President Trump’s Tariffs and the Separation of Powers at the Supreme Court

0:00Tariffs are taxes on Americans. The tax bill goes to my clients. My clients pay the bill. Tariffs are not paid by foreign governments, as President Trump sometimes says. Taxes on American citizens is something that is closely guarded by Congress. We actually fought the American Revolution largely on the slogan of no taxation without representation. That is to say that you shouldn't have to pay taxes unless you're represented in a legislative body that enacts them.

0:42This is Stanford Legal, where we look at the cases, questions, conflicts, and legal stories that affect us all every day. I'm Pam Carlin, along with Diego Zambrano. Please subscribe or follow this feed on your favorite podcast app. That way you'll have access to all our new episodes as soon as they're available. Today, we're going to be talking with our colleague Michael McConnell about something that does affect us all every day if you buy any products other than things at the local farmer's market and maybe even there, which is the tariffs that President Trump has imposed on a huge number of nations and a huge number of goods and the challenge that's been brought to those tariffs.

1:22It's great to have Michael back on the show. Michael is the Mallory Professor of Law here at the law school. He's visiting at NYU for the fall, and he is serving as one of the lawyers in a challenge to the tariffs case. Michael is also, I should say, somebody that William Brennan, who was a justice on the Supreme Court, once said was one of his two smartest clerks. And so having Michael here to talk with us about the tariffs case is especially good because this is actually a really kind of hard and complicated issue. So thanks so much for coming back to the show, Michael. Thanks, Pam. Are you sure he didn't say I was one of his most smart-alecky clerks?

2:01No, he actually said, and this is actually such a tribute to you in a way, Michael. He said, you know, my two smartest clerks were Michael McConnell and Richard Posner, and I don't agree with them about anything. Now, this was, of course, after a couple of martinis in Miami after he'd retired. But I really do think that you bring so many different skills to being a law professor, both having been a former federal judge and being an active litigator, in addition to being a scholar of presidential power, stretching back to the founding. So it's just delightful to have you here. My, I don't know what to say.

2:39That's the most flattering introduction I've ever gotten. Oh, well, usually you have to be dead before people say such nice things about you, but I figured worth saying now. Being at NYU is kind of like being, you know, Tom Sawyer at his funeral. Oh, I thought, are you asking people to paint fences? Actually, I do, yes. I get people to give me free help on tariffs because I've had to do a whole education in American trade policy. Yeah, so maybe we should start with what actually the president did. So on April 2nd, he issued an executive order which declared an emergency under the National Emergencies Act, an emergency with respect to what he called large and persistent trade deficits.

3:26And at the same time, also said that they presented an unusual and extraordinary threat to various American interests. Those are all buzzwords in a statute called the International Economic Emergency Powers Act, which everybody calls AIPA. I love that name, AIPA. And what AIPA does is it gives the executive a number of authorities having to do with world economic matters that are triggered only upon a declaration of emergency, but also can only be exercised in the case of a, quote, unusual and extraordinary threat to American interests. AIPA is a successor statute to something that was called the Trading with the Enemy Act.

4:21And the Trading with the Enemy Act was essentially a codification and extension of old common law principles arising out of the law of war. So when a country declares war, it becomes illegal for their own citizens to engage in trade with the enemy country. It also authorizes the belligerent nation to seize property and do a number of other things. IEPA carries over a number of these authorities. None of them historically had anything to do with tariffs. They all had to do with things like embargoes, blockades, asset freezes, that sort of thing. So like no Cuban cigars? No Cuban cigars, exactly.

5:34getting Iranian assets back into Iranian hands. And this involved free, this involves suspending certain claims that were pending in U.S. courts against Iranian companies. And so that essentially releasing a whole bunch of, you know, billions of dollars was involved and the IEPA was used to that. So this has to do with asset freezes. Again, never tax that. The taxing power is vested in Congress. And there's no doubt that that is taxing its imports as well as anything else. This is Article 1, Section 8, Clause 1, the very first clause giving the powers of Congress. And it gives Congress the power to impose taxes, imports, imposts, and duties.

