Weekend Law: SCOTUS to Decide Tariffs, Presidential Power & Music Piracy

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2:01Find an independent agent at cinfin.com. This is Bloomberg Law with June Grosso from Bloomberg Radio. Why do you think presidents Clinton, Bush, Obama have not used IEPA to impose tariffs? It's one of the most important cases of the term, a test of presidential power where President Trump's signature economic policy is at stake. And a decision against him could mean the refunding of more than$100 billion. And after nearly three hours of oral arguments in November, Supreme Court justices across the ideological spectrum appeared skeptical that Trump has the legal authority to impose the tariffs.

2:54Chief Justice John Roberts and Justice Sonia Sotomayor said the tariffs are taxes and the Constitution gives taxing power to Congress. It's a congressional power, not a presidential power to tax. And you want to say tariffs are not taxes, but that's exactly what they are. They're generating money from American citizens, revenue. The vehicle is imposition of taxes on Americans, and that has always been the core power of Congress. Trump is arguing that the International Emergency Economic Powers Act, or AEPA, gives him virtually unlimited powers to impose tariffs by executive order. But as several justices pointed out, the word tariffs is nowhere to be found in that law.

3:42Here are the Chief Justice and Justice Ketanji Brown-Jackson. Well, but the exercise of the power is to impose tariffs, right? And the statute doesn't use the word tariffs. Your argument suggests that we should see the phrase imposed tariffs in that same series of things that the president could do. We don't see that word, and instead you take regulate and say that must mean that. No other president has tried to impose tariffs under IEPA. and Justice Neil Gorsuch, a Trump appointee, expressed alarm at the idea that Congress could delegate such seemingly unlimited power to the president. So Congress is a practical matter, can't get this power back once it's handed it over to the president.

4:30It's a one-way ratchet toward the gradual but continual accretion of power in the executive branch and away from the people's elected representative. All three lower courts that ruled on the issue found the tariffs to be unlawful. My guest is Timothy Brightbill, partner and co-chair of the International Trade Practice at Wiley-Rhine. Tim, tell us what's at stake in this case. This case involves the centerpiece of President Trump's economic agenda. It's the biggest trade case the Supreme Court has ever heard. And it goes straight to the key constitutional issue of who has the power to impose tariffs, the U.S.

5:12Congress or the president. President Trump says the law that he used, the International Emergency Economic Powers Act, gives him the power to regulate imports, and that that includes the power to impose tariffs, including fentanyl tariffs on China, Canada, and Mexico, and reciprocal economic tariffs on almost all countries. Whereas the plaintiffs in this case say that Congress has that power and cannot delegate that power, and that IEPA, which has never before been used to impose tariffs, does not include that power and authority. So that is what is at stake. And of course, the tariffs under IEPA have led to collection of hundreds of billions of dollars of tariffs already.

5:56So it's very high economic stakes for the companies and industries that have paid those tariffs as well. There's always a textual analysis these days, and many of the justices were concerned that the text of the statute doesn't mention the word tariffs at all. Exactly. The argument focused quite heavily on this law used by President Trump, IEPA, and whether that law, which gives the president the power to regulate imports, also includes the power to impose tariffs. That really dominated most of the hearing, and the justices asked very difficult questions on both sides. The administration said that the ability to impose tariffs is a core application of the ability to regulate imports.

6:42In a historical context, said that, of course, the power to regulate imports would be read to include tariffs, because tariffs have been used throughout our country's history. On the other hand, several justices were skeptical of that. And the plaintiffs in this case said that when the delegation includes tariff authority, there is always specific language to that effect and that there are always conditions and tests and agency decisions that have to go into that tariff power. So there was a good amount of the argument focused on those issues. And again, whether power to regulate imports includes the power to impose tariffs.

7:21And what did you think about the Solicitor General's argument that the Trading with the Enemy Act of 1917 gives the president authority to impose these tariffs? The Solicitor General argued, yes, that the Trading with the Enemy Act was used to impose tariffs in a prior situation by President Nixon, and that there's no reason to think that anything had changed when IEPA had passed. On the other hand, the plaintiffs had a response to that in terms of the fact, again, that when tariffs are involved, there are always conditions on their use. There are always specific procedures. And also the fact that the reality is that no other president in 50 years has used IEPA to impose tariffs.

