The rocky legal future of Trump’s tariffs

0:02Good morning from the Financial Times. Today is Tuesday, March 31st, and this is your FT News Briefing. UBS might not be packing its bags after all, and American retirement funds could soon open to private capital investments. Plus, we bring you the second installment in our series on U.S. President Donald Trump's tariffs. This one is all about what happens now that the U.S. Supreme Court ruled them illegal. So in the words of Justice Brett Kavanaugh, one of the justices who actually was in dissent, when it came to the AIPA case, it is quite a mess. I'm Mark Filippino, and here's the news you need to start your day.

0:48Last year, UBS privately threatened to leave Switzerland if strict new banking rules were put into place. But a new push might change the bank's mind. Some Swiss lawmakers have assured the bank that there will be a compromise that would water down the proposal. That's according to people familiar with the situation. The reform package that UBS opposes would increase its capital requirements by$22 billion. The proposal is a response to Credit Suisse's collapse in 2023. UBS rescued Credit Suisse in a state-orchestrated takeover. UBS declined to comment on the story, but has previously warned the capital requirement reforms would put it at a competitive disadvantage internationally.

1:30Now, if UBS were to leave, it would be a huge blow to Switzerland. It is the country's last remaining global banking champion, and its balance sheet is bigger than the country's domestic economy. The potential compromise is coming from a group of influential lawmakers, but opposition parties on the left might still hold it up.

1:56The Trump administration wants to open up U.S. retirement funds to private markets. It took the first step to do that yesterday. This is all happening as concerns mount about the stability of private credit. And here to tell us about the upsides and the risks of the move is the FT's Antoine Gara. He covers private credit. Hi, Antoine. Hi, how are you? I'm doing well. Just give me the details. What exactly did the Trump administration do yesterday? Sure. So last summer, Trump issued an executive order in which he basically wanted to get private assets into retirement plans. So think private equity deals, private credit deals, and even things like cryptocurrencies.

2:35So basically just everything that wasn't in your 401k before, which 401ks mostly are public stocks and public bonds and funds for those. And so what came yesterday was the actual rule from the administration that basically tries to offer new rules of the road on how this would happen. And it's basically trying to provide the people who administer 401k plans, like a Vanguard or something, a kind of checklist of things to do when you're making decisions on the types of private capital firms you allow people to invest in. Performance is key. the fees of the funds is key, the complexity, and the liquidity.

3:19There are a few other ones as well, but those were the key ones. So why does the White House want to make these changes? Well, first off, I'd actually gotten a lot of calls from people in Washington who were saying, you know, we think that the administration might slow play actually putting these rules out there, given all of the uncertainty in private markets. Because as you know, we've been writing about private credit funds, seeing rising defaults, seeing wealthy investors pulling their money. And it's really rocked Wall Street, you know, the last few months. And so it's coming at a really interesting time.

3:54That being said, the rulemaking is kind of agnostic to the current market conditions. And it's meant to sort of insulate retirement plans from being sued. The people who administer the plans are very scared of litigation because there's this whole industry that sues plans for all kinds of different reasons. And so what they're looking for is the government to provide a much more clear rules of the road, which would then insulate them from lawsuits. Antoine, what are some of the arguments for this? Well, they think it's part of a sort of balanced retirement plan. What they're saying is that regular people, they can just only invest in public stocks and public bonds.

4:36And so this is trying to open the menu of potential investments. But it comes with a lot of risks because unlike your index fund, which has ownership of slices of companies like Microsoft and Apple and companies we all know, private equity funds are much more opaque. They value assets the way they want to, not really based on any trading price. And the deals can carry a lot more leverage, a lot higher fees, and be much harder to exit than just buying and selling a stock. Do you think people will have an appetite for these types of investments? I think people will, but I think there will also be a lot of skepticism.

5:16Firms like Blackstone, Apollo, KKR, they have great brands. They're famous on Wall Street. There is a lot of appeal for people who don't have exposure to their types of funds to get some. That being said, it's a moment in time where the private market's outperformance to public markets is really in question. And, you know, a lot of the private markets have actually disappointed investors. So I don't know that it will be people banging on the doors of these institutions to pour their money into them. Antoine Gara is the FT's U.S. private equity and deals editor. Thanks, Antoine. Thank you.

