The first federal court hearing on Trump’s tariffs did not go so well for Trump

A federal court held the very first hearing on President Donald Trump’s wide-ranging, so-called Liberation Day tariffs on Tuesday, offering the earliest window into whether those tariffs — and potentially all of the shifting tariffs Trump has imposed since he retook office — will be struck down. The case is V.O.S. Selections v. Trump. It is unclear how the three-judge panel that heard the case will rule, but it appears somewhat more likely than not that they will rule that the tariffs are unlawful. All three of the judges, who sit on the US Court of International Trade, appeared troubled by the Trump administration’s claim that the judiciary may not review the legality of the tariffs at all. But Jeffrey Schwab, the lawyer representing several small businesses challenging the tariffs, also faced an array of skeptical questions. Many of the judges’ questions focused on United States v. Yoshida International (1975), a federal appeals court decision which upheld a 10 percent tariff President Richard Nixon briefly imposed on nearly all foreign goods. That is understandable: Yoshida remains binding on the trade court, and the three judges must take it into account when they make their decision. It is not, however, binding upon the Supreme Court, whose justices will be free to ignore Yoshida if they want. Ultimately, that means it is unclear how much influence the trade court’s eventual decision will have over the Supreme Court, which is likely to have the final word on the tariffs. At the heart of V.O.S. Selections are four key words in the International Emergency Economic Powers Act of 1977 (IEEPA), the statute Trump relied on when he imposed these tariffs. That statute permits the president to “regulate” transactions involving foreign goods — a verb which Yoshida held is expansive enough to permit tariffs — but only “to deal with an unusual and extraordinary threat with respect to which a national emergency has been declared.” It is likely that the trade court’s decision will turn on what the words “unusual and extraordinary threat” means. While Yoshida offered guidance on “regulate,” there appears to be few, if any, precedents interpreting what those four words mean. In his executive order laying out the rationale for these tariffs, Trump claimed they are needed to combat “large and persistent annual US goods trade deficits” — meaning that the United States buys more goods from many countries than it sells to them. But it’s far from clear how this trade deficit, which has existed for decades, qualifies as either “unusual” or “extraordinary.” Schwab seemed to flub several direct questions from the judges asking him to come up with a universal rule they could apply to determine which “threats” are “unusual” or “extraordinary.” When Judge Gary Katzmann, an Obama appointee, asked Schwab to name the best case supporting his argument that a trade deficit is neither unusual nor extraordinary, for example, Schwab was unable to do so. That said, some of the judges sounded outright offended when Eric Hamilton, the lawyer for the Trump administration, claimed that the question of what constitutes an unusual or extraordinary threat is a “political question” — a legal term meaning that the courts aren’t allowed to decide that matter. As Judge Jane Restani, a Reagan appointee, told Hamilton, his argument suggests that there is “no limit” to the president’s power to impose tariffs, even if the president claims that a shortage of peanut butter is a national emergency. The overall picture presented by the argument is that all three judges (the third is Judge Timothy Reif, a Trump appointee) are troubled by the broad power Trump claims in this case. But they were also frustrated by a lack of guidance — both from existing case law and from Schwab and Hamilton’s arguments — on whether Trump can legally claim the power to issue such sweeping tariffs. What the Nixon precedent tells us about Trump’s tariffs Early in the argument, Schwab appeared to be in trouble, as he faced a barrage of questions about how the Yoshida decision cuts against some of his arguments. As Restani told him at one point, the argument that a statute permitting the president to “regulate” does not include the power to impose tariffs is a nonstarter, because Yoshida held the opposite. That said, all three judges proposed ways to distinguish the Nixon tariffs upheld by Yoshida from the Trump tariffs now before the trade court. Restani, for her part, argued that the Nixon tariffs involved a “very different situation” that was both “new” and “extraordinary.” For several decades, US dollars could be readily converted into gold at a set exchange rate. Nixon ended this practice in 1971, in an event many still refer to as the “Nixon shock.” When he did so, he briefly imposed tariffs to protect US goods from fluctuating exchange rates. Yoshida, in other words, upheld temporary tariffs that were enacted in order to mitigate the impact of a sudden and very significant shift in US monetary policy, albeit a shift that Nixon caused himself. That’s a very different situation than the one surrounding Trump’s tariffs, which were enacted in response to ongoing trade