Three US courts have ruled that the US President doesn’t have the authority to declare fentanyl a national emergency and use that to place tariffs on American companies and consumers importing goods.
Article 1 of the US Constitution says:
The Congress shall have Power To lay and collect Taxes, Duties, Imposts and Excises, to pay the Debts and provide for the common Defence and general Welfare of the United States; but all Duties, Imposts and Excises shall be uniform throughout the United States.
The President has tried to bypass that by using emergency laws that were only previously used on despotic regimes like Iran and North Korea. The language in says it must be an “unusual and extraordinary threat” from outside the United States.
The latest decision was at the Federal Circuit court, which ruled 7-4 against Trump.
This week, arguments will take place in the Supreme Court and the market will be watching for comments and questions from Supreme Court judges on which way they might be leaning. Betting markets show about a 60% chance the tariffs will be struck down, in what could be a windfall for companies that had paid them (there is also the risk that prior tariffs will be allowed to stand, but not collected going forward).
On the merits of the law, this should be a clear loss for Trump as the law itself and the Constitution are clear. The question is whether we’re in a new era where ’emergency’ includes whatever Trump says it is, including hitting Canada with an additional 10% tariff because Trump didn’t like the content of an ad quoting Ronald Reagan.
The problem is that Republicans hold a 6-3 majority in the Supreme Court and they may be inclined to ignore prior statute to let Trump do whatever he wants. That’s a real risk, and it’s not just as risk for tariffs but in future showdowns regarding Presidential powers, emergency powers and anything else Trump might want to do.
In short, this is a question of whether the Supreme Court will ever stand up to Trump.
Importantly, this isn’t going to be a snap decision. Typically, it takes 3-6 months to get a decision and that means this could drag until the middle of 2026. Most court watchers though expect a decision around January.
If the tariffs are struck down, a clean trade would be something like Nike, which has paid extensive tariffs and could get a big refund. Other companies that have paid tariffs would also benefit. In addition, it would be positive for global growth levered trades, commodities, international equities and industrials. It would be negative for Treasury bonds but at $90 billion in revenues so far (on a $2 trillion deficit), it’s not nearly as material as Trump would like to pretend.
Trump wrote late yesterday:
Next week’s Case on Tariffs is one of the most important in the History of the Country. If a President is not allowed to use Tariffs, we will be at a major disadvantage against all other Countries throughout the World, especially the “Majors.” In a true sense, we would be defenseless! Tariffs have brought us Great Wealth and National Security in the nine months that I have had the Honor to serve as President. The Stock Market has hit All Time Highs many times during my short time in Office, with virtually No Inflation, and National Security that is second to none. Our recent successful negotiation with China, and many others, put us in a strong position only because we had Tariffs with which to negotiate fair and sustainable Deals. If a President was not able to quickly and nimbly use the power of Tariffs, we would be defenseless, leading perhaps even to the ruination of our Nation. The only people fighting us are Foreign Countries who for years have taken advantage of us, those who hate our Country and, the Democrats, because our numbers are insurmountably good. I will not be going to the Court on Wednesday in that I do not want to distract from the importance of this Decision. It will be, in my opinion, one of the most important and consequential Decisions ever made by the United States Supreme Court. If we win, we will be the Richest, Most Secure Country anywhere in the World, BY FAR. If we lose, our Country could be reduced to almost Third World status — Pray to God that that doesn’t happen!
This article was written by Adam Button at investinglive.com.