Welcome to the Votes and Verdicts podcast hosted by Bloomberg Intelligence, the investment research arm of Bloomberg LPA. In this podcast series, we talk about the intersection of business policy and law. My name is Holly Frome. I'm an analyst with Bloomberg
Intelligence covering consumer and industrials litigation. Today's podcast, we'll focus on several key court rulings impacting tariffs, and specifically a May twentieth decision by the US Court of International Trade and May twenty ninth decision by a Washington, d c. District Court holding that President Trump's reciprocal tariffs and tariffs imposed on China, Canada, and Mexico were unlawful. I'm delighted
to be joined today by law Professor John Yu. Professor U is a Senior Research Fellow at the Cibitas Institut, a Distinguished Visiting Professor at the School of Civil Leadership at the University of Texas Austin, the Emmanuel Heller Professor of Law at the University of California at Berkeley, and a non resident Senior Fellow at the American Enterprise Institute.
Professor U served as an official in the US Department of Justice General Counsel of the US Senate Judiciary Committee, and was a law clerk for Supreme Court Justice Clarence Thomas and Federal Appeals Judge Lawrence Silberman. He has written or assisted in the writing of numerous books on constitutional law national security in the Supreme Court and graduated Harvard
College and Yale Law School. Professor U also serves on the board of the Pacific Legal Foundation, which is representing businesses that have filed a case called Princess Austin versus Customs and a separate lawsuit against the Trump administration over
the tariffs we will discuss today. Thank you so much for joining us, Professor U. So, just by way of background, the International Trade Court on May twenty eighth found executive orders imposing so called reciprocal terrors were also called worldwide terraffs and terraffs in China, Canada, and Mexico related to
fentanyl trafficking unlawful. The Court found reciprocal terrafts lawful because it found the International Emergency Economic Powers Act, the law the President used to impose them, doesn't permit unbounded teriffs. If it did, the Court said it would violate the major questions and non delegation doctrines, and with respect to fentanyl trafficking terraffs, it found that the terriffs don't deal with the emergency as required by what's the Internationalency Economic
Powers Act were also known as AIPA. So, as many people know, the President posed reciprocal terrafs on the grounds that the trade deficit constituted an emergency. And you've said that the judges of the International Trade Court could have rejected the reciprocal terraces on the straightforward ground that the trade deficit doesn't qualify as an unusual and extraordinary threat as required by AEPA, But the court didn't make that determination. Why do you think they didn't?
Thanks for having me, Holly, And it's an interesting question. There's really two different parts to it. One is what's the right role of the courts? And that's the question you just asked, why didn't the courts reach a certain question or not? And then the second one is just under the statute is this and appropriate use of the
emergency international Economic powers? So I think as to the first question, courts have always been reluctant to second guess the executive branch, and when it decides there's an emergency. In fact, I don't think that any court really ever has overturned a finding of it by the president of an emergency. This is because courts feel a great deal of reluctance in this area to try to determine what the facts are. They understand that emergencies are fast moving,
that they happen in an unanticipated way. That's in fact why Congress often delegates broad authority to the president. So I think that this court, this Court of International Trade, which is a very unusual court. It's in fact, for most of its history it was actually an administrative agency, and it's not like the other kinds of federal courts were used to reading about, which have what we call a general jurisdiction. They can hear almost any issue under
federal law. This court especially created just to hear really cases about dumping and unfair subsidies in the trade context. I don't think they wanted to step out and be the first federal court to ever overturn of finding a presidential emergency. That doesn't mean that, you know, as to the second question I raised, under the law itself, this
is an emergency. It might just be that this court thought, maybe be it should be the Supreme Court or the Federal Circuit, the higher appeals court that take this fateful step.
Yeah, that makes sense. And then I wonder why, well we'll get I guess we'll get to it later because you know, there's another district court case that found the tarifs and lawful for different reasons, which we'll get to. That court also didn't say that the trade deficit wasn't an emergency, but the President has said that the trade imbalances have hollowed out our manufacturing base, inhibited our abilities to scale domestic manufacturing, undermine critical supply chains, and rendered
our defense industrial based dependent on foreign adversaries. So why do you think that that doesn't lead to the conclusion that trade balance imbalances and other trade barriers doesn't arise to the level of an unusual and extraordinary threat. Yeah.
