Tariffs On Trial

A courtroom showdown over tariffs just forced the biggest question in trade policy: who gets to tax Americans in the name of national interest? We sat down to parse a marathon Supreme Court argument and why the Justices sounded skeptical of using emergency powers as a back door for sweeping tariffs. From first principles to practical fallout, we translate the legal jargon into plain English and outline what it could mean for markets, supply chains, and the balance of power between Congress and the White House.

We walk through the key statutes—Section 301 for unfair trade, Section 232 for national security, and IEEPA for sanctions—and explain why each has distinct guardrails. When tariffs become a foreign policy tool rather than a revenue measure, the constitutional lines blur. The bench pressed that tension hard, probing hypotheticals like climate-driven tariffs and the risk of unbounded executive authority that Congress can’t realistically unwind without a veto-proof majority. We also examine a curious idea floated at argument: replacing tariffs with “license fees” under IEEPA, and why that likely runs against the statute’s purpose.

If these tariffs are curtailed, what happens next? We explore scenarios from targeted rollbacks and importer reimbursements to narrower, evidence-based tariffs that fit within existing law. For investors, the near-term market impact may be muted compared to earnings and interest rates, but the structural payoff could be real: fewer policy whiplashes, clearer compliance, and better planning. Along the way, we offer a candid read on the Court’s likely split and how this case fits into a larger set of Capital D decisions that define the limits of presidential power.

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Chapters

• 0:50 Setting The Stage: Tariffs Case
• 1:45 Court Skepticism And Core Questions
• 3:03 Tariff Authorities: 301 vs 232 vs IEEPA
• 4:41 Are Tariffs Foreign Policy Tools
• 5:48 Hypotheticals And Scope Of Power
• 7:17 Congressional Checks And Veto Dynamics
• 8:14 Constitutional Authority And Revenue
• 9:21 Significance, Scope, And Overreach
• 12:12 What The Court Might Actually Do
• 13:09 Licenses As Tariffs By Another Name
• 15:04 Investor Impact And Market Reaction
• 19:54 Likely Ruling And Political Ripples
• 21:55 Reading The Court’s Makeup
• 23:14 Capital D Decisions Ahead
• 24:18 Takeaways For Portfolios And Closing

Transcript

Steve Davenpport: 0:26

Hello, it's Steve Davenport, and I'm here with Clem Miller, and we're here to talk about the oral arguments in front of the Supreme Court regarding tariffs. The tariffs issue has come to the forefront and made this last six to nine months um more than we ever wanted to know about how much is traded with which countries and which ones are taking advantage of us. So I've been looking at this, and I don't think it's really legitimate that the tariffs were imposed in a way related to the um emergency act, and that there's some kind of a national emergency or uh something that is needs reaction from us in order to uh promulgate these tariffs. What do you think, Clem? Where do you think the tariff discussion is going? Is is now and will be in the future.

Clem Miller: 1:21

So today the Supreme Court had oral arguments on the tariffs case, and they went on, these oral arguments went on for hours, hours of discussion. I mean much longer than than I anticipated they would. Listening ate up a lot of my day, actually. I would say that that there was a great deal of skepticism on the part of I don't know, almost everybody on the Supreme Court about these tariffs. And let me put that skepticism into sort of several buckets. First of there's the bucket that, you know, are you know, are tariffs actually a remedy for uh are tariffs actually a remedy under the International Emergency Economic Powers Act? That act has never been used before uh it to uh justify tariffs. It's been used to justify economic sanctions.

Steve Davenpport: 2:31

Well, isn't there some tariffs on steel that was used as okay?

Clem Miller: 2:35

Well, steel's a different thing. Steel is under 232. Okay, so there's there's several, so Steve, there's several different tariff authorities out there. Uh one tariff authority says that uh you can apply, I think it's 301, right? That you can apply tariffs uh basically in a sort of a tit for tat basis, right? If somebody is dumping, uh you can apply an anti-dumping countervailing duty, right? So that's sort of case by case, product by product, country by country, which is of course not the case uh with Trump's tariffs. Uh or there's another one, Section 232, which is a uh an act that says that uh for national security-related uh purposes, you can apply tariffs to commodities that are national security. So that's applied to steel and aluminum. And while Trump could try to uh try to have Section 232 apply to everything, call everything national security, uh that would be a huge stretch, and I think would invite its own uh its own challenges, right? So instead, what Trump tried to do is use the this International Economic Powers Act, which is used for things like sanctions on Russia, sanctions on Iran, uh, you know, trying to prevent um uh trying to prevent people from, you know, individuals from violating sanctions, like uh exporting, uh, you know, importing oil out of Russia and so on, trying to use that as a justification for tariffs. And the the the key argument uh uh at the Supreme Court today was does tariff, are tariffs really a revenue generating device, you know, primarily or exclusively, or can they can the tariff function be considered to be ancillary and tariffs be considered to be a legitimate use of the emergency powers in a foreign policy sense? So, you know, the Trump argument is well, we're not really trying to collect revenue, right? It would be great if we could do things without even collecting revenue. This is the Trump argument. Uh, but uh we're really you using this to advance our foreign policy objectives.

