--:-- Ryan Knutson: Welcome to The Journal, our show about money, business, and power. I'm Ryan Knutson.
--:-- James Romoser: Yesterday, the Supreme Court heard arguments in one of the year's most anticipated cases.
--:-- Ryan Knutson: The case is about whether Donald Trump exceeded his authority, violated the law when he enacted his sweeping global tariffs at the beginning of his second term.
--:-- James Romoser: That's our colleague James Romoser, who covers the Supreme Court. It's hard to overstate its importance. It's certainly one of the biggest cases the Supreme Court will hear this term, if not the biggest case.
--:-- Ryan Knutson: Hanging in the balance is billions of dollars in tariffs and one of President Trump's central economic policies.
--:-- James Romoser: But James says the case is about even more than that.
--:-- Ryan Knutson: So as if the case isn't big enough just by virtue of testing Donald Trump's signature economic policy, the case even has broader implications than that because it will affect the balance of power between the president and Congress, not just the current president, but presidents in the future.
--:-- James Romoser: And if you could use just one word to characterize the sentiment that the justices displayed yesterday in their questions, what would it be?
--:-- Ryan Knutson: If I had to put it in one word, the word I would use is skeptical.
--:-- Ryan Knutson: Welcome to The Journal, our show about money, business, and power. I'm Ryan Knutson. It's Thursday, November 6th.
--:-- James Romoser: Coming up on the show, will Trump's tariffs survive the Supreme Court's scrutiny?
--:-- Ryan Knutson: Make paperwork, and source the twist ties you need so your business can stay unstoppable. Learn more at sap.com slash uncertainty.
--:-- Ryan Knutson: My fellow Americans, this is Liberation Day. Waiting for a long time. In April, President Trump announced sweeping tariffs.
--:-- James Romoser: April 2nd, 2025 will forever be remembered as the day American industry was reborn, the day America's destiny was reclaimed, and the day that we began to make America wealthy again.
--:-- Ryan Knutson: And how did the Trump administration justify this move at the time?
--:-- James Romoser: The Trump administration cited a 1977 law known as the International Emergency Economic Powers Act. Otherwise known as AIPA, which is very fun to say.
--:-- Ryan Knutson: AIPA, yes. Yes, it sounds more like an exclamation rather than a statutory term, but that is how it's known.
--:-- James Romoser: Or something my son might say when he's trying to, you know, make an animal sound.
--:-- Ryan Knutson: Right, AIPA. I'm not sure what animal that is.
--:-- James Romoser: Yeah, me either. Anyway, sorry.
--:-- Ryan Knutson: So what is this International Emergency Powers Act?
--:-- James Romoser: So what this 1977 law says is when the president determines that there is a national emergency originating from abroad, the president has the power to take certain steps in regard to foreign imports.
--:-- Ryan Knutson: And the key language in the statute is that the law gives the president the power to regulate the importation of goods.
--:-- James Romoser: And that phrase has long been used by previous presidents to do things like impose embargoes.
--:-- Ryan Knutson: The statute also gives the president a bunch of other regulatory-type powers with regards to foreign imports.
--:-- James Romoser: There's a key list in the statute of a bunch of different verbs that the president has the power to do.
--:-- Ryan Knutson: Those verbs include investigate, block, regulate, direct and compel, nullify, void.
--:-- James Romoser: One of those verbs is not tax. One of those verbs is not tariff.
--:-- Ryan Knutson: And that's where the problem arises, because AIPA does not use the T word anywhere in its text.
--:-- James Romoser: In order to invoke AIPAA, Trump declared two emergencies.
--:-- Ryan Knutson: The first, he said, was a trade deficit emergency, meaning that America buys more things from abroad than it sells.
--:-- James Romoser: The second was the fentanyl crisis.
--:-- Ryan Knutson: And so in response to trade deficits, he enacted tariffs on virtually every country in the world.
--:-- James Romoser: And in response to the fentanyl crisis, he enacted punitive tariffs, additional punitive tariffs, on three countries, China, Mexico, and Canada.
--:-- Ryan Knutson: Today, there's a baseline 10% tariff on virtually all countries and steeper tariffs on others.
--:-- James Romoser: Some tariffs are under negotiation.
