The economics of tariff ruling

US SUPREME COURT HAS POSITIONED RULE OF LAW AS THE ULTIMATE ARBITER OF A TERRIBLE ECONOMIC POLICY

- STEPHEN S ROACH

THE US SUPREME Court did the right thing by ruling that the International Emergency Economic Powers Act of 1977 (IEEPA) “does not authorise the President to impose tariffs”.

Half of the Court’s conservative majority has, at long last, stood up to US President Donald Trump’s brazen overreach of executive power.

The Court, claiming “no special competence in matters of economics or foreign affairs’, stayed in its lane, as dictated by Article III of the US Constitution, and focused solely on the legality of Trump’s signature tariff policies. Its 6-3 decision, with three conservatives joining the Court’s three liberal justices, effectively positioned the rule of law as the ultimate arbiter of terrible economic policy.

The Court’s argument is based on a simple principle that Americans learn early in their education: Under the separation of powers doctrine, the Constitution grants taxing power solely to Congress. The corollary is that, notwithstanding the Trump administration’s absurd protestations, tariffs are indeed taxes on US companies and households. As Chief Justice John Roberts wrote in the majority opinion, the Court was not about to allow such a “transformative expansion of the President’s authority over tariff policy”.

Claiming no special competence in legal matters (apart from having a small office at Yale Law School), I am compelled to weigh in on the ruling’s economic implications, which align with the Court’s underlying reasoning for three key reasons.