Tariffs on Trial: What’s Next for President Trump’s Trade Policy

GOODMAN: Thanks, Sam. Good afternoon from Washington and welcome to the Council on Foreign Relations. My name is Matt Goodman. I direct the RealEcon Initiative: Reimagining American Economic Leadership, and we’re delighted to welcome you to this event—this virtual event on “Tariffs on Trial.” Delighted to have such a strong turnout of hundreds of people watching and a great panel who I’ll introduce in just a second.

So one week ago I’m guessing most people, at least not on this call, had never heard of the Court of International Trade, a little-known federal court that does important work reviewing actions arising—civil actions arising out of U.S. trade laws. But now we all know what the—(laughs)—CIT is because last Wednesday it issued—a panel of three judges on the CIT issued a historic decision, really, ruling that the tariffs that President Trump had imposed under the so-called International Economic Emergency (sic; Emergency Economic) Powers Act—IEEPA, as it’s known—were effectively illegal. And while an appeals court has paused that ruling the next day, in fact, this has really rocked the trade policy world, and we’re here to really take it apart, and analyze it, and look at what its implications are.

We have an all-star panel of CFR fellows here who have been tracking both these developments and more broadly the trade work. If you have not been to CFR.org recently, you’ll see that we have a lot of stuff on trade including a hub—a trade page where you can get lots of content, and analysis, and visualizations, and so forth. So please check that out.

With that, I’m just going to quickly introduce by name and title, really, the three panelists. Ted Alden is our senior fellow, a trade expert here at CFR, well-known to a lot of people on this call. Jennifer Hillman is a senior fellow for trade and international political economy here at CFR, and is also at Georgetown Law School. And Inu Manak is our fellow for trade policy here at the Council. And all terrific experts who have written, and I’m sure you all known them in one capacity or another.

With that, I’m going to hand over to our president, Mike Froman, also something of a trade expert, to preside over the event. Mike?

FROMAN: Thanks very much, Matt. And thank you all for joining us, and thank you to this panel for making time.

Why don’t we start, Jennifer, with you, because you, together with Peter Harrell, Fred Norton, and others filed an amicus brief on behalf of 148 members of Congress in the case Oregon versus Trump, which was just decided by the CIT. Why did you file the case? Were you surprised by the result? And what do you make of the appeals court decision to stay the decision of the—of the Court of International Trade?

HILLMAN: Well, thank you very much, Mike. It’s really a pleasure and an honor to be here.

So why did we file the brief? Because, again, the leadership of the Democrats on the House Judiciary Committee, the House Foreign Affairs Committee, and the House Ways and Means Committee—so, you know, the three most relevant committees to this issue—reached out and said, you know, they wanted to put, you know, the Congress on the record as sort of asserting, you know, its clear authority over tariffs. And they had a clear message that they wanted to convey, you know, and they asked us to help write that up as a—as a brief that was filed at the Court of International Trade in support of the case that the state of Oregon and eleven other states had filed challenging all of the tariffs that President Trump had issued pursuant to this International Economic—Emergency Economic Powers Act, or IEEPA.

And basically, the Congress wanted to make a couple of points. I mean, they wanted to just really remind the court that it is the Congress and not the president that has the power under the Constitution to impose tariffs. And they, secondly, wanted to make the point that whenever the Congress does delegate that authority to impose tariffs to the president, it always does so with a lot of constraints and guardrails, and it always does so in a particular manner. It always uses the word “duty” or “tariff” to signify we’re handing over our power to impose tariffs. It always puts procedural constraints, that you have hearings and notice and a process; that there are restraints on how high the tariffs can go, so that they never exceed, you know, sort of statutory authorities within—that the Congress has already enacted. They provide notice, comment, all of those things.

So the Congress wanted to say: Wait a minute here. We know how to delegate tariff authority, and IEEPA is not it. You know, within IEEPA the word “tariff” or “duty” does not appear anywhere, so the court should not read that as a delegation of authority. There are no guardrails in IEEPA for any of this, which is what has allowed the president to say that he has this power under IEEPA to impose any tariff on any country at any time in any amount; to move them up, down, sideways; again, without any evidence, without any basis, without any rationale, without anything being said. And so the Congress really wanted to say, no, that is not what the Congress intended, and that you cannot read IEEPA to give the president this unfettered authority to do tariffs. So they really wanted to make that really essential point and just sort of reassert the constitutional role of the Congress, and to make the point that Congress continues to jealously guard its tariff authority and to keep it cabined in. So that was kind of why they asked for the brief and the kind of gist of what the brief said.

In terms of what do I think of the CIT opinion, look, I think it’s a very strong opinion, particularly with respect to what it says about the so-called reciprocal tariffs, this 10 percent across-the-board tariff on every country with the options of a lot higher tariffs on a lot—on sixty-plus additional countries, you know, that could come into effect. I personally wish they had gone even farther and just finally ruled that IEEPA does not provide tariff authority ever, full stop. They stopped just short of that. They clearly did not indicate in that opinion that they think IEEPA necessarily does or necessarily doesn’t ever permit tariffs. But they made it very clear that this across-the-board, you know, everybody covered, any amount of tariff that the president has asserted under the reciprocal tariffs procedure is just not permitted, and not constitutional, and a violation of law. So, again, I think that part of the opinion is particularly strong.