--:-- Ryan Knutson: Through August the government has collected around $1 billion from the tariffs according to analysts who reviewed Customs and Border Protection data
--:-- James Romoser: Not long after the tariffs were put in place several small businesses and a dozen states sued the Trump administration
--:-- Ryan Knutson: The argument was quite simple.
--:-- James Romoser: The argument was that Trump does not have legal authority to enact these tariffs.
--:-- Ryan Knutson: The only law, the only statutory authority that he cited was the law that we talked about, AIPA.
--:-- James Romoser: AIPA doesn't use the word tariffs.
--:-- Ryan Knutson: According to challengers. The vague phrase in the statute, regulate imports, means regulate.
--:-- James Romoser: It doesn't mean tax.
--:-- Ryan Knutson: The Constitution gives the taxing power and therefore the tariff power directly to Congress.
--:-- James Romoser: The president doesn't have any inherent authority to enact these tariffs.
--:-- Ryan Knutson: And so if he wants to do it, he has to point to some statute where Congress delegated the tariff authority.
--:-- James Romoser: And presumably these companies are also saying, this is creating a hardship for us.
--:-- Ryan Knutson: We're having to pay this much harder, bigger tax.
--:-- James Romoser: Our costs are going up significantly, and we don't want that.
--:-- Ryan Knutson: Yes, they contend that they are suffering quite significant financial harms by virtue of having to pay these steep tariffs.
--:-- James Romoser: And three lower courts have ruled in their favor and against the Trump administration.
--:-- Ryan Knutson: The reasoning of the three lower courts differed in some of the details.
--:-- James Romoser: But the bottom line is that three lower courts all ruled against Trump, and that's how the cases got to the Supreme Court on appeal.
--:-- Ryan Knutson: Mr. Chief Justice, and may it please the court, on April 2nd, President Trump determined that our exploding trade deficits have brought us to the brink of an economic and national security catastrophe.
--:-- James Romoser: Yesterday, at the Supreme Court, Solicitor General John Sauer was the first to stand before the judges, arguing on behalf of the Trump administration.
--:-- Ryan Knutson: His argument was pretty simple.
--:-- James Romoser: The word regulate in that 1977 law, AIPA, gives the president the power to impose sweeping tariffs.
--:-- Ryan Knutson: The phrase regulate importation plainly embraces tariffs, which are among the most traditional and direct methods of regulating importation.
--:-- James Romoser: And then, as part of the argument, one thing that he says is that everyone agrees that IEPA gives the president the power to enact embargoes, to block trade altogether.
--:-- Ryan Knutson: And it would be a little funny if Congress said to the president, you have the power to block trade wholesale, to stop all foreign trade, but you don't have the power to simply enact a small tariff on those very same goods that you could block altogether.
--:-- James Romoser: This is what was referred to in the oral argument as the donut hole problem.
--:-- Ryan Knutson: Sauer says under the challenger's interpretation of the statute, where the president has the ability to embargo but not to tariff, that leaves a big, giant, illogical donut hole in the law.
--:-- James Romoser: And so the Supreme Court shouldn't read it that way, the Solicitor General argues.
--:-- Ryan Knutson: Was there any discussion about whether or not these emergencies that the president cited were legitimate or not?
--:-- James Romoser: There was some minimal discussion of that.
--:-- Ryan Knutson: So I think as a baseline, the Supreme Court in general is usually not in the business of second-guessing presidential determinations about emergencies, right?
--:-- James Romoser: The Supreme Court would typically say, we're not the experts on these sorts of things.
--:-- Ryan Knutson: If the president thinks there's an emergency about fentanyl, if the president thinks there's an emergency about trade deficits, you know, we're not going to really scrutinize that.
--:-- James Romoser: Not all justices gave the administration such leeway, though.
--:-- Ryan Knutson: For instance, liberal justice Elena Kagan seemed to suggest that the Trump administration has been invoking emergencies all over the place.
--:-- James Romoser: And in fact, you know, we've had cases recently which deals with the president's emergency powers.
--:-- Ryan Knutson: And it turns out we're in emergencies everything all the time, about like half the world.