6:23Well, imposts and duties, those are just synonyms for tariffs. In the early years of the Republic, tariffs amounted to the vast majority of federal revenues, often more than 90 % of federal revenues. They were the leading tax. And so when people speak of the Congress having the power to tax and power the purse in the early years of the Republic, that really meant control over tariffs. And it has only been recently that presidents have had any authority at all. And we say that that the president has to stick with the specific statutes that talk about tariffs, that give him authority with respect to tariffs.

7:07And he can't reach out to IEPA, which doesn't even mention tariffs. And by the way, no president has ever used it for tariffs in the past. Before we get into the weeds of the tariff arguments and the case that you're litigating, I want to, again, ask the broader question of emergency powers in general. So you've mentioned just the history and the framers, and it seems like there's this enormous web of emergency powers in general. I mean, do you see those as a monstrous deviation of the original design of the Constitution? Or are emergency powers appropriate? And you happen to disagree with the one here.

7:47So the president has no emergency powers vested by the Constitution. But if Congress chooses to give him defined emergency powers, I don't think there's anything wrong with that. And indeed, I think there are circumstances in which somebody has to be able to move quite quickly in the event of an emergency. You can't always bring Congress together and get something passed. I do think that there is a problem with the National Emergencies Act in that it is extremely broad and it unlocks powers under, I think, I think it's 180 different statutes. And when the Emergencies Act was originally passed, Congress had a one house with veto, or it may have been a two house veto, but had a legislative veto so that if the president declared an emergency and Congress didn't agree, they could immediately shut it down.

8:47About 10 years later, the Supreme Court held that legislative vetoes in general, not specifically about the Emergencies Act, but legislative vetoes in general are unconstitutional. And yet the Emergencies Act is still out there. Congress felt free to write a very broad statute because it would hold the reins. And now we're stuck with an unusually broad statute without the check that Congress originally. If I can follow up on what Diego was saying, Diego, I'd love for your reaction to this as well. There are two different issues here in a way. One is, can Congress give these emergency powers to the president and did it?

9:25And the second is, what counts as an emergency, which also there's not a kind of really great definition of, is there? Well, there's no definition at all in the Emergencies Act. And we've got a president who seems to think everything is a five alarm fire. Yeah, I mean, this is true, although we have to acknowledge that previous presidents were pretty free to declare emergencies as well. There are quite a few emergencies on the books with about any number of things. very rarely do they pertain to a massive domestic policy like attacks. I mean, this is, I think, the most far-reaching presidential act justified on an emergency basis.

10:13I mean, maybe a related question before we get into the weeds of the case, and I do want to do that. The question of congressional inaction. You mentioned this system might make sense where Congress can't act, and therefore it delegates to the president emergency powers to act as quickly as the president can. But now you have a situation where Congress could act. It's just paralyzed for different reasons. It seems, again, this is kind of a corruption of the way the system is supposed to work. This is a broader problem than just the emergencies. Recent years, presidents have tended sometimes to take the view that, well, if Congress won't do what they want, then Congress isn't doing their job and we'll just do it ourselves.

10:59So, you know, President Obama was famous for saying something like, I have a phone and a pen. And so he's just going to do it. As you say, this really is a departure because if there's a power that is vested in Congress and Congress does not act with that power, it means that there is no authority in the executive to execute. Yeah. Do you want to turn now, I think, maybe to the tariffs case itself and a little bit about how this case came about and what the claim you're making is? So there are actually three cases that are consolidated. I am involved in one of them, which I think is the most important, maybe because I'm involved, but because it has real plaintiffs with real stakes in the action.

11:48There's no question of standing. It's a direct. Our clients are five small businesses that have paid tariffs and are suing for a read. They're also affected by the tariffs in other ways in that their input costs have gone up. In many cases, that's enough to drive them out of business. Fortunately, they haven't gone out of business yet. The other two cases, one was brought by 12 states, all of them with Democratic attorneys general. And then there's a third case, which was also brought by individual businesses, but not brought in. And this is really getting into the weeds. But our case was brought in the Court of International Trade.