With respect to the second set of IEEPA tariffs—which are those that are applied on Canada, Mexico, and China pursuant to a different IEEPA declaration around imports of fentanyl—the court chose a different ruling, a different rationale, and they basically said that among the other things IEEPA requires is that there has to be a direct connection between the emergency and the tariffs that are imposed. And there they said, no, to impose a tariff on everything coming in from Canada—whether that’s lumber or teddy bears or T-shirts—is not connected to the emergency of fentanyl, and therefore those tariffs, again, fall outside of IEEPA because IEEPA requires this connection between the tariffs and the emergency that’s been declared.

So by and large, again, a strong opinion by the Court of International Trade. Again, I personally think it has, you know, very strong chance of being upheld on the merits on appeal.

You asked about the stay that the Court of Appeals for the Federal Circuit has granted, and I think we should be very clear it’s a minor and fairly common procedural, you know, step. It is an administrative stay. It is not a decision in any way on the merits of this case or a decision that there should be a long-term stoppage of the Court of International Trade’s ruling. So it is literally trying to say for this administrative period of time, which I expect to be no more than a few weeks, we’re going to leave the status quo in place. The next step in this process is going to be the arguments that are going to be made before initially the Court of International Trade and then immediately the Court of Appeals of the—for the Federal Circuit on whether a long-term kind of permanent stay on the imposition of the tariffs should occur while all of the litigation over the merits of the case get decided. So, again, it was a pretty small, narrow stay, and I personally don’t read anything into it in terms of how the CAFC may or may not rule.

FROMAN: And that process begins a week from today, the ninth?

HILLMAN: Well, again, so the—so the way the process formally works, you have to first go to the Court of International Trade and ask them, do you want to stay your decision? I would fully expect the CIT to say, no. We actually like our decision. We’re not going to stay it. And that then gives you something to appeal. So now you have something to appeal. You can appeal the Court of International Trade’s denial of your stay. That will then come before the Court of Appeals for the Federal Circuit. Briefs by the government are already due June 5. Briefs by—you know, by the plaintiffs in the case due June 9. So, again, my expectation is that the Court of Appeals for the Federal Circuit will fairly soon rule on this basic question of, while the appeals are pending, should the tariffs be collected or not? And that’s really all they will be ruling on, is while ever all of the skirmishing is going on do we collect the IEEPA tariffs or do we not collect them? But that I do expect the Court of Appeals to make a decision on, you know, in the next couple of weeks.

FROMAN: Got it.

Inu, some people have read this announcement that all of Trump’s tariffs have been invalidated by the court, but that’s not—that’s not the case. Only the tariffs that were imposed under IEEPA, as Jennifer laid out. There’s still tariffs under the national security provisions, under 232, the unfair trade practices provisions of Section 301. What are the Trump administration’s alternatives to IEEPA? If you were determined to impose tariffs, notwithstanding the decision of the Court of International Trade, what tools would you reach for, and what do they require?

MANAK: So the president has a lot of tools at his disposal if he wants to levy tariffs. The Congress has delegated a tremendous amount of authority to the president since the 1930s to do so. I actually had my bet this year that the president would not use IEEPA. So I was wrong. But I thought he would actually use a different law, called Section 338 of the Tariff Act of 1930. That law gives the president authority to raise tariffs up to 50 percent of a product’s value if another country is unreasonably discriminating against the United States through tariffs, regulations, or other actions. Now, historically we haven’t really seen this used. You have to have a petition to the International Trade Commission, it’s an independent agency, to investigate whether there’s trade discrimination that’s taken place. And if the ITC cetera finds that there is discrimination, the president can take action.

The ITC has never made a finding of discrimination in any of these sort of petitions. So this law has never been used to impose trade restrictions. But Bob Lighthizer, Trump’s former USTR, actually wrote about this in his book as one of the options that he would have pursued if he was to do this all over again. So I think it’s a potential option that’s in play for the president. But he also could ignore the requirement for an investigation and just go ahead and impose the tariffs, but it certainly would invite foreign retaliation and potentially a court challenge.

There’s another route he can use too that’s been talked about a lot, and that’s called Section 122 of the Trade Act of 1974. Now, this law actually gives the president power to address large and serious balance of payments deficits by imposing tariffs up to 15 percent or requiring quotas for imports. Now, basically this is something that economists are kind of nervous about that president would use this because it would mean, you know, talking about the fact that, you know, the trade deficit is a major problem that needs to be solved, which most economists disagree about. And the other challenge here is that the president could only use this action for 150 days. So there’s a time limit on what he can do here, unless Congress agrees to extend that action.

And it’s 15 percent, so not the high kind of number that President Trump likes. So it’s kind of a tradeoff that he would have to accept. And also it doesn’t really seem like Congress would really want to get involved in increasing tariffs. They’ve been pretty hesitant on weighing in on the IEEPA tariffs, except for Democrats in both the Senate and the House who have been vocal about it. But Republicans don’t seem to want to vote on the legality or try to impose any of these tariffs on their own. So I think that if it came down to post-150 days, Congress would be really hesitant to grant the president additional authority to keep those in place. So that might be too small a number and it could be legislatively very challenging.

I think what they’re likely to do right now is simply expand existing tariffs that they already put in place. So we already saw the president do that on Friday with the steel tariffs and aluminum tariffs, which he increased to 50 percent. From past rulings on Section 232 at the Court of Federal Appeals we found that they gave the president vast discretion to modify indefinitely any action that he takes under Section 232. So I would imagine he’s going to use that not just on steel and aluminum, but maybe also on auto tariffs and auto parts tariffs, as a way in the interim to get the tariffs that he wants—although not as big as the ones that he had put in place across the board.

