To break it all down.
I'm pleased to have two different guests on from two vantage points to dive in.
Philip W.
Magnus is a senior fellow at the Independent Institute and the David J. Throw Chair in Political Economy. He's been a research fellow elsewhere, has been a prolific author of several books as well. I'm also pleased to be joined by Thomas A. Barry, director of the Robert A. Levy Center for Constitutional Studies and the editor in chief of the Cato Supreme Court Review. Gentlemen, welcome to KOA. It's good to talk with you both.
Absolutely thanks for having us, Yes, thanks for having me.
Thank you both for coming on.
So I will start with our legal expert for the beginning, and that would be you, Thomas A.
Barry.
Can you break down for us, just if you boiled it down, what the essence of this case is between the two sides with the Trump administration is arguing in the court and presented the other day, and what the point of suing the federal government have said?
Absolutely, well, thanks for having me, and if you'll permit me one brief correction. That third voice we heard talking about the accretion of presidential power was Neil Gorstich.
Now, excuse Melito, thank you. I'm embarrassed he's from Colorado. How could I?
Gorstich was much more skeptical of the administration than Alito.
Was true the argument, thank you for that clarification.
In a nutshell, this is about, as you said, the text of AIPA, whether it allows President Trump to impose these tariffs that he started on so called Liberation Day as he put it, which have varied quite a bit. Not every tariff he's enacted is a part of this challenge because the lawsuits were filed months ago, so some of the newer ones might not be an issue, though their legal grounding might be undermined as well, depending on
the reasoning the court issues. But i EPA, this nineteen seventy statute essentially has a long list of verbs and nouns that the president can do if he finds that there's an extraordinary and unusual threat and he declares a national emergency and he claims that he needs to take this action to deal with it. So among all of those very long list of verbs, some of them are quite broad. For example, nullify, void, prevent or prohibit importation.
So the president can say, you know, no one can import platinum or gold or type tungsten or whatever from Vietnam or China or something like that. But the keyword is among those verbs is regulate, so it says the president can impose in order to regulate. And then among those objects of the verbs is importation. And what the administration is hanging its hat on completely is that if you combine those two regulate and then put in ellips's
importation that includes tariffs. The tariffs are essentially a regulation on importation, and that they were necessary to deal with the extraordinary two threats through to national emergencies, one being the importation of fentanyl and the other being the so called trade imbalance with various countries. And the administration's main argument that they've made repeatedly in oral arguments is that they don't want these tariffs. The purpose of these isn't
to raise revenue. This is what they're claiming now, though President Trump has said some things at odds with this, but their legal argument now is the purpose of this isn't to raise revenue. It's to provide leverage to change change people's behavior, and that the hope is that either other countries will stop the flow of fentanyl, and thus
we won't need the tariffs anymore. So essentially the punishment ends, or that manufacturing will increase in the US, the trade imbalance will go away, and the things that we were importing just voluntarily won't be imported anymore, and once again tariffs won't be imposed. The administration's argument, in a nutshell, is that they're dealing with these two extraordinary threats by regulating importation and in this and tariff's count as among the things encompassed by the verb regulate.
Let's talk for a moment, Philip Magnus about that aspect of this idea of a regulatory terrorists versus revenue raising tariffs, because that is part of the distinction that the administration is addressing, per what Thomas Berry just told us, And it's interesting to me to hear this at the same time, phil that the administration, particularly President Trump, has been touting all kinds of revenue coming into the federal government. Look how much money we've made in America from these tariffs.
But before the Supreme Court, now, no, this.
Is about regulatory terrorists, not about making money.
Right right, So Trump has actually contradicted in footplop several times on this particular point, including some of his own court filings, and certainly is Economic advisors public documents that they've released. Trump has been teuting that these tariffs, the i EPA tariffs that are being challenged right now, are projected to raise between about two point eight and four trillion dollars in new tax revenue over the next decade.
And even as his lawyers are arguing this before the court, the White House is tweeting out media eclipse of President Trump bragging about all the revenue that's coming in even an internal contradiction and messaging here, although one of them they're arguing for illegal reason because they think if the court accepts these tariffs as regulatory powers, they'll be granted
more deference in the leeway in the international arena. The reason being that the tax power is so explicitly tied to what Congress does in Article one, even though that's as where the commerce regulation power comes from. But the tax power itself is fundamentally seen as something that our representatives in an elected body are supposed to have direct and exclusive oversight on. So Trump wants to run away from the tax claims in court even while he's making them in public.
And kind of dovetailing in with that.
I want to ask you real quick of Phil Magnus, because you were tweeting about this on x as well, going back into the early mid well still pretty early eighteen hundreds, during the nullification crisis, and you had the debate that was going on there and some things you were pointing out about John C. Calhoun, who's a former Vice president of the United States, the seventh Vice president
of the United States. Talk to us a little bit about what you're noticing from the Solicitor General that would be the Trump administration's lawyer, John Sower, and what he argued to the Supreme Court and John C.
