is, first of all, it's just a massive part of our overall economy. But I also think this is a way to get attention. And I think we've had a history, even from President Trump's first administration, where drug prices were seen as a threat, something that upsets consumers. And I think ultimately, even though people ultimately need, American consumers need medications, they're kind of an easy target to pick on from a popularity standpoint.

18:05Trump wants more pharma companies to manufacture their drugs in the U.S., but already three companies, Johnson & Johnson, AstraZeneca, and Eli Lilly, said they would spend$55 billion,$50 billion, and$27 billion, respectively, on expanding drug manufacturing here. Yeah. Big pharmaceuticals that you're mentioning, you know, which are already essentially global companies, they're all responding that they want to increase the production capacity in the United States at the same time that they're threatening that this is going to really hurt patients, hurt health care providers, access to medication and really hurt R &D, research and development.

18:49But they are responding and trying to, you know, to give a signal that they're prepared to ramp up their U.S.-based production. I mean, will this increase the cost of pharmaceuticals to consumers if he puts these tariffs on? Absolutely. First of all, we should say even before he does anything specific, we're already looking at, you know, different tariffs depending on what part of the world you're talking about. But we already have EU tariffs at 15 percent, India at 25 percent. I think China is at 10 percent. So there already is, you know, a lower level tariff that are but obviously we're talking about potentially increasing these as much as 25 times.

19:28So either American consumers are already paying the price increases or the drug manufacturers are containing, you know, these and just taking a hit on their bottom line. But this is obviously a dramatic going from 10, 15 percent to 250 percent. It's pretty radical. He said other nations make a fortune on pharmaceuticals, citing drugs imported from China and Ireland. Is that true? And don't pharmaceutical companies in the U.S. make a fortune as well? Yeah, obviously, like there are a lot of U.S. companies making a lot of money on drugs. It's interesting that reference to Ireland is super interesting.

20:04Ireland is, among other things, notably producing some of the GLP-1 weight loss drugs that are just surging in demand, you know, semaglutide, gerseptide. And so, you know, when we talk about China and India, we're talking much more about the generics. And so the reality is, like, our drug supply is fairly multinational between Europe and Asia. Yes, these countries are producing a lot of the drugs and inherently making profits that come from those drugs. But it's not like we don't have any U.S. manufacturing. It's just a question of how much of what the allocation is today and what he wants it to be.

20:43Has he said what he wants it to be? It sounds like he wants it to be something like 100 % of the U.S. or 90-10, but it's an interesting question. I haven't seen exact data, but I think it's fair to say that the majority of drugs that Americans are consuming are imported. Depending on how you measure, you know, whether you're measuring revenue or actual production, the percentage is going to be different. But it definitely is the case that we have more foreign sources. He's certainly trying to reverse that and make sure that the overwhelming majority of drugs are coming from U.S. production. On July 31st, he sent letters to 17 drug companies urging them to lower drug prices, U.S.

21:22drug prices, by September 29th to most favored nation amounts paid by other nations. What does that mean? Most favored nation is just a reference to essentially whatever the best pricing that a particular company is offering in the marketplace, it has to offer to the United States. So this has been a particular, again, this is a theme that went back to the first Trump administration, which is that America essentially props up the pharmaceuticals by paying higher prices for drugs. We know that Medicare, for example, has limitations that prohibit the Medicare program, the U.S. government from negotiating with drug manufacturers over certain prices.

22:04We saw legislation in the Biden administration to begin to allow negotiations on some drugs. But the point here is that most favored nation status would mean that the U.S. would not be subsidizing drug costs, drug development costs for the rest of the world and allowing them to take much cheaper costs while Americans and insurance companies absorb all those additional expenses. Will you explain, you know, a little more detail how the U.S. is subsidizing the development costs for other countries? Right. And what's happening essentially is that because we have certain government programs, most notably Medicare, that are locked into paying certain very high costs for drug companies and not being able to negotiate.

22:46And if you think about their purchasing power, you know, the Medicare program is without question the single largest purchaser of drugs. So I think that the data is that, you know, in many cases, particularly on brand name prescription drugs, the U.S. and the Medicare program is paying two and a half to three times higher than other advanced industrialized countries. And so in many cases, basically 250 percent over foreign drug prices. It might be that that 250 percent tariff that President Trump is referencing was based on that data point alone. And, you know, the argument that the drug companies make is that our paying these higher prices here in America helps sustain their innovation, their drug development, helping patients around the world who can't afford it.

23:32But the reality is when you look at other advanced industrialized countries, including the European Union, for example, there's no explanation why we should be bearing that higher burden. Essentially, the argument is that when we pay for drugs with public-funded research in the U.S. as well, that we're essentially paying the burden once in terms of our tax level and then another time at the pharmacy. It's an effort to rebalance, I think. the real solution would be to change the Medicare laws? That would be one huge piece of the puzzle, allowing the government to negotiate for fair pricing. I think another, just another data point here is that supposedly, I think the number is 75 % of global drug company profits come from their U.S.

24:15sales. So you can imagine there's a lot of room to negotiate pricing downward, whereas drug companies can still do just fine and make a reasonable return on their investment from the Medicare program without us having to carry, you know, their entire profitability and worry about their shareholders. So it seems like a rational move to allow the Medicare program and other large governmental programs to negotiate like anybody else in the marketplace over what the fair price is. But, you know, the drug companies have lobbied to prevent that from happening for a long time now. So I was going to ask you why they can't negotiate.

24:53And I guess it was the lobbying by the drug companies that stopped that? Yeah, the drug companies are certainly one of the most powerful groups. They've had bipartisan support. And, you know, they've used the amazing advances that we've made in pharmaceutical research and innovation, and particularly getting cutting edge drugs, life saving, really game changing drugs on many medications into the market to fund massive amounts of hundreds of millions of dollars of lobbying Congress to support them. And we have not yet seen a real turn, you know, on the part of Congress. And one of the really interesting questions will be how far, you know, President Trump may be able to change that.

25:36Drug companies have said that tariffs might disrupt international supply chains. Is there a possibility that if tariffs are imposed, people will not be able to get the drugs that they need? Well, I mean, I think the question is going to be who's going to bear the burden of these. If prices increase, when we say 250 percent, we're basically saying increasing prices 25 times. So obviously, if you're a hospital, for example, and you need to buy injectable drugs to have the inventory for when patients need particular drugs or cancer drugs, you know, the question is who's going to pick up that cost?

26:15If an injectable drug went from costing$20 today to all of a sudden$500 per single vial or whatever, you know, just patient. That's a dramatic problem. And you can imagine that budget from hospitals, reimbursement from insurance companies are going to limit uptake. And it's going to take time to build new facilities in the U.S., not subject to the tariffs. That might take years. And so in the meantime, you can imagine that there's going to be a point where certain drugs just won't be available at certain hospitals and in certain parts of the U.S. I mean, we should point out that the White House previously pledged to impose steep tariffs on pharmaceuticals and later backed off.

26:58So this could just be floating this. Look, I think certainly President Trump got everyone's attention in terms, you know, and that's been the pattern. We hear extreme numbers as part of a negotiating position and then ultimately negotiated settlements for lower numbers when there's outcry from the industry, from voters. And I do expect that we will see some smaller tariffs, probably more in the zone of 10 to 20, 25 percent applied to select products. And I think probably some exemptions for drugs with critical shortages in terms of supplies. I don't think the administration is looking to trigger shortages and lawsuits and to antagonize seniors, particularly because so many medications for chronic conditions are really an issue for seniors, which is why Medicare is such a big deal.