--:-- James Romoser: And she didn't elaborate, but I interpreted that as her basically saying like, you know, at some point it becomes implausible if there are just, you know, emergencies about the drug trade, emergencies about immigration, emergencies about trade deficit.
--:-- Ryan Knutson: And lots of other emergencies that Trump is attempting to invoke.
--:-- James Romoser: One of the main areas of questioning was over a concept called the major questions doctrine.
--:-- Ryan Knutson: So the so-called major questions doctrine is this legal theory that says, essentially, if a president wants to rely on language in a statute to enact a policy of sweeping, vast, political, or economic significance, the president needs to point to exceedingly clear statutory authority.
--:-- James Romoser: He can't just take some vague phrase in a statute as the legal basis.
--:-- Ryan Knutson: Congress needs to be very, very clear if it's going to delegate to the president the power to enact a really big policy, essentially.
--:-- James Romoser: So if he's going to do something major that has a huge impact on the country or the economy, it's got to be pretty clear that Congress intended for him to have that power.
--:-- Ryan Knutson: You can't just find some little line in some obscure law and say, yeah, this gives me the power to change everything, basically.
--:-- James Romoser: That's exactly what the major questions doctrine says.
--:-- Ryan Knutson: The most famous recent use of the major questions doctrine was when the Supreme Court struck down Biden's student loan forgiveness program, which he had justified by citing an old law and the COVID emergency.
--:-- James Romoser: Yesterday, Liberal Justice Sonia Sotomayor questioned Imagine whether Aiepa really does delegate the power to tariff to the president if the law doesn't use the word.
--:-- Ryan Knutson: Could you tell me why it is that when Congress intended to permit a president to regulate by imposing tariffs it always used tariff and regulate I have about 16 laws in the past that when Congress intended regulate to mean taxing that it used taxes simultaneously.
--:-- James Romoser: But it didn't here.
--:-- Ryan Knutson: Let's talk about the conservative justices now and how they responded.
--:-- James Romoser: Let's start with Amy Coney Barrett.
--:-- Ryan Knutson: Yeah, Barrett is definitely going to be a critical vote in this case.
--:-- James Romoser: Of course, she's one of three Trump appointees on the court, so a lot of people were watching her very closely.
--:-- Ryan Knutson: And she styles herself, like many of the conservatives, as a real, true, strict textualist.
--:-- James Romoser: And so she, too, was very focused on why the statute doesn't use the word tariff and how important that is.
--:-- Ryan Knutson: Sauer, can I just ask you a question?
--:-- James Romoser: Can you point to any other place in the code or any other time in history where that phrase together, regulate importation, has been used to confer tariff-imposing authority?
--:-- Ryan Knutson: And she sort of hammered him on that.
--:-- James Romoser: I think our argument goes a bit further than that as an interpretive matter, because if you look at that history, the history of delegations...
--:-- Ryan Knutson: Could you just answer the justices' question?
--:-- James Romoser: Can you identify any statute that used that phrase to confer tariff?
--:-- Ryan Knutson: At one point where she asked Sauer, look, I understand if Trump thinks there's an emergency regarding trade deficits, but these tariffs are so sweeping.
--:-- James Romoser: They're imposed on virtually every country in the world.
--:-- Ryan Knutson: And she asked, is that really proportional? Is that necessary?
--:-- James Romoser: These are imposed on, I mean, these are kind of across the board.
--:-- Ryan Knutson: And so is it your contention that every country needed to be tariffed because of threats to the defense and industrial base?
--:-- James Romoser: I mean, Spain, France, I mean, I could see it with some countries.
--:-- Ryan Knutson: But explain to me why as many countries needed to be subject to the reciprocal tariff policy as are.
--:-- James Romoser: Early on, it looked like things weren't really looking great for Trump.
--:-- Ryan Knutson: No, I don't think things were looking great.
--:-- James Romoser: I mean, Barrett asked some skeptical questions of the Solicitor General.
--:-- Ryan Knutson: Even Chief Justice John Roberts and Brett Kavanaugh asked a few skeptical questions.
--:-- James Romoser: And then I think the most dramatic moment in the argument came about 45 minutes in when we heard for the first time from Justice Neil Gorsuch.
--:-- Ryan Knutson: That's next.
--:-- James Romoser: Justice Neil Gorsuch was President Trump's first nominee to the Supreme Court back in 2017.