Calhoun from two hundred years ago.
Well, that's the interesting thing. We've had all of these arguments play out before it goes back to the earliest days of the Republic. Because James Madison, basically the main figure in the design of the Constitution and the main record keeper at the Convention, introduces the first tariff bill in seventeen eighty nine, and in his opening speech he says,
this tariff achieves two things. One is it raises revenue to it regulates commerce and Madison's point was that tariffs are actually a joint exercise of these two powers under Congress. They are both taxes and regulation. And for your economic followers out there, we also know that the economics of tariffs work in this exact way. You put a tax in place, it raises revenue, but it also discourages importation at the same time thereby regulating it. So it's a
simultaneous exercise of these powers. Well, John C. Calhoun in eighteen twenty eight, the US Congress passed something referred to as the Tariff of Abominations. It was an extremely high protective tariff following the philosophy of Henry Clay to basically wall off America from foreign competition to protect our industries. And Calhoun basically made the same argument. He says, this is a regulatory tier if this is not a revenue tariff, even though it was listed as the Revenue Act of
eighteen twenty eight. But Calhoun's point was, you can only pick one of these two clauses at a time. It's either a revenue tariff or a regulatory tariff. And he had further arguments. He said that if this is a regulatory tariff, it's unconstitutional because it doesn't fulfill the tax power. Madison is still alive in this time, and he's still writing commentaries on these debates to his friends and close associates, and we have several letters from him. Madison rebukes essentially
the Calhoun position. He says, no, these are joint powers exercise simultaneously, because every tariff does both things. It raises revenue and it regulates commerce.
And quite honestly, I would choose the words of the father of the Constitution over John C. Calhoun, and particularly on that one. Again, we're joined by Philip Magnus, who was an economic historian, and by constitutional scholar Thomas Barry. And Thomas, I want to come back to you because one of the things that I've noticed, and I think you've observed this too, is that President Trump's administration has been searching around what's the legal justification we can find
for the broadest tariffs possible. We saw a similar thing with Joe Biden and his presidency on things like in particular the student loans issue.
Can you speak to that?
And presidents looking for a legal justification for their chosen expansions of presidential authority.
Yeah, that's exactly right. And this is the reason why the Supreme Court has, over the last decade or so, developed named doctrine. It's come to be called the Major Questions doctrine. And it gets that a common sense idea, which is that if the president starts with a policy goal in mind, and he President Trump very much had that goal in mind. He wanted tariffs, he made that
clear before he was elected. If he starts with a policy goal in mind and then goes hunting for an old statute to enact it because he can't get Congress to give him what he wants, you should be more skeptical about whether that legal argument is correct, especially if that old statute has been around for a while but has never been used in the way that the president is now using it. So we saw this playout under President Biden with student loan forgiveness. This was a major
issue in the twenty twenty election. He had a lot of pressure from his base to an act student loan forgiveness. Bills were introduced in Congress, but none of them could
get passed. So he uses an uncontroversial old statute enacted during the two thousand and three Iraq War and claims that it allows him to takes a very general term waiver or modify provisions related to student loans, and claims that modify encompasses essentially a wholesale change in the structure of the student loan system, including for giving billions and
billions of dollars in debt. And the Supreme Court right struck that down, and all of the reasoning of the six justices who voted to strike that down applies just as much, if not more here, And in fact, we heard John Roberts, Chief Justice, who's been the biggest proponent of the Major Questions doctrine, asking some pointed questions of the Solicitor General about whether the Major Questions doctrine should
apply here as well. So I think all of that reasoning that of all six justices who joined that student Loan's opinion should lead them if they're being consistent to strike down these tariffs.
Let me ask you a little more about that, Thomas Berry, particularly Justices A Leado who you corrected me on before, and yes, absolutely was much more a sort of friendly to the government's side, which I found interesting in Justice Thomas who you know, he's been speaking a lot more since COVID he didn't say a word for decades, then suddenly started to ask questions, and the few questions he asked were, we're not.
So averse to this.
Talk to me a little bit about how you view the conservative justices and their interpretation what could be here, especially from their questions, and whether they will or will not. I mean, obviously I'm not asking you for crystal ball. May or may not line up with what they concluded in the student loans case that you just mentioned.