He could also expand and modify the Section 301 tariffs that were used to wage the trade war against China. And he could do that fairly easily as well. But we have a lot of pending investigations, seven in total, Section 232 investigations. So I would imagine that some of those will be fast tracked a little bit in order to get a little bit more movement there. So a lot of options on the table for the president. I think he’s going to get some tariffs, again, but in the meantime the ones that are there are still in place. And perhaps that can put a pause on him taking any action right away.

FROMAN: Ted, this administration, has made clear that it really wants to move ahead with tariffs. I think the Secretary of Commerce said something in the last couple of days, one way or the other, they’re going to move ahead. Whether it’s using—being able to use IEEPA, or using some other authority. What are the prospects that—you know, all these other authorities that Inu just laid out—301, 232, 3382, 221—was at the 15 percent?

MANAK: One-twenty-two.

FROMAN: I’m sorry, 122. One-twenty-two. They all require some degree of process. There’s some amount of public comment or public involvement. What are the prospects that they just ignore that and use them to impose tariffs? And what would happen? Would they be—would those be able to be sustained, or would they be immediately challenged in courts?

ALDEN: Well, I think a lot would depend on the process they used. I think one thing that the CIT decision shows, I think it’s one of the reasons it’s a historic decision, is that there are clear limits on the president’s authority with respect to trade. Congress has laid out procedures for each of the tools that that Inu enunciated here. And if these are not used according to the procedures that Congress laid out, then they’re potentially subject to court challenge. I think it’s quite likely, given the success of this case—and, remember, it’s individual companies initially that filed these cases—that other companies will feel emboldened to challenge other actions by the president. So I think there was a pretty clear message sent by the CIT ruling.

And if you read through the ruling, they were—they did not hide behind this. They were—the judges were absolutely clear. They said, look, the president’s powers in the area of trade are delegated powers from Congress. There are limits to which Congress can delegate those powers. And the powers that it has delegated the president is required to follow certain statutory procedures. So I think it was a very strong reaffirmation that the rule of law still operates in this country, even though we’ve got a president and an administration willing to push the edges as much as they can. So might what you’re talking about happen? Absolutely. But I think the court decision shows that there is more room for the companies and others adversely affected by these actions to push back through the judicial system.

FROMAN: You focus a lot in your research and writing on immigration and other issues at the border, where IEEPA sometimes comes into play as well. How do you—how do you—what implications do you think this decision about the scope of IEEPA might have in other areas, like immigration?

ALDEN: Yeah, I think this is a powerful decision. Now, to be clear, IEEPA has not been directly used in immigration-related actions. But you have the president, in the case of immigration, using other powers that are essentially emergency powers—the Alien Enemies Act most prominently, which goes back a couple hundred years at this point—claiming emergency-type situations, national security threats, in order to do an end-run around what we would consider normal due process. This is hard in immigration, right? The president has enormous inherent powers with respect to the border, with respect to who is allowed into the country.

There are procedural issues on which these things can be challenged. Sometimes there are fundamental civil liberties issues on which these actions can be challenged. But we’ve seen in the series of court actions on immigration so far, and there are going to be dozens more, this is difficult. The cases are often fought out one by one. The administration has not responded in some cases, you know, despite the courts ordering the return of people who have been wrongfully deported abroad. So this is—this is an area in which we’ve seen really, really a difficult slog.

Why trade, I think, is important here is that the lines in trade are much clearer than they are on immigration. The Constitution—and Jennifer can clarify anything I get wrong here—but the Constitution is absolutely clear that trade, foreign commerce fall within the authority of the president. And so every bit of authority that the president has to carry out the sorts of actions that Inu was talking about were authorities that were delegated by the Congress. And in this decision, what the Court of International Trade said is, look, presidents cannot use emergency powers. IEEPA being the vehicle in this case, to bypass clearly delineated statutory authorities on trade handed, over to the president by Congress.

And I think this is powerful because, you know, if you look at the work of our colleague Steven Levitsky and others working on the use and misuse of emergency powers, this is a standard tactic for authoritarian, or would-be authoritarian regimes. I mean, all democracies have emergency powers that are granted to the executive branch because there are genuine emergencies, wars being the most obvious one, in which some of the normal democratic and civil liberties protections need to be suspended for the sake of national security. But would-be authoritarians have discovered that these powers can be pushed very dramatically in otherwise peacetime situations to enhance the power of the president or other executive authorities.

And I think in this case the court, and quite surprising from the Court of International Trade, clearly said, no. This is not acceptable. This is not appropriate. The president’s powers in this area are clear and delineated. You cannot just yell “emergency” and override all these restraints. That’s why I consider it a historic decision. It’s not just a trade decision. It goes beyond that.

FROMAN: Yeah, but just to play devil’s advocate for a second.

ALDEN: Yeah, please.

FROMAN: IEEPA had been used by previous administrations to be the foundation for various laws and regimes that Congress just failed to pass. Export Administration Act, as I recall, had expired. That’s the law that created or implemented the export control system. Congress failed to renew it when it expired. And so various administrations just kept on renewing it under IEEPA. And that’s not authoritarian. That’s just recognizing that there’d been a failure of government to renew a law, and that yet the law was important to national security and so they were going to use IEEPA to shoehorn it—to shoehorn it in.

And then second point I love for you to respond to is, yeah, the Constitution is clear about Congress setting tariffs. But it’s also clear that the president runs foreign policy. And where does trade policy end and foreign policy begin, and when it comes to deciding, OK, we need to do something to push back against China, our pacing threat, or a variety of other countries whose trade policies or situational economic relationship with us is undermining our national security?