12:32There is a statute that provides that any litigation about the enforcement of tariff laws must be brought in the Court of International Trade and nowhere else. And this other group, the leading plaintiff is called Learning Resources, brought suit in an ordinary federal district court. And so there's a jurisdictional question as to where the case should have been brought. The Supreme Court allowed learning resources to intervene in this or to be consolidated and to be part of the same action. So that no matter where jurisdiction is, the Supreme Court's going to be able to decide this case. And they put it on a super fast track for them, which is they set it for the November sitting, the first week of the November sitting.

13:24That's right. They could hardly have acted any quicker. But note that this is not one of those emergency so-called shadow docket cases where they decide important questions sort of provisionally without there having been a full decision. There's an actual decision by the Court of International Trade on the merits, full opinion. There was a full consideration by the appellate court with a decision on the merits. There's full briefing. There will be argument. This is a normal case. It's just that they're doing it quickly. Yeah, which I think is so much better than what they've been doing with the shadow docket, because the parties do have a full opportunity to present their arguments, both in writing and orally.

14:09Yes, I don't think it's the Supreme Court's fault, but these cases where they have to grapple with difficult issues, often for the first time, where there hasn't even been a decision below, it is a problem. But our case is not like that. So let's talk about the reasoning of this decision in the federal circuit. In broad terms, the court held that regulate importation doesn't authorize these tariffs that the president issued. And there are a bunch of tariffs. And it actually is important to untangle which tariffs we're talking about because they may be authorized by different statutes. But the main one here, IEPA doesn't authorize this.

14:56Now, this was a 7-4 majority decision, and there were four dissenters who wrote a compelling dissent on why they think the AIIPA does authorize these tariffs. So what do you think is the biggest disagreement there? Maybe start discussing the statutory texts. Yes. So the big disagreement is over the meaning of this phrase in AIIPA, namely the president, that in the event of the unusual and extraordinary circumstances and an emergency, in that event, the president has the authority to engage, do certain things. And one of them is to, quote, regulate importation or exportation. And it was the opinion of the majority that that does not include taxation, that regulation is a separate kind of power than the power to tax.

15:52But even if it did, that IEPA, if there's any taxing power at all, that IEPA has to be limited in some way, that it can't just be an unbounded power for the president to be able to do whatever he wants. A great deal of this has to do with the history of how IEPA came about in the 1970s. And that's really where the, you know, it may get into the weeds, but I think that's where the real meat of the legal argument in the case is. Absolutely. And I just think we should just say briefly that the text, regulate importation, doesn't include the word tariff or customs. It doesn't... Or duty or tax. Duty, tax, et cetera.

16:37And so you could argue just on a textual basis that this isn't covered. The president doesn't have this power. You could, and we do. The government argues quite strenuously that the term regulate might sometimes, it doesn't preclude taxation, and sometimes it includes a taxation. You could imagine, for example, a statute that says something like the FDA may regulate cigarettes by imposing taxes. That is not an incoherent idea. But our position is without some sort of special context or words of that sort, you don't just read into the word, the bare word regulate this very different power of taxation.

17:23Well, and especially when you do have other statutes that more explicitly say things like taxes, et cetera. However, Michael, I do want to. So that's a very important point, Diego, because Congress has passed a series of statutes giving the president explicit powers to impose tariffs under specific circumstances. So, for example, where a type of import endangers national security, import or export. So, for example, this might involve the export of militarily significant technology. The president is able to block that under that statute. Another statute provides it when another country trading partner is engaged in dumping or other unfair trade practices, that the president can respond with a tariff.

18:13But through a rather elaborate process, it has to be. Yeah, and those statutes have both a lot of process, and then they also have a lot of substantive restrictions on how much the tariff can be in some cases or for how long it's imposed or like. And if the president can proceed under IEPA, presumably his claim is he has unlimited authority to decide how big the tariff is and for how long. Yes, and the most pertinent such statute was just passed, you know, the Congress before IEPA. And this is Section 122 of the Trade Act of 1974. And it is in the case of large and serious trade deficits that the president can act.

18:58But he cannot increase tariffs by more than 15%. And it only lasts for 150 days. So most of President Trump's tariffs, or at least a great many of them, depending on whether, They keep changing almost every day, on and on again, off again. But many of his tariffs are in excess of 15 percent, 57 percent on Brazil, for example, 30 percent on India. China seems to change every day. So they're in excess of that limit and also they're perpetual. They're not limited to 150 days. Our position is when Congress enacts a specific statute allowing a certain power, but limited in a particular way, it makes no sense to say that another statute that doesn't even mention tariffs just allows the president to do whatever he wants.