8:08The major questions doctrine came up several times during the arguments. It basically says that when the executive branch takes an action with major political or economic significance, Congress has to have expressly authorized it. And the chief justice made it fairly clear that he thought the major questions doctrine applies here. Yes. So the question here is, does the major questions doctrine require a clear statement in AIPA that it includes the power to impose tariffs? And this court has not hesitated to start using that doctrine more broadly. But I think you're right that the justices had some concerns about pursuing it in this venue.

8:57And again, the question comes to, is the power to tariff implied in the power to regulate imports? Or if it's not, was this a question that Congress was required to state clearly that tariffs were a part of what was envisioned by the new law? The conservatives use the major questions doctrine to block several of President Biden's initiatives, like his student loan forgiveness program. if they allow Trump to impose these tariffs. Do you think they'll have to explain why the major question's doctrine applied to Biden, but not Trump? I think it's an interesting question, whether they'll go there or whether they will just focus on the language of IEPA and this issue of whether the power to regulate imports includes the power to tariff.

9:47And I think several justices went down that road. I don't think just because these doctrines have been used in other cases, such as the Biden student loan forgiveness case doesn't necessarily mean that they will have to address it in this opinion if they have other bases for finding that the tariffs were legal or improper in any way. And Justice Gorsuch in particular expressed alarm about the seeming lack of limitations on the powers the president was claiming here. Justice Gorsuch asked the hypothetical of if Congress can delegate the tariff authority, what would prohibit Congress from delegating everything, including the power to declare war, which is clearly given in the Constitution to Congress.

10:34And so that was a very interesting discussion, certainly raising some concerns about the limits, if any, on the authority that the government was claiming. So where do you think the justices are going to come out here? Well, I'm not in the business of making predictions generally. My own personal view is that the court's three Democratic justices probably vote against these tariffs. And then the question is whether some of the majority of the court have similar concerns about the president's use of this law. And I do think that it's still a very close decision. It could go either way. I thought Chief Justice Roberts and Justice Barrett and Justice Gorsuch were perhaps more skeptical of the president's tariff authority under AIPA than the other justices.

11:20I guess the only other point I would make is, although it was discussed in the oral argument, I have a hard time seeing this court making a split decision that some of President Trump's tariffs are acceptable, but others are not. So if the court does rule against Trump, what happens next as far as his tariffs are concerned? Well, two things would happen. First of all, there would likely be some sort of a refund process for importers that paid the tariffs during this time. And there is some precedent for that before that was discussed during the oral argument, a situation where the court struck down a harbor maintenance tax.

11:57And there was basically a process where companies could file claims for the amount of the tax that they paid. So Justice Barrett was concerned that this could be a mess and could be very unwieldy. I guess the more important point is what will the president do going forward? And I think it's clear that tariffs are still a cornerstone of this administration's economic policy. And if the court says that the president cannot use IEPA, the president will likely pivot to one of several other trade tools that are available. And the court mentioned many of these, including Section 122, Section 232, the national security law, which the administration has already made quite a bit of use of in this administration, Section 301, and so forth.

12:44The limit on those laws is that they do require studies or actions by other agencies. So Section 232 requires a study and a report by the Commerce Department and consultation with the Defense Department in order to decide that imports of a certain product, like semiconductors or pharmaceuticals, are a threat to national security. Similarly, Section 301, which was the law used to impose tariffs on China during the first Trump administration, also requires a detailed study by the U.S. trade representative with public input. So those tools, for the most part, cannot be used as quickly as IEPA was used by President Trump.

13:28The court put this tariffs case on a fast track, suggesting that the justices will try to resolve the case quickly so a decision could come down at any time. Thanks, Tim. That's Timothy Brightbill of Wiley-Rhyne. Coming up next, will the Supreme Court give the president control over dozens of independent federal agencies? I'm June Grosso, and you're listening to Bloomberg. The thing about AI for business, it may not automatically fit the way your business works. At IBM, we've seen this firsthand. But by embedding AI across HR, IT, and procurement processes, we've reduced costs by millions, slash repetitive tasks, and freed thousands of hours for strategic work.