--:-- Ryan Knutson: He's considered to be one of the court's most conservative members.
--:-- James Romoser: He's not often kind of considered a swing vote.
--:-- Ryan Knutson: And for the first 45 minutes, we didn't hear him say a word.
--:-- James Romoser: And then all of a sudden, he jumped in.
--:-- Ryan Knutson: And for 10 minutes straight, he just hammered John Sauer.
--:-- James Romoser: In a pretty aggressive way.
--:-- Ryan Knutson: I thought that was just such a key moment because Gorsuch was really invested in this idea of the separation of powers and what this case says about the balance of power between Congress and the president.
--:-- James Romoser: So could Congress delegate to the president the power to regulate commerce with foreign nations as he sees fit?
--:-- Ryan Knutson: To lay and collect duties as he sees fit?
--:-- James Romoser: We don't assert that here.
--:-- Ryan Knutson: That would be a much harder case now in 1790.
--:-- James Romoser: Isn't that the logic of your view, though?
--:-- Ryan Knutson: I don't think so, because we're dealing with a statute that was a carefully crafted compromise.
--:-- James Romoser: It does have all the limitations that I just talked about.
--:-- Ryan Knutson: You're saying we shouldn't be concerned with—
--:-- James Romoser: I want to explain to me how you draw the line.
--:-- Ryan Knutson: And Gorsuch was very concerned about the fact that the taxing power belongs to Congress, not the president.
--:-- James Romoser: And he seemed to be suggesting even if AIIPA does give the president the power to enact tariffs, that delegation in itself might be unconstitutional.
--:-- Ryan Knutson: In other words, even if Congress did mean to give the president the power, it might be unconstitutional for Congress to do that.
--:-- James Romoser: The reason, Gorsuch suggested, is that Congress should not be able to hand away its core powers like the taxing power.
--:-- Ryan Knutson: And Gorsuch even used examples.
--:-- James Romoser: He asked Sauer, could Congress simply delegate to the president the power to declare war?
--:-- Ryan Knutson: Could Congress simply hand that away?
--:-- James Romoser: What would prohibit Congress from just abdicating all responsibility to regulate foreign commerce, for that matter, declare war, to the president?
--:-- Ryan Knutson: We don't contend that he could do that.
--:-- James Romoser: Why not?
--:-- Ryan Knutson: Well, because we're dealing with a statute, again, that has a whole set of limitations.
--:-- James Romoser: I'm not asking about the statute.
--:-- Ryan Knutson: General, I'm not asking about the statute.
--:-- James Romoser: I'm asking for your theory of the Constitution and why the major questions of non-delegation, what bite it would have in that case.
--:-- Ryan Knutson: And Gorsuch seemed to be saying, no, of course not.
--:-- James Romoser: We would never allow that.
--:-- Ryan Knutson: And similarly, he seemed to suggest we shouldn't allow Congress to delegate away core taxing powers either.
--:-- James Romoser: Gorsuch also worried that if Congress were able to delegate its powers to the president, it wouldn't be able to claw it back.
--:-- Ryan Knutson: So Congress, as a practical matter, can't get this power back once it's handed it over to the president.
--:-- James Romoser: It's a one-way ratchet toward the gradual but continual accretion of power in the executive branch and away from the people's elected representatives.
--:-- Ryan Knutson: This exchange went on for quite a while.
--:-- James Romoser: And it really became clear that Gorsuch vote not only was in play but it seemed that Gorsuch was leaning very heavily against the Trump administration
--:-- Ryan Knutson: Did any of the justices seem receptive to Sauer's arguments?
--:-- James Romoser: I think that the most receptive justice was Sam Alito.
--:-- Ryan Knutson: Certainly one of the most conservative members of the court.
--:-- James Romoser: And he asked a series of quite skeptical questions to the challengers when it came time for their lawyers to stand up at the lectern.
--:-- Ryan Knutson: He was very concerned about making sure that presidents retain the ability to deal with unforeseen emergencies.
--:-- James Romoser: He was focused on the fact that this 1977 law is an emergency statute.
--:-- Ryan Knutson: It's meant for the president to deal with emergencies.