19:58Yeah, and I do want to talk about the history, but I will say the government has this argument that the statute does say the president can prohibit the importation. And it would be maybe nonsensical to say that you can prohibit the importation, but you cannot tax it, right? That the greater power to prohibit includes the lesser power of taxing. Now, maybe just briefly address that, but then I want to talk about the Nixon precedent because I think a lot of the case hinges on that. So I'd be happy, the greater includes the lesser argument, but there's both a historical and a logical problem with that argument.

20:34The historical argument is that IEPA comes from the Trading with the Enemy Act and the Trading with the Enemy Act was essentially a codification of the old law of war, which prohibited imports and exports when you're at war with another country. It didn't allow taxation and it was never used for taxation. So the prohibition taxation line is embedded in the very history of these powers. Logically speaking, though, there's some reasons why their taxing power is really not a lesser power. For one thing, taxation yields revenue. and you know president trump is proud of saying how many you know hundreds of billions of dollars his tariffs are going to bring in well that's a real temptation embargoes you know prohibitions don't bring in any money and bringing in money is always a very tempting thing and so you know it makes sense to treat these two things as quite different because the politics of them you know the practical consequences are so different.

21:40The second thing is that these prohibitions are prohibitions on foreigners importing into the United States. Tariffs are taxes, taxes on Americans. The tax bill goes to my clients. My clients pay the bill. Tariffs are not paid by foreign governments, as President Trump sometimes says. Taxes on American citizens is something that is closely guarded by Congress. We actually fought the American Revolution largely on the slogan of no taxation without representation. That is to say that you shouldn't have to pay taxes unless you're represented in a legislative body that enacts them. So the idea that regulation is greater and it includes the lesser just seems like a category error.

22:34Yeah. I mean, I've always thought the two are kind of orthogonal to each other, that, you know, they're not, one is not smaller than the other in the way that, you know, assault is less than assault with a deadly weapon. It's not like that. And you raised one point that I just want to say one thing about and then turn back over to Diego, which is the president keeps saying, as you noted, that foreign governments are paying these tariffs. And that's just at the end of the day, not true. I mean, at some point, the cost of those tariffs gets passed on not just to your clients who are American businesses, but to the customers of those businesses who are going to have to have to pay this stuff.

23:15And one of the things that's so extraordinary to me about the government's arguments is not just the quality of some of them, but also, I mean, you were an assistant in the Solicitor General's office for many years before you became a professor and then a judge and then a professor. And some of the statements the Solicitor General has made in his filings with both the Federal Circuit and the Supreme Court are just unlike anything I've ever seen from the government before. I mean, there was a letter saying, without the tariffs, America was a dead nation. And I just think it's worth sort of noting how unusual that all is.

23:55Well, Pam, you're a professor of law and you can point things out like that. But as one of the lawyers in the case, I think I'm going to pass on commenting on the other side's briefs. Yeah. Yeah. That's why I thought I'd say a little bit about it. But back to you, back to you, Diego. Well, there's this question that we've been now mentioning several times on the history of how the statute was enacted. And there's this argument that under the previous statute before IEPA, the Trading with the Enemies Act. President Nixon actually imposed a 10 % global duty. And the argument is twofold. One, that Nixon used the same exact language in that previous statute, regulate importation to do that, number one, and that that same language was preserved in AIPA.

24:43Michael, you can tell us about that major decision on the previous language. But two, that there is precedent for a president doing this. And that affects a second question in the case, the major questions doctrine, the idea that we should read statutes such that the president or administrative agencies don't have the power to impose major unprecedented regulation that has an effect on the economy, et cetera. So we're going to get into that, but talk to us about the Nixon case and the meaning of it. Yes, this is really important to the legal detail of the case because the government, you exactly summarized the government's argument, which is this language regulating importation or exportation is the same as language in the Trading with the Enemy Act.