I think, Holly, that if the courts do get to the question, if they do, unlike as you said, the Court of a National Trade just take off what we called denovo, a fresh look at whether an emergency exist or not. I don't think this is what Congress had in mind with AIPA. As you said in your introduction, you quoted the statute, it requires an unusual and extraordinary threat to the national security or foreign policy of the
United States. You go back and look, and first, I don't think that the trade deficit has suddenly fallen upon us. We've had a trade deficit consistently for about fifty years since the Nixon administration. And in fact, Nixon was the last person to kind of try something, last president to try something like this, to pose a kind of universal tariff in order to solve the trade deficit, which didn't work. And so the trade deficit has fluctuated up and down.
And I also looked, and if you correct for inflation, the trade deficit today is about where the trade deficit was at the beginning of the second Bush term. So it's been about many years. And the inflation adjusted size of the budget deficit, there's a percentage of GDP for example,
is really not change at all. So to me, it seems that an emergency, you know, something unusual, extraordinary, something that has an enormous impact, and it's something that's all of a sudden, it's something that has fallen us in an unanticipated way. Whereas this emergency is a non emergency. The trade deficit is just the fact of the economic life, or a trade SURPPLUS would be two. And it's been fluctuating up and down four or five decades now, got it.
So what the International Trade Court said was that if the president is going to address trade deficits, he has to do that through Section one twenty two of the Trade Act and not through I do you agree with that ruling.
I think that's an I don't think that's correct. So I think there's a number of ways that the president can impact trade, and I think that's why this legal question, the first one is this an emergency is all important because if you then turn to AIPA and you read the powers that are given to the president, it doesn't use the word tariff, but it uses the words which you make up a tariff. It says that the president is allowed to regulate block sees any kind of transaction
with a foreign party. Essentially, so, for example, under APA, and keep in mind, AEPA grandfathered in other kinds of international emergencies that have been declared and trade sanctions that have been used, you could regularly impose an embargo on
a trade embargo on an entire country. So the predecessor of TAIPA was something called the Trading with the Enemy Act, and so when Congress, which was passed in nineteen seventeen, and so when Congress passed AEPA in nineteen seventy seven, it was trying to change how presidents could use those powers, but they didn't really change the powers that the president
got from the statute. And so under the Trading with the Enemy Act and then even under AEPA, presidents have regularly imposed trade sanctions that go even farther beyond teriffs, to the point of cutting off all trade with the country. For example, we're talking right now about secondary Russian sanctions, which would be to impose trade sanctions on country that do trade with Russia, not even primary sanctions, which are sanctions that are just directly on US Russian trade, which
is now very small. This to me is even more powerful tool than just straightforward tariffs, and that would be done under IPA. I think the way to understand what these powers are is that they're very broad, broader than these x under the other trade laws. But I think what they're really aimed at, in combination with the first question, is this an emergency, is that the purpose of the
statute was to aim at individual countries. So, for example, if President Trump were to say, a trade with China and China itself is a national security and foreign policy threat, so I'm going to impose sanctions on China, for example, in order to protect American national security related industries, or to build up alternate sources for raw materials or for basic electronic components that if we rely on China for I think that would fall under AUPA.
So do you think he would have been on better legal footing perhaps if he had directed it in a specific country instead of the you know, the worldwide chairis where he directed it in almost every country.
Exactly right, Holly. That I think is the way APA is supposed to work is here's a country like a China, like a Russia, they now pose a threat to our national security. Then AIPA gives you much broader therapy power than just terriffs. You know, president could just close off all trade, not just trade. You can close off trade, you could close off travel, you could close off communications
with that country. But it has to be I think, country by country, and it has to be because, of course, you find that country is a threat, not because they're just part of the overall trade deficit that we have. That makes sense. So the District Court of Washington, d c. However, said that AIPA doesn't authorize tariffs at all. And one of the points the court raised was that AIPA never
even mentions the word tariff. What do you think, what do you make of the argument that if Congress meant to authorize the president to impose terriffs vi iepa, it would have explicitly said so in the statute. You know, this is a I think a problem with that opinion and the Court of International Trades opinion is that I think they ignore that Supreme Court decisions in this area of international emergencies and economic powers. It has very different
fundamentals than domestic law. So you mentioned earlier that the Quarter of International Trade had held that the Trump administration was violating what's called the major Questions doctrine. This is essentially what the Court in Washington has helped too. And this idea that the Supreme Court has articulated in cases like striking down President Biden's effort to forgive student loans
or the nationwide vaccine mandate. This is the idea that a statute that's vague, isn't to be read to give the executive branch power on a question of major economic or social or political importance. In other words, if Congress really wanted to give the executive branch that power, for example, to acquire a nationwide COVID nineteen vaccine mandate, it would say so in the statute. And courts aren't to give the president the benefit of the doubt. And that's been
a very important development under the Robbers Court. But the Supreme Court has never applied that to foreign affairs. And so there's another line of cases involving international economic regulations where the Court has rejected exactly that argument, and in fact it rejected it exactly in the area of interpreting AIPA. The first major use of AEPA was against Iran, and it was to resolve the Iranian hostages crisis. Is a
case called Dames and Moore versus Reagan. And in that case, the Court, I'm sorry, the President had to execute certain economic sunctions and lifting of sanctions that were not permitted under a EPA. The Court said that even though the statute did not clearly deny the authority to provide the authority for that, it was going to give the president the benefit of the doubt because it involved foreign affairs and involved national security, involved fast moving events that the
court was reluctant to resecond guests. And that's exactly I think what's going on here. So that's why I think really the hard question for the courts are going to be are they going to review the emergency declaration? I think once they do, then the major questions doctrine. So far the Supreme Court can always change his mind. The major questions doctrine and the theory of it has not been held to apply to IBA. Got it.