ALDEN: Yeah. Great questions, Mike.

FROMAN: I’m playing law professor. I’m playing law professor here. Sorry. I should leave that to Jennifer.

ALDEN: No, no, absolutely. Absolutely. You know, I want to—I’m going to want Jennifer to weigh in on these things too. The Export Administration Act I consider to be a very different sort of situation, right? Export controls have a fairly direct nexus to national security. These are products that can be used to enhance the national security capabilities of adversaries. Pretty easy to make the case that the expiration of those laws and the failure of the administration to have any tools would pose a severe national security threat.

FROMAN: But the emergency—

ALDEN: I don’t think that’s at all clear in the case of tariffs. And also, the Congress has spoken quite clearly on tariffs. There were no laws here that expired that the president needed to step into the breach. Laws are very clear. They’ve been on the books a long time. In the case of the balance of payments tariffs, the reciprocal tariffs, the law is quite recent and extremely clear. I mean, so I don’t think that that comparison actually holds in this case.

On the broader foreign policy issue, that’s—I think potentially that’s where that this gets interesting, right? Is trade a general foreign policy realm in which the president’s powers are much more substantial? Again, that’s not really what the Constitution says, but you could argue that there’s a gray area there. I agree with Jennifer that I think the court’s reasoning on what they call the trafficking tariffs, the fentanyl and illegal immigration, potentially a little weaker because the president is trying to use the tariffs as leverage to deal with an area that you could argue quite clearly falls under foreign policy, and that that’s appropriate. I think the ruling there is not as clear cut as dealing with the reciprocal tariffs. But it’s hard for me to think of an area that’s got a foreign policy nexus in which the administration is operating right now where the Congress has spoken more clearly than it has on this question of how and under what circumstances tariffs can be used.

FROMAN: So let me ask the panel about two constituencies and how they are to react to all of this. One is the business community or the investor community. Companies deciding whether to move their production to the United States, to expand manufacturing because they may face tariffs going forward. How do they—there was already a lot of uncertainty, given the various changes in the administration’s tariff policies. Now we have this judicial uncertainty as well. How is a company supposed to digest this and integrate it into their capital allocation decisions?

And then the second question—you can do—you can choose one or both—is other countries. We have somewhere upwards of ninety countries, evidently, who’ve said they want to sit down and negotiate with the Trump administration to get rid of the reciprocal tariffs. So you had one agreement reached with U.K., or at least a partial agreement with some further details to be negotiated in the future. What are you hearing from other countries? And what would you expect other countries to do in this context, given the uncertainty around what tariffs they might actually face going forward? Jennifer, you want to start us off?

HILLMAN: Well, I’ll take on the first one, the business and the investor community, because I do think this one is really important. Because, as you say, I mean, what we have right now is just chaos. And whatever else you can say about chaos and uncertainty is it’s a real damper on investment. And so—and you’re already seeing that. And we saw that the last time in the Trump administration. The Fed put out a really good study that said, you know, just the chaos in 2018 over what was going to happen, you know, had a significant impact on overall economic growth. So there’s no doubt that there is an absolute connection.

So in terms of—part of that is also the reason that was in this congressional brief and others, is saying one of the other reasons why IEEPA does not and should not be used for tariffs is because it doesn’t have the—you know, the certainty, transparency guardrails that the other trade statutes do. I mean, when you use 301, 201, you know, fill in the blank. 338, 122, there’s a process. And it’s transparent. And the tariffs are known. And they’re known in advance so everyone can plan whether or not to make, you know, that—you know, whether or not to buy those goods, whether or not to ship them, et cetera. As opposed to what we’ve seen, which is, you know, goods that are already on the water.

I mean, you know, one of the big impacts that we’re seeing from these tariffs are on small businesses who, arguably, ordered their goods in December, and paid for them in January, and had them made in January, shipped in February. They arrive in the United States after April 2. And then they have to come up with cash money to pay the tariffs in order to get their goods out from customs. And they don’t have it. They don’t have the cash. And no bank will lend them the money because no bank believes that this small business is going to be able to recoup these much higher costs for their goods. So you’re going to start to see a lot of these small businesses shut down because they needed those parts in order to keep their factory up and running. So that is having a big effect. And just the uncertainty of are these coming off or not is creating that.

And the second thing to just note on this is, you know, to step back and say, why are we doing these tariffs? Just, why are we doing this? And if you look at what the president has said, the rationale for this sort of falls into four buckets. I mean, one of them is to raise revenue. Well, again, if what you want to do is raise revenue, again, what you don’t want is the notion that you’re going to cut deals and then take down the revenue, because that—you know, take down the tariffs, because that means you don’t really have any revenue.

You know, the second, you know, sort of stated reason for doing this is to deal with the trade deficit. And, again, we can have lots of arguments about whether these tariffs will or will not, you know, do very much in terms of the trade deficit, but clearly we’re putting the tariffs on countries that we have a trade surplus on. You know, which begs the question of why are we doing that? We’re putting tariffs on little, tiny, least-developed countries like Lesotho, GDP per capita $2.62 a day. Imposing a tariff on Lesotho is not going to make them buy more product from the United States. You know, so some real issues.

But, you know, the clearly underlying message is have everybody make everything in the United States, build everything in the United States in order to get around this tariff wall that the president is creating. But you step back and look at that. First of all, it’s going to take a long period of time to do it. Second of all, to do that, to bring back all of this manufacturing, what is the other thing that you have to import? A lot of equipment, in order to build all of those factories out. And there’s high tariffs on all of that equipment. So it makes it really hard to see how you gear up all of this U.S. manufacturing production that can be competitive.