25:34And it had been, so the Trading with the Enemy Act was originally passed during World War One, it was never used for tariffs until 1971, when for one time only a president did use it for tariffs. And this was Richard Nixon at a time, by the way, of an undoubted emergency. Basically, what happened is that the old monetary system, the gold standard broke down and And there was very quickly, there was a real problem. And President Nixon imposed a 10 % surcharge. Note that that's respecting all of Congress's set rates, but just changing them by 10%. But and only, and it was temporary, it lasted actually less than five months.

26:25And how did Congress respond? Congress actually didn't disagree with the economics of what Nixon did. It was probably one of Nixon's smartest moves in a way, but they were very concerned about the assumption of power. And so there were hearings on the Trading with the Enemy Act in which witness after witness came in and said, this is just a dangerous power. It's been used too much. We need to cut back on it. Even the administration at the time testified that maybe this needs to be cut back. And so they did several things. The first thing that they did was that they passed a specific statute to give the president explicitly the power that Nixon had exercised.

27:12So they explicitly say in the case of of large and serious trade imbalances, the president can impose tariffs, but only within 10, within 15 percent limitation and only for 150 days. So essentially what they did was they would not have passed that if they had actually, if IEPA really meant for the Trading with the Enemy Act at the time, really did provide this authority, if Congress thought it did, there'd be no need for this statute. So what they did is they, after Nixon asked or acted, they come in and they, in effect, ratify his decision, but with a very narrow and specific statute. Secondly, they then repeal the Trading with the Enemy Act, except in the case of declared war.

28:06So that's now a side. And then third, they enact IEPA. And by this time, they now think that the tariff issue has already been dealt with. And so they don't even mention tariffs. There's nothing about tariffs in the legislative history. Nobody talks about tariffs. It just wasn't on their minds. And the reason for that is that they had already dealt with the tariff question in the Trade Act. But here's the second aspect of this, that so Nixon does his tariffs, his 10 % surcharge. They are immediately challenged in court. Customs Court, which is the predecessor court to the Court of International Trade, says Nixon didn't have the power to do that.

28:50He can't do that. Trading with the Enemy Act doesn't mean that. regulating importation does not mean that. That's when Congress enacts the Section 122 of the Trade Act, giving the president this very limited authority. By this time, the tariffs are over. And so all that is at stake in the litigation is whether the people who had paid the tariffs are entitled to a refund. And the appellate court reverses the Customs Court and they say, TWIA is broad enough to encompass Nixon's tariffs. And the reason that that was okay is that Nixon's tariffs were so limited. They were temporary. And perhaps most importantly, the way that Nixon did them is that they were all under the congressionally authorized rates.

29:45So Congress had authorized tariffs at a pretty high level. And then over the years, and given president's authority to negotiate with trading partners to bring them down. And so what Nixon did is he went up by 10%, but only countermanding decreases that had been by presidential decision, not congressional decision. So he completely stayed within the legal structure of what Congress had previously an act although michael this doesn't at least rebut the idea that the language regulated importation could include a terror i mean you you are giving us a lot of other detail oh but yes but if the only reason one might think that is because a court said so then you want to look at what the court actually said and so what the court said is that it we're limited to this very you know We're approving very narrow, limited tariffs.

30:45And they go on to say, we are not, they explicitly say that we're not interpreting this to give the president unbounded tariff authority. They say that would actually even be unconstitutional. It would be contrary to the whole history of trade regulation and so forth. And so the government now wants to say, well, that means unbounded authority. Yeah. Yeah, a lot of this hinges, and you've given us a lot of great detail on how we interpret that original Nixon global duty of 10%, the Yoshida case in between, and then what Congress did in IEPA. And so there are lots of arguments about that, and the dissent at least buys the government's arguments.

31:27And a lot of the Supreme Court case will revolve around that. I want to ask you a final question here on the major questions doctrine. And so as I mentioned a second ago, over the last 10, 15, 20 years or so, the Supreme Court has increasingly used this doctrine to limit the power of agencies usually, but also the president, to at least issue regulations that have vast economic and political significance. And the court has said we're not going to interpret a statute to confer that power unless Congress is very clear about that. And the argument here is that we should read the statute as not conferring this authority on the president because it would be vast, vast economic and political significance.