So the International Trade Court said that if the law allowed unbounded terrafts, as it found a reciprocal terrafs were, it would violate the non delegation doctrine which you talked about. And that doctrine, you know, as you said, this says that Congress can't delegate a power to the president without providing intelligible principle or limits around that power. And you said you believe this line of reasoning, though, opens the
door for Trump to prevail on appeal. Can you explain why you think that?
Yes, So this pulls from that case in dameson Moore versus Reagan. The Court held that, So, I don't want to get too complicated, but this was the deal that freed the hostages in nineteen eighty and part of the deal was the United States had to had frozen all Iranian government assets in the United States under a EPA, and a whole bunch of people and companies had also sued Iran's government for nationalizing all their assets and had
won judgments and attached them all throughout the country. And so as part of that deal, the Carter first and then the Reagan administration had to free up all that money and send it out of the country. AIPA doesn't allow you to do that. AIPA doesn't actually say that you, the president, in the course of a national emergency, can take away basically lift all those attachments and basically eliminate all those judgments in court. And so the Supreme Court said, yes,
we admit. They were very open. They said, we admit that the Statute APA doesn't specifically give the president that power. It gives a president a lot of other broad powers.
And so we think that in the area of an economic regulation during an international emergency, we are going to basically give the president the benefit of the doubt, let him exercise that power, just kind of like filling a gap in the statute and not strike down something during the during an international emergency, which we don't want to
second guests. So that case really is the one that the Trump administration should be relying on, and I'm sure they will as this case moves up to the Supreme Court.
It's actually quite I don't think they did, though. I think it's really puzzling that the trial courts weren't confronted with this case and so have to explain, you know, why they were able, you know, why they were able to hold what they did in the face of you know, the most recent This is the clearest Supreme Court President president on the IPIS Statute itself.
So, if this case does make its way to the Supreme Court, do you think there's a way that they can affirm the International Trade Court's decision with regard to worldwide sheriffs but disagree with its reason for finding them am awful.
Yes, I mean, I think the easiest thing the Supreme Court could do would be to say we don't consider
this an emergency within the meaning of the Statute. And to do that would be to look at, as I said, all the emergencies under the Trading with the Enemy Act and look at that which were all nations specific, and then to say, you know the purpose of the statue and the way it's been used, And that's the thing a court has been looking at a lot in its recent cases in other areas, is what's been the tradition and history, what's been the practice under the statute and
say these all appeared to us to be aimed at specific countries that pose a threat, and then actually gives you broader powers and terrors. But that what the Congress didn't think an international emergency would be is something that's again been with us for fifty years, hasn't really changed in twenty years. So it's hard to say it's an emergency.
You've said that the Trade Court's decision intrudes into foreign policy in a manner no federal court has ever done before. Can you explain what you mean by that?
So this is the thing I think that's dangerous. You know, it's close to but different than the argument I was making, which is, I don't know though, if the courts want to get in the position of saying we can decide whether this is an emergency or not just on our own power. I think what's easier about what I just laid out what the court would try to do is figure out what did Congress think is an emergency? You know,
what does Congress think it was doing. What did Congress think it was doing when it passed the EYEPA law. What kind of international emergencies did it have in mind when it said unusual an extraordinary threat to the national security and foreign policy United States? But I think what the courts will be cautious of is sort of deciding
for itself whether something is an emergency. I think you mentioned that the Court the lower courts have been doing this in other areas, specifically immigration cases, and so far the Supreme Court is actually intervened mean to overturn the cases where the Supreme Court the lower courts have done this and said, reconsider what you're doing. It's not clear
that this is what the federal courts should be. You know, this is this this question is included in our powers, the question of what is an international emergency in terms of just the president's powers, in terms of the constitution. All they would have to do in the course that I think they might follow is just say this is what we think, congressman, when they gave the power to the president in the first place.