Steve Davenpport: 5:11

I'm not sure. I I think the problem with the objective to upset your foreign policy exactly have a negative objective, right? Does the court approve things that are negatively skewed? Right. And you eliminate rights for people and is it is it really an emergency if you're applying tariffs across the world to almost everybody, including countries with which the US has trade surpluses, like if we were if we were at war or if there was a world war and we needed to do this across the board because these people like I agree. I I I also look at it and say, you know, the unemployment rate may have tipped up 0.1%, but I'm not sure we're in an economic culture, you know, crisis because of the market being at all-time highs. I'm not sure we're in a financial one because rates are coming down.

Clem Miller: 6:05

So one of the one of the justices said, well, you know, maybe, you know, maybe we were, you know, we maybe we come under a different uh government, which is much more mindful of climate change than this one is. And they say, oh, the climate is a s provides uh a serious economic emergency, therefore we're going to put tariffs on countries that uh that generate you know too much carbon. You know, would this justify it? And they had to say, yeah, this would, you know, under the Trump uh you know arguments, uh, that would be justified to put tariffs on countries that generate too much carbon. Uh and certainly, you know, who who wants to give that kind of authority to the president, right? The other thing, the other thing that was brought up, and this was Gorsuch who said this, uh, was that you know, the peculiar way in which this whole emergency powers act is set up is that is that the Congress can take back a particular executive order that uh under the Economic Powers Act that the president has signed. They can take it back. They would have to vote, both houses have to vote, but that particular taking back of that power also requir also is subject to a presidential veto. That means that the House and the Senate would have to have a V veto-proof uh majority to be able to pull back that power. So, in other words, the president had would have powers to apply tariffs to almost everything, and and and and and Congress wouldn't have the ability to pull it back. So that was a concern of uh Justice Gorsuch uh in looking at this. But you know, the the bigger issue is the one of you know, tariffs are a revenue generating device. Historically, uh in the Constitution, uh the power to tariff is you know is given to Congress to do, and it's not given to the president. Congress can delegate some things to uh the president and has passed laws that say, look, under these narrow conditions, like I mentioned this the national security uh commodities like steel and aluminum, and also uh to uh to level the playing field in certain products, you know, you can use them in those cases, but it's subject to strict scrutiny and lots of uh, you know, lots of uh you have to do studies and this kind of thing. You just can't, you know, whip out a blackboard and and and start listing countries? And start listing countries. You can't just do that, right? It's just kind of random.

Steve Davenpport: 8:52

So do they talk at all about the significance of some of these tariffs? Because to me, I understand the concept of what he's trying to do. I understand the frustration of some countries who don't treat us well in terms of an equal opportunity. But I I don't understand why we spend time talking about Vietnam when in reality, like, is there is there any rule of significance that you've got to say to yourself, the president is overstepping his bounds because these things have economic significance to the president?

Clem Miller: 9:28

That was that was all over the discussion today. The the issue of how much, you know, does he really have the power to apply tariffs across the board to everybody? Uh under this argument that there's uh some kind of emergency. Like, where's the emergency? Is it is it, yeah, the even even with this, even if you call a trade deficit an emergency, which is an enormous stretch because no no past president has ever applied tariffs under the Emergency Powers Act, much less for reasons of a trade deficit. Um even if you even if you use that, they they applied tariffs also to countries with which we have trade surpluses.

Steve Davenpport: 10:14

Right.

Clem Miller: 10:15

So it's just uh and not only and not only on top of that, Trump has had there have been occasions where Trump has kind of whimsically applied tariffs in a random way, like saying, Oh, we didn't like what the Brazilian Supreme Court did in ruling against uh president uh the former president Bolsonaro, so I'm going to apply tariffs because we didn't like what the Supreme Court of Brazil did. That has absolutely nothing to do with with anything, really.

Steve Davenpport: 10:43

I think there's there's one a question of significance, and then there's a question of scope, and then there's a question of, you know, is this even under his authority? And I'd say that the the part that I understood from most of my experience with steel was I think there are times when a president needs to act and he doesn't necessarily need to get approval from Congress if some companies has approval.

Clem Miller: 11:12

He has approval.

Steve Davenpport: 11:13

I know he has approval for a strict, a strict usage of something that has national significance, but right these don't these don't grow to that. Like, can you tell me which things you think are most out of line? Is it the reach? Is it the magnitude? Is it the you know, what do you think the the court will say? You know, he's not even close in terms of the reason for action, or he's not close in terms of how much revenue it would generate that it will cause this kind of uncertainty. Like, where do you think it's a good thing?