You know, and it also begs the question of is this really what America wants? I mean, do we really want to go back to making our own clothes, sewing our own clothes, having lots of those kind of jobs? Is that really what would make America competitive, innovative? You know, so big questions about, you know, again, this—is this really a goal, and is it a realistic goal, and does it make sense, And are tariffs the way to get there? And what is clearly the message is the on again/off again, 25 percent, maybe 50 (percent), maybe this, maybe that, is doing the exact opposite. You’re not seeing investment coming in because nobody wants to invest in this highly uncertain environment.

FROMAN: Inu, take one or both of those?

MANAK: Yeah, maybe—sure. A little bit on the small business side, too. I mean, when you look at the challenges to IEEPA, they came from small businesses. Those were the businesses courageous enough to speak up against what President Trump was doing. We don’t have any big businesses that filed lawsuits. And I think it speaks to who’s being impacted by this a lot. So I think there’s going to be many people who are going to say, oh, you know, it’s just the 10 percent tariff that got removed. It’s not a big deal. Well, it is a big deal when your margins are very, very small and you rely on imports in order to have your business run.

So I think for a lot of Americans across the country if these tariffs are actually revoked this is a huge relief for them in their day to day. It helps them make employment decisions. It helps them make sourcing decisions. And it creates stability in their business as well. So I think we should not downplay just how big it is in terms of the amount that actually people are being relieved of. And so I think that this is something that folks are thinking about in terms of their long-term business planning. For larger businesses it’s a different calculation, certainly. And some are probably paying attention to the other sectoral tariffs that may affect them in particular. So there will be—might be more concerns about that.

But one thing I would say, when we’re coming and thinking about, like, what the impact is on all these negotiations that have to be concluded, you know, very soon, right? We have a ticking deadline of July 9 when the reciprocal tariffs was to go back into effect if deals are not negotiating in good faith. One really interesting point about the CIT ruling that I thought was really fascinating, when they’re looking at the trafficking tariffs, is that they’re talking about the fact that IEEPA says you need to have a reasonable relationship to the goal that you’re trying to achieve and the means to get there, right? And they have a very cheeky footnote, which I liked, footnote seventeen, that basically says: The trafficking tariffs, of course, do not change the effective duty rate for smuggled drugs themselves. Of course, we don’t have tariffs on smuggled drugs.

FROMAN: Fentanyl? On smuggled fentanyl? Maybe we should, that would—(laughter)—

MANAK: Maybe if we did you could actually change a tariff, right? So maybe we should have a tariff for fentanyl. But the big question here is, OK, this gets rid of a key component of what the president was trying to use in these negotiations, which is leverage. And the court makes clear that you can’t just use tariffs as leverage to get something unrelated to what you said is the problem. And I think this raises a big question for all of our negotiating partners who are saying, hold on. If you can’t actually use these tariffs as leverage in the long run, why are we even negotiating with you? So I think they’re going to change their strategy a bit and think about where they should negotiate, particularly on the sectoral tariffs which are going to stay in place. So they’re going to need exclusions to steel, aluminum, auto, and auto parts, maybe the pharmaceutical tariffs when they come. But in terms of negotiating on the big, reciprocal tariffs, perhaps their strategy is going to be a bit different. And they’re going to have to wait out and see what happens in the courts too. So I think there’s a shifting strategy here, but they’re going to be cautious and just still—and sit and wait and see what happens.

FROMAN: Ted.

ALDEN: Yeah. Let me just weigh in quickly on other countries. So I know we want to—want to get to questions. I think the court decision probably makes the negotiations more complicated. One, because some countries will want to wait and see what the outcome of the legal process is. And also because I think it’s pretty clear from the steel announcement that the president’s going to weigh—is going to rely more heavily on 232 and the other sectoral tariffs. And he said the U.S. doesn’t want to negotiate on those. So I don’t know whether that—I don’t know what the scope is for negotiation right now.

The other thing that concerns me more fundamentally, and there are hints of that coming out with the—with the unrest already over the agreement with China, the treasury secretary saying China isn’t living up to its deal, not been exporting critical minerals and other things. I’m really worried that the trade negotiating process has been terribly degraded. I mean, you look at something like USMCA, I think Mexico and Canada had every reason to believe that they had negotiated in good faith with the first Trump administration, reached a deal that would last. There was a process for review in 2026. And suddenly in his second term, President Trump has ripped all that up.

So I think in capitals across the world you have countries asking themselves a very difficult question, which is: What is it worth negotiating with the United States? If the United States is not going to abide by the deals it negotiates, if you’ve got a president who’s willing to change the terms of tariff depending on which side of the bed he gets out of in the morning, should we be negotiating, expecting that this is going to resolve the problems we have with the United States in any fundamental way? Or is it worth pursuing other tactics?

So I really—I fear that that U.S. credibility as a trade negotiating partner is being seriously, seriously undermined. I’m not smart enough to predict exactly where that goes, but I think all this sort of breezy talk about, well, we’re going to negotiate deals, I’m not persuaded of that. We’ve seen very little yet. One very modest deal with the U.K., and the deal with China which apparently isn’t being followed by the Chinese. That’s not a very good track record a month out from what was supposed to be the deadline for all these deals.

FROMAN: All right, why don’t we open it up for questions from the participants. And, Sam, do I—

OPERATOR: Excellent. Thank you so much.