I wonder if they would run into that same problem, you know, that they are overstepping their authority. The courts when they if they decide, you know, Congress didn't meanness because AIPA is meant to be meant to give the president powers you know in the invention emergency that Congress can't contemplate.
Yes, I think that's a fair question. I think that's the best argument for the Trump administration is to say, uh, you shouldn't really the courts, you really shouldn't limit yourself to what Congress thought was an international emergency. Congress is very broad words in the statute. They knew they couldn't anticipate the future. And that's a very point of an emergency is you can't write laws in advance to really deal with them because they haven't happened yet and they're extraordinary.
And that's the whole point of these emergency statutes in the first place. And you can see I agree with that. You can see the courts are reluctant, at least the Supreme Court has been reluctant to have the federal courts tread into this area, which you look at the Constitution. Obviously it sets up Congress and the President as the branches to lead the country in the context of an emergency.
But at the same time, you could see the Supreme War is not going to say that's an unlimited power either that at some point, you know, at some point, the courts, I don't think, are going to allow a president to declare an emergency for something that's really slow moving,
really is permanent kind of social problem. So the example I give is, I don't think the Court would say that climate change is an an international economic emergency because it has been going on for so long and is very slow moving that I don't think the Court, for example, would allow presidents to say climate change triggers i EPA powers.
Right, That's an interesting example. I've never heard that one used before, but that makes sense to me. So you've said that the International Trade Court's decision with respect to the trafficking terraffs, and what the Court did there was they said that those don't deal with the fentanyl emergency. And you've said the Court's decision would allow courts to sit in judgment over the weather the president has chosen
the most effective means to achieve its goals. Do you support an approach that makes the presence means of dealing with an emergency not subject to judicial review? And if not, what role do you think the courts should have in reviewing such questions?
Well, I think this was the problem that you know, the Supreme Court is going to be worried about that if the trial courts really start getting into the business of reviewing is this an international emergency at all? And then this is what the corporal then went a head and said, is this responsive what the government's doing responsive to the international emergency? I think that's really an area where courts have very little competence. And this was a
good example. The Court said below that we don't see how putting trade sanctions in Mexico and Canada have anything to do with the flow fentanyl into the United States.
So how does the court know that The reason that the administration might have done that, for example, is to say, well, we're putting that sanction on Mexico because if they start to suffer a lot of economic losses from terrorists, then the government in Mexico will start to take the steps that we want them to take to reduce ventanyl and that seems perfectly logical to me. It may not be high probability. That's up to you know, the President and
the Secretary Stay and the just Department, the DEA. They're the ones who have the real information about how fentyel's getting into the country, and they're the ones who really have to make the hard decisions about how to try to stop it from getting into the country. I don't see how a judge can just sit back in Washington and just say I don't think it's going to work. You know, the court doesn't have the kind of experience or information regarding our national security to make those kinds
of decisions. But that's what I think is worrisome. I think that for the Supreme Court or if they are going to let trial courts make decisions about is this really an emergency? And then the next step would then an WLB is what the court, I'm sorry, is what
the administration proposing in response effective? That's that's that's something no court has ever done, actually is to been has been to hold on whether a certain measure by the government is really effective or not for our national security.
So this is my final question. My So many commentators have said that no court will rule that the fenttional trafficking isn't is not an emergency. Do you agree with that? And if so, is there any other way the Supreme Court, if it follows precedent, can find venttional trafficking terrorists on lawful.
So I think that that that the chance of survival of the President's tariffs are much higher for the ones that were you know, they're separate, right, the ones that are that were in ounced on China and Mexico and Canada are separate from the other terrorifts what I call
it the court calls these worldwide tariffs, for example. So I think that is much more in line those targeted terrorists are much more in line with how AIPA might buso saying the rise of fentanyl which is coming through and the present saying is coming through the borders of Canada and Mexico and it's produced by China. And because of that, I'm going to impose these terroriffs in order to get those down, you know, those ventanyl trafficking down.
That's actually I think much more likely to survive than every country in the world's going to pay ten percent terrorists.
Right, that makes sense, Professor you. I could keep you here for hours asking questions, but I know you have other things to do. Thank you so much for joining me today. Well, we'll be keeping a lookout for more articles you publish on the topic. Thanks you so much again
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