Clem Miller: 11:48

I think I think I think the court's gonna come down and say that that if if there has been a grant of tariff authority, uh, then the president can use the grant of tariff authority. And right now there's no grant of tariff.

Steve Davenpport: 12:02

So it's unrestricted?

Clem Miller: 12:04

Well, within whatever provisions uh are included in that grant of tariff authority. You know, in in 232 uh and in 338, they actually have to do some homework, right? In order to justify those tariffs. It may not be a great deal of homework, but they have to do some homework uh in order to justify the 232 and the and the the 301, I should say, tariffs, right?

Steve Davenpport: 12:29

Yeah.

Clem Miller: 12:30

Um so so I think, you know, but those aren't at issue today. At issue today is trying to wedge tariffs into this International Emergency Powers Act, which is really meant for sanctions. And which, which and there was one sort of side discussion, kind of which was kind of interesting, uh, that Amy Coney Barrett was saying, is saying, well, you know, under the Emergency Powers Act, uh, there's this provision for issuing licenses. And, you know, could could Trump just call uh just charge fees for licenses and uh and and do that instead of tariffs? I mean, is it is it a can he do a tariff under a different name, a license fee? And there was a lot of there was some discussion about that. And I don't think even the lawyers did a lot of homework on that. It was a lawyer for one of the um, it was a lawyer for uh for somebody who submitted a friend of the court brief, amicus brief, who who said who may who said correctly, and I I look I know a little bit about economic sanctions from the course I take, I teach. Uh and and they don't charge fees for these licenses. These licenses are exceptions from sanctions or from export controls or whatnot. And they don't charge the purpose is not to raise revenue. The purpose of these licenses is so that uh the US can decide whether you know a good is humanitarian, right? And should be allowed to go to Iran or Cuba or whatnot because it's a a humanitarian thing. Like let's say a hurricane sweeps across Cuba. We'll make exceptions in order to provide food and and uh and and health supplies and so on to Cuba. Um and that's what licenses are for, right? We don't we're not selling licenses uh as a as an alternative form of tariff. So that was that was kind of an interesting thing.

Steve Davenpport: 14:37

We're not yet, but we could be in the future.

Clem Miller: 14:39

Right.

Steve Davenpport: 14:40

I mean, what do you think is the next step? Like if I'm an investor and I've got to look at this issue, what's the the next step, the time frame, and how would it ultimately let's say it was struck down by the court, or let's say it was limited by the court to only countries or economies that are over a certain size or have significance? What what do you think the impact is for investors?

Clem Miller: 15:24

Well, I think what's gonna happen is there's going to be a rollback of these tariffs. And one of the one of the in fact, one of the issues that came up today was what happens if we rule against the tariffs? Is that gonna be a mess if we have to do uh if if the uh US government has to pay back the importers who uh who paid these tariffs? How much of a disaster is that gonna be? And so there was there was there was discussion about whether that would be a mess or not. Not that that's gonna be determinative, you know, they're they're not gonna make a decision based on whether there's a mess or not, right?

unknown: 16:05

Right.

Clem Miller: 16:06

But they wanted to know like how much how much of a problem would it be? And you know, somebody said, well, you could do, you could say from now on, uh it would be it would be a mess. Um and you know, somebody pointed out that you know, at a lower court hearing, the Trump administration said, Oh, we'll have no problem giving back the tariffs if the Supreme Court uh rules otherwise. So they pointed that out too, that the government actually said that, that they that reimbursement would be possible. I you know, I I think it probably would be. And and and another person, another lawyer pointed out, maybe it was the same lawyer pointed out that there have been tariffs in the past that have been uh reversed, and there's been no problem uh you know reimbursing those tariffs. So I think, yeah, is it would that be a mess? Yeah, it would be a mess, uh, but I think it I think it would happen uh this uh this reimbursement.

Steve Davenpport: 17:06

I mean, politically it would be a mess because you've said, hey, we've raised all this money to to make America great, and now you don't have that money anymore. Right.

Clem Miller: 17:15

So well, that was that's the whole problem. The whole problem is that Trump's use of the emergency uh powers act wasn't meant to raise revenue.

unknown: 17:26

Right.

Clem Miller: 17:28

I understand, but this is revenue that Congress never never endorsed.

Steve Davenpport: 17:34

Correct. But let's just go along the fantasy, let's go along the fantasy for a while and say, would the fantasy be completely disrupted? I think it would it would hurt politically if the court would rule against him. Do you think the court's structure because he appointed three or four, you know, or how do you think his appointees and that situation do you believe in the purity of the court, meaning that they're gonna find a right solution, or do you think it is still a political decision and that's what's gonna guide the ultimate decision?