Right, Alito definitely seemed to be on the administration side, and it seems that to Aledo, the difference here is the foreign policy aspect of this. Alito asked a lot of pointed questions about what if we have, you know, we're on the verge of a hot war with China, or we have a hostage in a foreign hostile foreign country like China that we're trying to use leverage to get them out. Shouldn't the president have the maximum number of tools at his disposal to put leverage on these
foreign countries to negotiate with them. So I'm guessing if Alito, I hope, writes a dissent, not a majority opinion supporting the government, he would argue that this is different from the student loans case because statutes giving presidents negotiating power with foreign countries should be interpreted more expansively given that the way the separation of powers is designed, it is understood that the president is the lead negotiator with foreign countries,
is the person who often makes quick decisions when an emergency arises unexpectedly. Nonetheless, my response to that would be, we have had two hundred years of presidents having many tools at their disposal for leverage, but tariffs have never been one of them. In terms of unilateral presidential policy making, We've always relied on Congress to be the one to spell out explicitly in statutes what the teriff rates are
going to be. So Congress really has always treated tariffs as a different kind of thing because they're not just foreign policy, they're also taxes on Americans.
Now, that's a great point. Thomas Berry and I would tend to agree.
Although there's an argument from President Trump and his supporters that the reason why Trump is using teriffs in this way is because he views it as a negotiation tool in a way that past presidents had not, and therefore is justified in going about it in this way.
How do you respond to that, Well.
He's been a very erratic and unreliable negotiator here because he keeps setting terms or claiming he comes to deals with other countries, and then a week later he gets mad at the prime minister of that other country or government official. He gets mad because Canada runs a TV ad quoting Ronald Reagan and decides that the deal is off and he's going to change the rate. And I think what this highlights is there's a deeper problem in
Trump's approach to IEPA. He likes IIPA because he can change it on a whim with an executive order, but that also means any in all of these deals that he has claimed to have secured it with foreign countries have no enforcement mechanism. They're not worth the paper that they're written on, if they're even written on paper at all.
They're outside of the balance of the traditional way of doing free trade agreements, which was there was a formal document, an agreement drafted, and it was put before Congress, and I think Congress would have to vote on it to accept the terms of that agreement. Trump's done absolutely none of that and is just relying on the perpetuity of his own executive orders to keep these supposed deals in place.
Well, you just got a few minutes left.
I want to ask each of you a different final question, a real quick film magnus. I'll throw it back to you on the argument about trade imbalances and how they're now viewed as a national emergency, and that is per the arguments presented in court as well before the Supreme Court this week, that this is part of the justification. Is the trade imbalance that we have with a given country a national security matter?
It is absolutely not, and you would not be able to find any credible mainstream economist who would support that proposition. In fact, we've run trade desits for basically the last fifty years. We've run trade deficits for as long as i EPA has been in place, and never once until Donald Trump invented this new power, did anyone try to use IEPA to counter this supposed emergency and the economics
behind it. It just comes down to basically the presidents in his team, they don't understand basic accounting in the international arena. They only see goods and services coming in or going out of the country. They don't look at all the other financial instruments. People are not giving us stuff for free, and they're not taking stuff away from us.
There's always an exchange. And if you do a full accounting of what crosses borders by definition, it's like if I were to pay my bill at the grocery store, there's no trade deficit that occurs because I offer money in return for goods or vice versus. Someone comes into a store that I own and they give me money for something that I give them as a physical product. It actually comes out to a balance.
Finally, appreciate that answer, Phil magnet So, Thomas A.
Berry. Let me just ask you so briefly to talk a bit about.
The implications of what the Supreme Court might decide. How do you think this may or may not go down, and what could it mean for the long term, particularly in so far as we consider presidential power.
Sure well, I was in the audience during the Supreme Court argument trying to predict the votes counted justices see who's giving more skeptical questions. I counted at least five
votes that I think are leaning against the administration. The three Democratic appointees plus Justices Gorsich and Barrett, and I could definitely see Chief Justice Roberts voting against the administration as well, given his interest in the major questions doctrine, and perhaps Justice Kavanaugh, who seemed to be a genuine swing vote. He seemed genuinely concerned and pained by both sides and really deep in the weeds of some of the precedents. So if I had to guess, I guess
somewhere between five and seven votes against the administration. But a lot will depend on how they write the opinion. Do they try to work through all of the implications of how the refunds might work for every party in the country, or do they simply say the named parties in this case are entitled to a refund, will leave it to the lower courts to deal with claims for refunds by every other affected person. If I had to guess,
I would guess that they would do the latter. The Supreme Court usually takes the approach of lessons more so there's certainly going to be much more litigation to follow no matter what. And of course, there are many other statutes that President Trump may use, and has said he probably sure to try to direct orff some more plausible than others. So we're likely to have litigation not just about IEPA, but about other statutes going forward.
Ah years ahead of Supreme Court potentially or at least legal arguments over different justifications for tariffs.
Oh what joy. Thomas A.
Berry, Director of the Cato Institute's Robert A. Levy Center for Constitutional Studies, and Philip W. Magnus, Independent Institute Senior Fellow and economic historian, thank you both so much for your time, really interesting discussion and appreciate it today.
Thanks for having us, Thanks for having us.
Thank you both