(Gives queuing instructions.)

We will take our first question from Kellie Meiman Hock. As a reminder, please state your affiliation.

Q: Great. Thank you so much. Kellie Meiman Hock with McLarty Associates. It’s been terrific.

Just wondering what your best bet would be—and, Jennifer, this question might be for you—with respect to the timeline of the courts. I mean, if what we’re waiting for with the appeal and stay is to see whether or not we’re going to see the IEEPA tariffs applied during this time period, I mean, what can companies think about planning for, from a timing standpoint, when we might finally have some certainty here? Thank you so much.

HILLMAN: Yeah. So, again, I think—I do think the timing is going to be relatively quick. Relatively quick meaning, you know, I think we’re going to at least know the stay issue—I mean, whether or not the tariffs are or not going to be collected during the pendency of an appeal on the merits—I think we may know that even before the end of June. On that basic decision of whether the tariffs are going to be applied during this pendency, I think that’s a really close call. I personally think the better of the arguments is that the Trump administration is not irreparably harmed if the tariffs are not being collected, because I’m not sure that it really matters to our trading partners how and when duties are actually collected and paid in the United States. The fact that there is still a threat hanging over a foreign country that these tariffs could be imposed is at least some incentive to negotiate. And whatever the disincentives are, are not really related to when the tariffs are collected.

So for me, you know, the more irreparable harm falls on the small businesses that are going to go out of business. And that the court has to—in deciding whether or not to have the tariffs be collected during the pendency of appeal—has to weigh the irreparable harm, you know, sort of on either side. As well as weighing, you know, what is the likelihood of success on the merits. And, again, for the Justice Department or the Trump administration to win on the issue of having the tariffs be collected during the time period—I mean, that a stay stays in place for the whole appeals process—they have to show that they will suffer irreparable harm if it’s not, and they have to show a strong likelihood of success on the merits. And I personally think that on both of those they do not have a really strong hand.

So I personally think that there’s—it’s going to be a close call, but I think the Court of Appeals could—for the Federal Circuit—could very well rule before the end of June that the tariffs will not be collected during the pendency of the appeal on the merits. The decision on the merits—the decision on the merits is going to be, again, a separate, longer process, also before the Court of Appeals for the Federal Circuit. Again, but I expect them to move relatively quickly, a couple of months. I mean, I don’t think it’s going to be, you know, a year kind of a process. I think it’s going to be a relatively quick process. Again, I personally think the case on the merits that the CIT got it right, that IEEPA but does not provide the president with the authority to do these broad-based reciprocal tariffs, will be upheld.

FROMAN: Does that mean, Jennifer, that there could be a refund of tariffs that have already been paid?

HILLMAN: So, yes. The answer is, yes. And the administration has already said in its brief about the stay that it would commit to refunding any duties paid during—you know, during whatever the interim periods are. Now, having said that, you know, in the past they’ve made that exact same pledge, but they’ve made it very hard to get them. Each individual importer has to file a lawsuit, a challenge, you know, seeking the refunds. Each individual, you know, importer has to have all of the records of, you know, everything that they’ve paid. And they have to bring a claim formally at the Court of International Trade. So, you know, it’s a little bit of cold comfort to say, you know, again, oh, don’t worry, you’ll get your refund at the end of the day. As I said, particularly for that small business that needs the goods now.

And just knowing that, you know, maybe six months or a year from now, if they file the right lawsuit at the right time in the right place, they might get a refund, is really not going to make them whole. And I’m hoping that the Court of Appeals for the Federal Circuit will hear that argument and understand that they really should not be charging these tariffs during this interim appeal period. Because, remember, the appeal period can then go all the way up to the Supreme Court. You know, and that adds even more months of time in which, if the tariffs are being collected, there’s more and more sort of pain and agony. Even if you think at the end of the day you may have the right to get a refund, you may not have the reality of getting the refund.

FROMAN: OK. All right. Sam.

OPERATOR: We will take our next question from Mara Lee.

Q: Hi. This is Mara Lee. And all three of you have been sources of mine. I’m with International Trade Today.

Inu, I think that the ITC did find discrimination when I was researching this. I think it was CRS said that in the ’30s they found it from Austria and Germany, but then nothing ever happened. But I guess I would like to ask two questions related to the appeals. One, how likely do you think it will be that the Supreme Court will take this up, especially given the District Court’s separate case saying that IEEPA can’t be used for tariffs at all? The other question I have is, if the Court of Appeals does say, no, you can’t collect during this time, but then later, ultimately, it is decided that the tariffs were kosher, will the importers owe back tariffs for this period when they were waived?

HILLMAN: So I don’t know who you want to answer that question, and I would love others to weigh in. I’ll take—I’ll try to take them both, but I will give a caveat that I’m not certain about the answer to your second question. So just to put that out there. My general understanding is that it would depend on whether the entry is what is referred to as “liquidated.” And so, as you know very well, you know, when imports come in normally what happens is the importer has to, you know, again, file all the import declarations and pay the tariffs. And then they get the goods. But the entry is not formally what they call “liquidated,” or closed out. In other words, the custom processing is not closed out. And customs has, you know, a fair amount of time, almost up to a year—I mean, it’s close to that—to formally make sure they’ve got the time to check to make sure that you accurately declared what the goods were, that you accurately declared what tariff line it was classified as, accurately declared the value of it, et cetera. And now your entry becomes finalized, and you get your ultimate final bill for the amount of tariffs.