--:-- James Romoser: Congress can't always foresee exactly what those emergencies will be.
--:-- Ryan Knutson: And so the court should therefore interpret the statute broadly to give the president a lot of latitude.
--:-- James Romoser: James says that the court's other three conservative justices, Roberts, Thomas, and Kavanaugh, were a little harder to read and ask tough questions of both sides.
--:-- Ryan Knutson: Yesterday, Trump told Fox News he heard the court case went well and the quote, it would be devastating to our country if we lost that.
--:-- James Romoser: I know it's impossible to say how the judges are going to rule, but you can obviously get a sense of where they're leaning based on their questions.
--:-- Ryan Knutson: So how is it looking for Trump's tariffs at the Supreme Court?
--:-- James Romoser: Yeah, I think for all the reasons we've talked about, it was not a great day for Trump and the Supreme Court.
--:-- Ryan Knutson: You know, I don't think it's a shoo-in that the court is going to strike down these tariffs wholesale, but it is difficult for me to count to five justices who signaled that they were willing to uphold the tariffs based on their comments at the oral argument.
--:-- James Romoser: If a majority of the court does rule against Trump, then the next question becomes how broad or narrow would that ruling be?
--:-- Ryan Knutson: But I think some justices may be hesitant about issuing a ruling that wipes away such a centerpiece of the president's policy agenda.
--:-- James Romoser: Right, because it's hard to imagine if the Trump administration gets these tariffs struck down by the court that Trump is just going to give up on this.
--:-- Ryan Knutson: I mean, as you said earlier, he has been talking for years about how tariffs are the most beautiful word in the English dictionary.
--:-- James Romoser: That's exactly right.
--:-- Ryan Knutson: And he's only amplified his rhetoric in recent days.
--:-- James Romoser: He has said that these tariffs are a literal matter of life and death for the country.
--:-- Ryan Knutson: So yes, it is impossible to imagine that if the court rules against him, Trump is just going to concede defeat and say no more tariffs.
--:-- James Romoser: If the court rules against Trump's tariffs, it's possible everyone who paid a tariff could get a refund, though that could be a quite complicated process.
--:-- Ryan Knutson: It's also possible the court might just say these tariffs are illegal going forward.
--:-- James Romoser: If Trump wins this case and the Supreme Court rules in his favor, what would be the implications of that and what would it mean for presidential power?
--:-- Ryan Knutson: Certainly, presidents would have a newfound tariff authority that prior presidents didn't think they had, right?
--:-- James Romoser: No president before Trump has ever tried to use IEPA to impose tariffs.
--:-- Ryan Knutson: And if the Supreme Court says that IEPA actually does, contrary to what people thought, give the president tariffing authority, then, you know, other presidents could use that.
--:-- James Romoser: And so one hypothetical that actually came up in the oral argument is this idea that some future Democratic president could declare a climate change emergency and then use IEPA to impose tariffs on, you know, a foreign oil, for example.
--:-- Ryan Knutson: Right.
--:-- James Romoser: And, you know, so like these are the kinds of scenarios that I think will be on the court's mind as it grapples with this case.
--:-- Ryan Knutson: It's unclear when exactly the court will rule on this case.
--:-- James Romoser: James said that a case this big is often held until the end of the session in the summer.
--:-- Ryan Knutson: That being said, both sides asked the court to take up the case quickly and would like the court to decide quickly.
--:-- James Romoser: So I think it's very feasible that a ruling could come much, much sooner than next summer, perhaps early 2026 or even by the end of the year in a matter of weeks or a month or two.
--:-- Ryan Knutson: And I think the Supreme Court is aware that the ruling on this question is being highly anticipated, you know, by the markets and economic actors.
--:-- James Romoser: And so I think if they know that they're going to issue a clear ruling, either upholding or striking down the tariffs, there might be a premium to get out the decision somewhat quickly.
--:-- Ryan Knutson: That's all for today. Thursday, November 6th.
--:-- James Romoser: The Journal is a co-production of Spotify and The Wall Street Journal.
--:-- Ryan Knutson: If you like our show, follow us on Spotify or wherever you get your podcasts.
--:-- James Romoser: We're out every weekday afternoon.
--:-- Ryan Knutson: Thanks for listening. See you tomorrow.