6:00It has been one year this week since President Trump announced his tariff plans that rocked the world. But they suffered a major blow last month when the U.S. Supreme Court ruled against them. The top court said the president couldn't use emergency powers to impose tariffs. And in part two of our series on the anniversary of Trump's so-called Liberation Day, we're looking at what's next for the president's levies after the ruling. Stefania Palma is our U.S. legal and enforcement correspondent, and she joins me now. Hi, Stefania. Hi, Mark. So, Stefania, remind us why six of the nine Supreme Court justices ruled that Trump's tariffs were illegal.

6:37So, basically, Trump, for the first time ever last year, used a law called the International Emergency Economic Powers Act to impose tariffs on dozens and dozens of countries. He was the first president to ever use this law for this purpose. Ultimately, a majority of the justices said that he was trying to assert extraordinary power to impose tariffs on what they called unlimited scope, amount and duration. And furthermore, that in the AIPA text, which is sort of a quick way to refer to the law, there was actually no reference to tariffs. And therefore, Trump could not use this law to impose this critical part of his policy agenda.

7:20So does that mean that the tariffs are in place or are they not in place? You know, where do we stand here? So immediately after the ruling, Trump was quite furious with the Supreme Court and very quickly imposed new tariffs using a different law. Now, the reason I think it's worth stressing, the reason why Trump decided to choose AIPA as a vehicle to impose tariffs in the first place is because it's essentially the quickest way. But now, all of a sudden, Trump doesn't really have choice. He has to go and sort of pursue other avenues. And so he did use the Trade Act of 1974 to impose tariffs. But this particular statute allows him to do so with duties of up to 15 percent for up to 150 days.

8:07Once that time is up, he will actually have to get a vote in Congress to extend them, which is sort of the next step. But a group of Democratic state attorneys general in states sued the government again, saying that actually that is not the appropriate tool to impose tariffs, specifically because it typically is not used to address a trade deficit. So we are sort of in a situation where the government is trying all sorts of options to try and impose tariffs, but it keeps hitting a wall in terms of legal challenges coming back at them. Okay, so just to recap, these new tariffs are in place while the lawsuit against them are playing out in courts, but they expire after 150 days, sometime in like mid-July, mid-late July, and then Congress needs to re-up them.

8:57Stefania, after the Supreme Court ruled the IEPA tariffs illegal, businesses, you know, they started suing the United States. Basically, they want their money back that they paid through these duties. Where do things stand there? So in the words of Justice Brett Kavanaugh, one of the justices who actually was in dissent when it came to the IEPA case, It is quite a mess in the sense that the Supreme Court decided to specifically focus on whether Trump had the authority to use AIPA to impose these tariffs. It left essentially all other questions to lower courts. It kind of pushed all of that back down.

9:36This is an enormous endeavor, not least because the U.S. has accumulated something like up to$150 billion in revenue stemming from AIPA tariffs. And now you all of a sudden have to find a way to potentially give all this money back. I mean, we speak to trade lawyers who've dedicated their professional life to trade law. And when you ask them, how is this repayment going to work? They basically say that if anyone says that they know exactly what's going to happen, they're essentially lying. And then no one really quite knows. I guess we'll just have to wait and find out. Stefania Palma is the FT's U.S.

10:15legal and enforcement correspondent. Thanks, Stefania. Thank you. In tomorrow's installment of our series, we speak to some American business owners who sued the Trump administration over the tariff regime. If the goal is actually bring manufacturing back to the United States, tariffs is absolutely not going to do it because it's going to put us out of business before we can do that. That's in part three of our series on tariffs. You can read more on all these stories for free when you click the links in our show notes, including a link to the first installment in our tariff series. This has been your daily FT News briefing.

10:47Check back tomorrow for the latest business news.

11:17fellow reporter Patricia Nielsen and I started digging into the porn industry to find out how the money flows. And in our new audiobook, The Kink Machine, The Hidden Business of Adult Entertainment, you'll hear our investigation into the power and influence that drives the most taboo corners of the internet. Find The Kink Machine, The Hidden Business of Adult Entertainment at pushkin.fm slash audiobooks or at Audible, Spotify or wherever you get your audiobooks. Thank you.