Clem Miller: 18:10

Well, he needs he needs five on the court. And I don't think he's gonna get five.

Steve Davenpport: 18:18

So So who's not gonna go? What?

Clem Miller: 18:23

Who do you think is gonna be the who's gonna side with uh who's gonna side with Trump? I think it's gonna be Alito, definitely. Uh I think it's gonna be Kavanaugh, and I think probably Thomas. I think those are the three. So I think it's gonna be a uh six to three decision uh against Trump.

Steve Davenpport: 18:51

Roberts. Roberts. Yeah. Okay. Um, I mean I I think it's one of those things on the radar, but I kind of have a question about significance here. I mean, I'm not I'm not sure. I think it's politically important and I think it's structurally important that we do the right things and we try to get our allies in a better place. But I guess I'm just not sure uh I'm gonna make a trade in my portfolio based on how the court rules or doesn't rule.

Clem Miller: 19:24

I agree with you. I agree with you. I think you know the market was up is up today a lot. I'm uh I think that's uh uh you know mostly due to the fact that it was down yesterday, right? And it's recovering. Uh so I I don't know how much of the up I can attribute to the Supreme Court hearing. What the Supreme Court will come up with in this case precisely, I don't know, right? I think it'll strike down the the my guess, just my guess, I think it'll strike down the tariffs as they're being implemented now, uh, and maybe provide some guidance as to what kinds of tariffs uh might be acceptable. Uh I don't think they'll look you know anything like what we've got right now. They won't be as sweeping and they won't be as uh uh they won't they won't provide Trump a tool that he can use in a whimsical fashion like he's been using them now.

Steve Davenpport: 20:25

Okay.

Clem Miller: 20:26

That's that was that would be my guess as to uh as to what's going to happen. So uh which I you know I personally think is a good outcome because I think tariffs are a a drag on the U.S. economy.

Steve Davenpport: 20:39

Yeah, I think we both agree that economically tariffs are an inefficient way to do something. So I don't think we have a disagreement on the fundamentals of of tariffs being good or bad. I just have it, you know, I just think it's a a case of is the Supreme Court really the Supreme Court of all the people, or is the Supreme Court the Supreme Court of Trump, which many people are saying, right? Well, we'll see. Yeah, and that's what I think is more important almost than what the issue is, or right, is is how do they vote when it really comes down to an issue that should have so Steve, on that point, you know, there have been a number of rulings that have gone in favor of Trump, but a lot of those rulings have been ones where they haven't had oral arguments like this.

Clem Miller: 21:29

Oh, where they've been basically overturning stays, you know, injunctions by lower courts.

Steve Davenpport: 21:36

Yeah.

Clem Miller: 21:37

So really, they're just like like, you know, let's put a pin in something and discuss it later. Let's, you know, let's hold that for now and we'll discuss it later. These those are the kinds of decisions we've had so far, which are kind of decisions with a lowercase d. This case is a decision with a with a capital D.

Steve Davenpport: 21:59

Correct.

Clem Miller: 22:00

Birthright citizenship will be a decision with a capital D.

Steve Davenpport: 22:05

Is that on the next?

Clem Miller: 22:07

And uh when we get around to discussing um you know, immigration and national guard, I think ultimately those will be decisions also with a capital D. Because those are the big, those are those big decisions. So I think those are, you know, those are the decisions where, you know, we'll really see the true character of the Supreme Court come out. I think in this case, I've already given you my opinion in this case, in the birthright citizenship, uh, I think they're gonna rule against Trump. Uh, and I also think they're gonna have problems uh with the whole National Guard issue. Uh, you know, we're not talking about the National Guard in this call, but I'll just say that that, you know, that it went up to the Supreme Court, this um Illinois case, and Amy Coney Barrett wrote back with a question, uh, which was kind of an interesting question. Like, what do you consider to be regular forces of the United States? And that's in the context of you only call up the National Guard when the regular forces can't achieve what you want to achieve. But and uh, and so there's a question, you know, are the regular forces like the army and the navy and the or the regular forces like ICE? Right?

Steve Davenpport: 23:28

And yeah, I think there's I think there's quite a few forces that were not, um, and and I think we've been working on the fringes, but I I I think this issue uh is important with a capital D, but uh as in terms of our investors out there, I'd say, you know, listen and learn, but I'm not sure your portfolio is going to change one way or another based on this issue. So do you have any last comments?

Clem Miller: 23:54

I agree. I agree with that.

Steve Davenpport: 23:56

Yeah. Okay, everybody, thank you for listening. And we just thought that we'd throw this issue in because it's current, it's happening today, and we want to give you the latest on what's happening in the news and try to understand its relevance to your portfolio and your financial wellness. So thanks everybody for listening, and we appreciate your tuning in. Please share with your friends and uh family and let us know what we can do to make our podcast better. Thanks again.