deficits that have existed for many years. Restani and Katzmann also pointed to a footnote in Yoshida that said Congress enacted a new law, the Trade Act of 1974, after the Nixon shock. This footnote states a future attempt to impose similar tariffs “must, of course, comply with the statute now governing such action.” Whatever power Nixon might have had in 1971, in other words, may now be limited by newer laws. Reif also made a similar argument, pointing out that there is a separate federal statute dealing with trade practices such as “dumping,” when an exporter sells goods below their normal value. He questioned whether the president could bypass the procedures laid out in that anti-dumping statute by simply declaring an emergency, and then imposing whatever trade barriers the president wanted to impose under IEEPA. That said, none of the judges — and neither of the lawyers — were able to articulate a rule that would allow future courts to determine which presidential actions are “unusual” or “extraordinary.” Hamilton’s suggestion that courts can’t decide this question at all sunk like a pair of concrete shoes, with Katzmann arguing that the IEEPA’s “unusual and extraordinary” provision would be entirely “superfluous” if Congress hadn’t intended courts to enforce it. Schwab, meanwhile, earned a scolding from Restani when he kept trying to argue that Trump’s tariffs are such an obvious violation of the statute that there’s no need to come up with a broader legal rule. “You know it when you see it doesn’t work,” she told him — a reference to Justice Potter Stewart’s infamously vague standard for determining what constitutes pornography. The three judges, in other words, expressed serious concerns about the Trump administration’s argument for the tariffs. But it’s not clear that they have figured out how to navigate the uncertain legal landscape looming over this case. Will the decision be broad enough to matter in the long run? Though the bulk of the argument focused on the four key words in the IEEPA, it’s not clear that a narrow decision holding that this law does not permit these tariffs will have much staying power. Trump could potentially try to impose the tariffs again, using the somewhat more drawn out process laid out in the 1974 Trade Act, which permits the government to “impose duties or other import restrictions” after the US Trade Representative makes certain findings. So if the courts issue a narrow ruling against these tariffs, they may have to go through a very similar dog and pony show in a few months. There are, however, two controversial legal doctrines popular with conservatives — known as “major questions” and “nondelegation” — which could lead to a more permanent reduction of Trump’s authority. Broadly speaking, both of these doctrines empower the courts to strike down a presidential administration’s actions even if those actions appear to be authorized by statute. Late in the argument, Restani seemed to latch onto the nondelegation theory. Under current law, Congress may delegate power to the president or a federal agency so long as it “shall lay down by legislative act an intelligible principle to which the person or body authorized to [exercise the delegated authority] is directed to conform.” This “intelligible principle” test is famously very deferential to Congress. Nevertheless, Restani asked some questions indicating that she may think that the IEEPA is the rare law which provides so little guidance to the president that it must be struck down. She noted that the law does permit Congress to pass a resolution canceling tariffs after the fact, but argued that this kind of after-the-fact review is not a substitute for an intelligible principle letting the president know how to act before he takes action. The major questions doctrine, meanwhile, establishes that Congress must “speak clearly” if it wants to give the executive branch authority over matters of “vast ‘economic and political significance.’” By some estimates, Trump’s tariffs are expected to reduce real family income by $2,800, so that’s certainly a matter of vast economic importance. Thus, to the extent that the IEEPA’s language is unclear, the major questions doctrine suggests that the law should be construed to not permit these tariffs. Hamilton’s primary argument against this line of reasoning is that the major questions doctrine does not apply to the president at all, only to actions by federal agencies that are subordinate to the president. But none of the three judges appeared sympathetic to this argument. Restani, in particular, seemed incredulous at the suggestion. Overall, the judges seemed interested in exploring the nondelegation and major questions factors, and repeatedly rebutted suggestions that ruling on the tariffs was beyond their power. And that suggests the trade court will likely rule against the tariffs. That outcome is far from certain, however, and the trade court is highly unlikely to have the final word on this question. But the legal case for the tariffs appeared weak before Tuesday’s hearing, and nothing that happened on Tuesday changes that.

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The first federal court hearing on Trump’s tariffs did not go so well for Trump