Monday, March 31, 2025

Supply Lines: Trump’s trade authority

Trade and economic policy do not often lead to rich-world constitutional crises. But as President Donald Trump prepares to unveil tariffs se
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Trade and economic policy do not often lead to rich-world constitutional crises. But as President Donald Trump prepares to unveil tariffs set to be a historic milestone in the management of the US economy, it's worth pointing out he won't be doing it the way the republic's founding document envisions.

As Trump's advisers finalize plans to impose another wave of duties including so-called "reciprocal" tariffs on all or most US imports, there's no sign that they have given the US Congress a substantive say. Or that Trump cares very much what Congress thinks as he gears up for April 2 and what he has dubbed "liberation day."

And yet Article 1 of the US Constitution is clear in giving the legislative branch the power "to lay and collect Taxes, Duties, Imposts and Excises" and "to regulate commerce with foreign nations."

In both his first term and his current one, Trump has invoked powers given to presidents via laws passed decades before to impose his tariffs. Those moves, though, haven't been without controversy and it's fair to say Trump is going a giant leap further in testing the boundaries this time.

That's caused even Republicans to mull out loud whether the legislature should rein him in.

"Tariffs really should be a congressionally initiated action," Republican Representative Don Bacon told CNN last week, citing the Constitution. Bacon also called past moves by Congress to delegate "temporary" tariff authorities to presidents a "mistake" and said "I think we should look back and maybe restore the power to Congress." 

Read More: Trump Open to Tariff Negotiations, Will Hit Drug Imports 'Soon'

Of particular interest to legal scholars this time is Trump's use of the International Emergency Economic Powers Act to levy duties on Canada, Mexico and China.

Trump in February became the first president to invoke IEEPA to justify tariffs. The only move like it is Richard Nixon's use of a predecessor of the 1977 law to impose duties that lasted four months in 1971 to force other countries into currency revaluations.

But there's a convincing argument out there that IEEPA doesn't really grant presidents the power to impose tariffs and that Trump's use of the statute violates the Constitution.

Court Challenges

Which matters because there's a good chance IEEPA will feature again this week as a justification for Trump's new tariffs.

At some point someone is likely to challenge the constitutionality of that maneuver and ask US courts to decide. Which means eventually the Supreme Court may rule on Trump's power to declare economic emergencies and levy tariffs.

For that reason there's an expectation that if some of Trump's tariff actions this week use emergency powers so they can go into immediate effect, they may be accompanied by the launch of investigations under other laws that would eventually put duties on firmer legal footing.

But all that is procedure and technicalities. Trump is already setting broader precedents that undermine Congress' constitutional trade powers.

Read More: Anti-American Sentiment Rises in Europe as Trump Fuels Anger

Until Trump won the 2016 election, presidents usually engaged Congress actively on trade. Mainly because most meaningful trade policy involved negotiating agreements with other countries that would eventually be voted on by Congress.

There is even a formal process under which Congress votes to delegate some of its constitutional authority to presidents so they can haggle over trade with other countries. Trump used that power when he renegotiated NAFTA and rebranded it the USMCA, putting it to a formal vote in Congress and gaining bipartisan support.

This time around, however, as he is on all sorts of issues, Trump appears intent on asserting unbridled presidential power over international commerce.

Trade Deals

That means ignoring commitments made in congressionally-ratified trade deals.

The tariffs imposed on Canada and Mexico using IEEPA represent a pretty clear violation of the USMCA. As do the auto tariffs Trump announced last week, which seem likely to break a trade agreement with South Korea as well. In fact, you could make a case that pretty much any trade agreement signed by the US is in question these days.

Read More: Charting the Global Economy for the Week Ahead

If Trump proceeds with "reciprocal" tariffs under which a single duty will be applied to individual countries based on their perceived barriers, he will be abandoning decades of negotiations under what are now the rules of the World Trade Organization, membership of which was ratified by Congress.

But Trump's expected actions this week also look a lot like the sort of sweeping package of duties and changes in policy that would have been debated – and voted on – in the legislature previously in US history.

The infamous 1930 Smoot-Hawley tariffs were the result of congressional legislation. As were the 1890 McKinley tariffs that Trump has cited as an inspiration.

Which is all to say that as Trump deploys his largest act of protectionism yet this week he won't just be testing the resilience of the US economy. He's also exploring the limits of his constitutional power.

Shawn Donnan in Washington

Bloomberg's tariff tracker follows all the twists and turns of global trade wars. Click here for more of Bloomberg.com's most-read stories about trade, supply chains and shipping.

Charted Territory

Passing the buck | Trump's escalating tariffs and bid to roll back globalization are shaking confidence in the US currency, causing it to drop against most major currencies over the last three months. His actions are rekindling discussions about whether overseas governments will accelerate efforts to reduce their reliance on the dollar, potentially undermining its value and safe-haven status. Meanwhile, oil fell last week on concerns that the Trump's tariff onslaught will reduce energy demand.

Today's Must Reads

  • Car shoppers are descending on showrooms in the US, and automakers are speeding up shipments of new vehicles. Trump said he expects consumers to migrate to US-made cars if automakers raise prices in response to the 25% tariffs.
  • The Trump administration is reviewing US funding for the World Trade Organization as part of a broader review of support for international organizations. The US is currently in "Category 1" arrears with the WTO.
  • Fewer Canadians are flying to the US as an escalating trade war between the nations alters vacation habits. Meanwhile, Canada is headed for a period of weaker growth and higher inflation, economists forecast in a new survey.
  • Chinese President Xi Jinping urged global business leaders to push back against protectionism and promoted China as a reliable partner. Separately, UK Home Secretary Yvette Cooper refused to rule out retaliating to US tariffs on cars and steel.
  • Watch Jessica Caldwell, head of insights at Edmunds, share her thoughts on what to expect after Trump's announcement on 25% auto tariffs. Also, Bloomberg's Anthony Palazzo explains why the market share for Chinese electric vehicles in Europe has dropped to a two-year low. 
  • An Indigenous community in the heart of the Peruvian Andes is doing what most of its peers in mineral-rich areas around the world aren't: mining and profiting from their ancestral lands.
  • European wine growers are struggling with a decline in consumption and are now facing a potential 200% tariff threat from President Donald Trump, which could worsen their situation. Separately, China has postponed the conclusion of its anti-dumping investigation of Cognac and Armagnac.

On the Bloomberg Terminal

  • The 25% tariff on auto imports President Donald Trump announced March 26 could lower US GDP by 0.2% and lift core PCE prices by 0.1%, a Bloomberg Economics analysis shows.
  • New US tariffs will have ripple effects on economies and supply chains as they're likely to be inflationary, and will limit GDP and freight growth, according to Bloomberg Intelligence.
  • For Bloomberg Economics trade analysis: BECO MODELS TRADE
  • Run SPLC after an equity ticker on Bloomberg to show critical data about a company's suppliers, customers and peers.
  • Use the AHOY function to track global commodities trade flows.
  • See DSET CHOKE for a dataset to monitor shipping chokepoints. 
  • For freight dashboards, see BI RAIL, BI TRCK and BI SHIP and BI 3PLS
  • Click HERE for automated stories about supply chains.
  • On the Bloomberg Terminal, type NH FWV for FreightWaves content.
  • See BNEF for BloombergNEF's analysis of clean energy, advanced transport, digital industry, innovative materials, and commodities.

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