So my basic understanding is that, for the entries that have been liquidated, closed out, that I don’t think you can go back and tell importers that you now have to, you know, redo that. In other words, once the entry has been liquidated, my understanding is, it’s closed, it’s done. For all of the entries, and there may be very many of them, that are unliquidated, that have not yet been finalized, I believe that there may be a process where the Trump administration could say, you now owe these IEEPA tariffs on any unliquidated entries. But this is a question for a real customs maven, which I am not. But that that is my—you know, my vague understanding.

On the Supreme Court, to me it’s really going to matter what the CAFC decision says. You know, because to me there are two or three important Supreme Court doctrines that are at issue, at play here. And if the Court of Appeals for the Federal Circuit really sort of goes through those very clearly and says: OK, we’re going to apply what is referred to as the major questions doctrine, which says—and that’s this Supreme Court that has enunciated this major questions doctrine—which says that if it is a major question—and there’s no question the volume of tariffs here is a major question—if it’s a major question and it is an issue about congressional delegation of authority to the executive branch, it has to be crystal clear that the Congress actually delegated the authority. And here, to me, you can’t even possibly argue that it’s clear that the Congress delegated tariff authority under IEEPA but when they didn’t even use the word “tariff” or “duty.” How can that possibly be a clear delegation of authority?

So if, again, the court does a very careful, you know, major questions analysis, the Supreme Court may say there’s no reason for us to review this because, you know, they’ve gotten it right. Similarly, second, you know, clear doctrine that is going to come into play is what is referred to as the non-delegation doctrine, which basically says that, you know, the Congress, when they do delegate authority, they cannot just delegate a blank check. They can only delegate authority if they put proper guardrails, if there is intelligible principles, is the buzzwords, you know, by which you can know when, where, and how this delegation can be applied. And so, again, if the CAFC goes through a careful non-delegation, you know, analysis, and says, hey, there are no guardrails anywhere in IEEPA. So this, again, is violation of the non-delegation doctrine and, again, does that analysis correctly, you know, again, I think the Supreme Court might say, nothing to see here. I mean, good for the CAFC. They got it right. We’re not going to review it.

You know, and the third one that they—you know, that the court may or may not get into is this issue of interpreting a statute as being constitutional wherever you can. Because under the IEEPA language, the language that is at issue in all of these IEEPA cases, is the language in IEEPA that says that where Trump thinks he’s getting this power to do this is the right to regulate importation or exportation. And what the Trump administration is arguing is that word “regulate” means tariff, impose a tariff. So then you interpret that interpretation, impose a tariff on imports or exports. That’s how you would have to read it to read it consistently. The problem is, the U.S. Constitution, Article One, Section Nine, forbids export tariffs. So if you actually read this right to regulate as meaning tariff you have now read the statute to be inconsistent with the Constitution, Article One, Section Nine, because it would be allowing tariffs to be imposed on exports, which is not permitted under the Constitution.

So, again, there’s three clear constitutional bases on which the CAFC could say no to these IEEPA tariffs. In which case, I don’t know. I mean, you know, maybe the Supreme Court would say, you know, we’re going to leave it alone. You know, look, I think, given how significant this is and how big the tariff issue is, I think it’s more likely—far more likely than not that the Supreme Court would take this up, and would consider the issue. But it will depend on the basis on which the CAFC rules.

FROMAN: We got another question, Sam?

OPERATOR: We will take our next question from Doug Rediker.

Q: Hi, everyone.

It’s a crazy question to ask, but it’s one I get asked all the time. What if the court, whether it’s the Circuit Court or the Supreme Court, but let’s assume it’s an intermediate court, rules against the administration, and the administration says, we don’t care. We’re going to actually seek to impose the tariffs anyway. Is there a means by which they could pull something akin to what they’ve done in disregarding lower court rulings, or at least creatively interpreting them, on the immigration front, where they put somebody on a plane and say, too late? Is there a means by which they could order the customs officials to impose a tariff subject to the liquidation that Jennifer referred to, but where, despite the fact that they have lost and despite the fact that maybe there’s no stay, they do it anyway?

ALDEN: Do you want me to have a stab at that first, Jennifer, since I raised the immigration question?

HILLMAN: Yeah. Yes.

ALDEN: I mean, you know, I think the proper answer, Doug, is that that’s a fear in a lot of different areas. So far, I have not seen signals from this administration that they are prepared to do that. I mean, in the case you mentioned involving the Salvadoran citizen, Abrego Garcia, who was sent from Maryland to the prison in El Salvador, the administration has been quibbling over the court’s meaning of the word “facilitate his return,” and arguing over what that means. Does that mean that the president needs to pick up the phone to Bukele in Mexico (sic; El Salvador) and say, release him and send him back home? Or does it mean other steps short of that? So I think so far the administration has hesitated to be seen as in open violation of a court ruling. The scenario you’re describing, to me, would be open violation of a clear court ruling. And I just think that puts us in different terrain that I’m not sure any of us knows exactly what that would mean. Again, the signs that I’ve seen from the administration is they’re not prepared to go that far.

Jennifer.

HILLMAN: The reason—the only reason I was hesitating is I wanted to read out one sentence from the Court of International Trade’s opinion in their conclusion. “The challenged tariff orders will be vacated and their operation permanently enjoined.” To me, that leaves no wiggle room. You know, when the court says the tariff orders “will be vacated and their operation permanently enjoined,” there’s no wiggling around that. And, you know, so, again, I think these orders are going to be very clear. And I just don’t see—I don’t see how—you know, again, so what has to happen is instructions have to be sent, you know, to each customs—you know, through the customs messaging service. A customs message has to come out. You know, sending that message in light of this kind of a very clear statement, to me, is exactly what Ted is saying. That is a direct, unequivocal violation of a court order. I, at least, don’t see how they could possibly get away with doing that.