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16:16At oral arguments last month, the conservative justices suggested they will allow President Trump to fire Rebecca Kelly's slaughter from the Federal Trade Commission, despite a law that says commissioners can be fired only for specific reasons. The liberal justices like Sonia Sotomayor and Elena Kagan expressed alarm at giving the president such unchecked authority over agencies that overlook crucial areas like nuclear energy, consumer product safety and labor relations. You're asking us to destroy the structure of government and to take away from Congress its ability to protect its idea that the government is better structured with some agencies that are independent.

17:08So the result of what you want is that the president is going to have massive, unchecked, uncontrolled power, not only to do traditional execution, but to make law. But the conservative justices like Brett Kavanaugh and Neil Gorsuch say the real concern is Congress's creation of agencies that exercise executive power but can't be held accountable. Independent agencies are not accountable to the people. They're not elected, as Congress and the president are, and are exercising massive power over individual liberty and billion-dollar industries, whether it's the FCC or the FTC or whatever it might be.

17:53Tomorrow we could have the Labor Commission, the Education Commission, the Environmental Commission, rather than Departments of Interior and so forth. Opponents of regulation have long sought to reverse the 1935 Humphreys' executor ruling, a decision that upheld FTC job protections and cleared the way for the independent agencies that proliferate across the federal government. My guest is constitutional law expert William Treanor, a professor at Georgetown Law. Bill, tell us about the issues in Rebecca Slaughter's case against Trump for firing her. The issue before the Supreme Court is that Congress puts limits on when the president can fire the heads of independent agencies.

18:43So an independent agency is like the Federal Trade Commission or the Federal Reserve. So really, since the start of the Constitution, Congress has imposed limits on when the president can fire these people. The question in the case is whether that's unconstitutional, whether the president can fire the head of an independent agency for any reason, even if Congress has said they can only fire them, you know, if they're engaged in bad behavior. So this is a very big deal. So much of the government structure that protects people in different ways or regulates the economy is done through independent agencies.

19:18Congress has wanted to insulate them from total executive control. And the Supreme Court is deciding right now whether, in fact, the president has the kind of control that comes with being able to fire the leaders of the agencies. In these oral arguments, you often hear the Supreme Court justices say, well, that's a job for Congress. You know, that's not something that we should be interfering in. So why are they interfering here where Congress has set up these agencies and the rules? That's a great question. There have been so many times in which the court is saying, this is a political matter.

19:53We shouldn't be deciding. But at the same time, the conservative justices of the court are very dedicated to what's called the unitary executive theory, which means that the president is in total charge of the executive branch. So what they're saying here is Congress doesn't get to be involved. The president is in total charge of the executive branch, including what have historically been things like the independent agency. That is kind of one of the core commitments that has really been at the basis of what Chief Justice Roberts has thought really going back to when he was a young attorney. And that's the same thing for most of the whole conservative wing.

20:33What kind of concerns did the conservative justices express during the oral arguments about this 90-year-old president, Humphreys Executor? There are two things that we're seeing the conservative wing of the court struggle with. One is they want the Federal Reserve to continue to be independent. They don't want the president to be able to fire somebody on the Federal Reserve. And they don't want that because, you know, that would be terrible for the economy. If the Federal Reserve is setting interest rates just in order to help the president rather than to help the economy, that would be a disaster, be a disaster for the market.

21:13It would be a disaster for the economy as a whole. So the conservative wing of the court, I think, wants to overturn Humphrey's executor, but they're trying to come up with some rationale in which they can say the president can fire somebody on the FTC, but he can't fire somebody on the Federal Reserve. And they're going to be looking at the Federal Reserve later in the term. That's a big concern for them. So I think that animates all of the conservative justices of the court. I think also, you know, what I'm hearing with the chief justices, what he's trying to do is to come up with some way in which there's some agencies where Congress can, in fact, limit the president's ability to fire people.

21:55And he's thinking about, you know, are there ones that are essentially kind of judicial in their function? And, you know, that may be an area in which Congress can establish requirements for when the president can terminate somebody. But that's not the Federal Trade Commission. Federal Trade Commission is not making judicial decisions. It's very much deciding executive-type rules. So I think we're seeing two things on the conservative wing of the court. One is they're trying to come up with some way in which they can say the president can fire somebody at the FTC, but not at the Fed. And I think the chief is trying to come up with some way in which there's some type of agencies in which the president can be limited by Congress.