MANAK: Yeah, I would say I agree with that, but I don’t think they will openly ignore court ruling if they have to adhere to it. And it’s also because they have so many other options of what they could do in terms of raising tariffs, right? So this is just taking away one of the toys that Trump has. And he has many others that he could play with. So I think that they’ll just shift gears and find other ways to impose the type of tariffs that they want. It won’t be as broad as the IEEPA tariffs, but they can still do quite a bit of damage without that.

FROMAN: Sam.

OPERATOR: We will take our next question from Mark Feldman.

Q: Thank you very much. Exciting panel. Very important topic. I’m a Washington lawyer of a certain age, specializing for many years in foreign relations law.

And back in the day, when Congress was considering the NEA and the IEEPA I was—happened to be acting legal advisor of the State Department, and testified before Congress on those matters. Sitting next to me at the time was Antonin Scalia, who was the assistant attorney general for OLC. If you—and this may have a bearing on a future briefing, I don’t know. But if you look at the legislative context, if you look at the hearings and the interagency, you will see that the—you were in a period of congressional energy, quite the different environment than what we have today. And the concern of the lawyers in the agencies was, above all, to preserve those sanction powers that had been exercised under the Trading with the Enemy Act. And each of the agencies had a list of existing authorities and powers that they wanted to have preserved.

And nowhere on that list was any reference to tariffs. And also, wholly apart from the reform backlash to Watergate and to Vietnam, you were in a period when Congress was super active in the trade area and established an agency that was responsible to both Congress and executive branch. So even if somebody had an idea to preserve that one episode cited one of the court opinions by Nixon, nobody would have dared to raise it or be interested in raising it. My question to the panelists is, what about the fact that this is a tax? I don’t hear as much emphasis on the congressional control of taxation of the American public as I would have expected.

FROMAN: Who wants to take that?

HILLMAN: I don’t know. I mean, well, first of all, Mark, thank you so much. Partly you’re making me feel much more comfortable that a lot of your sense of the legislative history of the National Emergencies Act, you know, again, which is the legal predicate for doing any of this under IEEPA, and what happened in IEEPA when Trading with the Enemy Act was sort of split off and you left a certain amount of powers for what the president could do in a time of war and then created these much more limited, in theory, set of powers for what the president could do when it’s not a time of war but there’s been a declaration of an emergency. I’m just saying I’m feeling very comfortable that what you’ve just said is fully consistent with everything that we were trying to argue both in this amicus brief and more generally. So thank you.

In terms of the tax issue, I do think it’s mentioned sometimes. I mean, I’ve certainly been among the many that keep saying, you know, not only is this, you know, taking us back to tariff levels that we haven’t seen, you know, since the early 1900s, but it’s the single-largest tax increase in more than fifty years, all without the Congress. I mean, arguably the single largest tax increase in more than eighty years, without the Congress. So I think that, to some degree at least, is being said in this description.

In terms of the legal analysis, I will say, you know, one of the arguments that was made in this amicus brief and elsewhere is, if you read this word “regulate” to mean tariff or tax, you got to really be careful about what you are allowing every agency that is clearly being given the power to regulate. Are you really suggesting that they all have the power to also tax? I mean, if you’re going to read that word “regulate” to also mean tariff or tax, you are really opening up the door to many, many other ways in which, again, agencies can engage in tariffs and taxes, which were never intended by the Congress. So in that sense, this argument about the relationship between “tax,” “regulate,” “tariffs,” et cetera, is coming into the legal assessments of this IEEPA phrase.

ALDEN: And, Mike, just one more comment I’d want to make on this. And it’s—you know, we’re looking back at all of this very old history. And there’s a danger here. I mean, one of the reasons we’re in such a mess on immigration is that the Congress has not rewritten laws that, in some cases, date back to 1952, at the very least to 1965. We have fifty-year-old laws governing how we act on immigration. And it leaves a lot of scope for interpretations by presidents from both parties that I think have done a lot of damage.

I think we risk the same thing in trade, right? We haven’t seen trade promotion authority fast tracked now for, what is it, a decade? And so the Congress has not been speaking clearly at all on what it wants done on trade. It’s left this huge vacuum that the president has walked into. And I think that’s an enormous danger in our system. I don’t—you know, I appreciate why people aren’t hammering the Congress because it won’t do anything. But I don’t think we should forget how damaging that is for our system of government to have a Congress that cannot act in areas that are so clearly within its responsibility.

FROMAN: You know, I think that’s about all we’re going to have time for. But I just want to thank the panel, Jennifer, Inu, Ted, three of our great experts on trade. And encourage everyone who’s called in to do what Matt Goodman referred to earlier, which is to take a look at our website, our trade hub. The team here is endeavoring to stay on top of the day-to-day, hour-to-hour developments and provide research and analysis both about them and about the broader context. And delighted that we’ve got such a strong team here focusing on this critically important issue for the Council, its membership, and the general public.

So thanks for joining us, all. Thank you to the panel. Thank you, Matt, for introducing us. And we’ll look forward to doing follow-up events as more announcements come down the road, no doubt.

HILLMAN: Thank you very much.

FROMAN: Thank you.

ALDEN: Thanks.

(END)

This is an uncorrected transcript.