22:36But those would be ones that are really deciding kind of quasi-judicial matters, not the FTC. The liberals painted a dire picture of what would happen if Trump wins here. Justice Sotomayor said to the Solicitor General, you're asking us to destroy the structure of government. Do you think it's that serious? I think that's absolutely right. You know, we have had independent agencies, which largely exist to protect people of limited power. You know, and they've been in place really for 100 years. And the idea is that these should be basically bipartisan or apolitical. They should not just be tools of the president.

23:16So what the court is considering right now is whether that whole kind of structure gets gutted. So the stakes on this are huge. Well, President Trump wasn't specifically mentioned by name. two of the liberal justices, Elena Kagan and Ketanji Brown-Jackson, did make broad references to his firing of experts and dismantling of the Department of Education. The more realistic danger here is that we'll have an education department, as authorized by Congress by law, that won't have any employees in it. Having a president come in and fire all the scientists and the doctors and the economists and the PhDs and replacing them with loyalists and people who don't know anything is actually not in the best interest of the citizens of the United States.

24:08You know, what we're seeing right now is that in the Trump administration, the independent agencies and all of the government watchdogs, there's an attempt to politicize them in a way that, you know, we've never seen before. So the stakes are very different and they're much higher. You know, if Humphrey's executor has been overturned in President Bush 43's administration, the stakes would have been very different because President Bush was not focused on making independent agencies kind of the tool for his politics. But that's what we're seeing with President Trump, and that's why the stakes are so high.

24:44They've always been big, but in this administration, where there's such an attempt to kind of move away from scientific expertise and neutral decision-making to control every part of the executive branch, the stakes are huge. And that's really a part of what those three liberal justices were questioning. You know, the other thing that they really are focusing in on, it's very, very hard to come up with some line where you can say Congress can limit the president's ability to fire the heads of the FCC. They can't fire at will the heads of the Fed. And I can't think of any kind of coherent way to distinguish those two cases.

25:25And that's one of the things that the liberals were pressing on. You know, I think they're also pressing on the history. If you look at the Constitution, the text of the Constitution doesn't say that the president gets to fire people in the executive branch. It doesn't deal with removal at all. So there's not a text that really helps the conservative way of the court. And Congress really starting in the Washington administration limited the president's ability to fire people running agencies, kind of what was analogous to modern agencies at the time. So I think what the liberals on the court are focusing on are the text, the original understanding, as well as the huge consequences of essentially giving the president the power to politicize all of the independent agencies.

26:06I wonder what happens when there is a Democratic president. Do the conservatives then try to limit the ruling they're expected to make here? You know, one of the reasons why I think that the court should not overturn Humphrey's executor is to the extent that you have any kind of political concerns, you're giving a Democratic president the power to do exactly what President Trump is doing, to politicize every independent agency in the way that that president wants. You know, and then how does a conservative court say, well, you know, Humphrey executors is back. Once you establish a rule, you know, it applies to everybody.

26:42And that's something that they really have to think through because of the long term consequences. Because I don't think they would feel comfortable, you know, with limiting a Democratic president after they allow President Trump to fire people whenever he wants. So then you think this is the end of Humphrey's executor? You know, I think they will completely overrule Humphrey's executor. I think the one question for me is whether the chief comes up with some limiting principle in which if there are quasi-judicial independent agencies, then Congress can put limitations on the president's ability to fire.

27:20But the basic point is I think they're going to overturn Humphrey's executive. So I think what the court will try to do is to say the president can't fire Jerome Powell or can't fire Lisa Cook. But, you know, I don't think that that is a coherent approach, you know, because I think it would be based on history, but the history doesn't support it. Well, we often see some strained interpretations of history from this court. And we'll learn more about the carve out the Supreme Court is indicating it wants to create for the Fed on January 21st. That's when the justices will hear oral arguments in the case over President Trump's attempt to fire Federal Reserve Governor Lisa Cook.

28:01Thanks so much for your insights, Bill. That's Professor William Traynor of Georgetown Law. Coming up next on the Bloomberg Law Show, the Supreme Court is weighing giving internet providers a stronger shield from lawsuits when customers pirate copyrighted works. At issue is a jury's verdict of$1 billion in a music industry lawsuit against Cox Communications. I'm June Grosso, and you're listening to Bloomberg. So there's a lot of noise about AI. But time's too tight for more promises. So let's talk about results. At IBM, we work with our employees to integrate technology right into the systems they need.