Tariffs Fade From Center Stage

Markets don’t fear tariffs because they’re ideological. They fear tariffs because they’re unpredictable, blunt, and expensive at the point where businesses actually pay: the border. We dig into 2025’s tariff surge, why the legal footing always looked shaky, and how the market learned to translate political slogans into real cash costs for U.S. importers and consumers.

We start by untangling a common mistake: treating trade deficits like federal budget gaps. Trade balances sit inside the broader balance of payments and are offset by services and capital flows, so using blanket tariffs to “fix” them misses the economic mechanics. From there, we walk through the constitutional and statutory landscape. Congress owns tariff authority, and while it delegates narrow powers for national security and anti‑dumping cases, the International Emergency Economic Powers Act was never designed for worldwide levies. That’s why courts, including the Supreme Court, signaled skepticism toward the April rollout.

Then we get practical. Who pays? U.S. importers write the checks, then fight to pass costs along supply chains, with mixed success. That reality explains the sudden April selloff, the blow to business confidence, and the scramble for exemptions. We also trace the diplomatic fallout—frayed goodwill with Canada, Mexico, and the U.K.—and the hollow optics of “agreements” without text or verification. Finally, we map what’s next: a likely legal reversal, a shift back to targeted tools, and a slow drip of tariff relevance rather than a flood. For investors, the edge lies with firms that hold pricing power, diversify suppliers, and invest in regional resilience.

If you value clear thinking over noise, tap play, subscribe for future breakdowns, and leave a review with your take on how trade policy should actually be built.

Straight Talk for All - Nonsense for None

Please check out our other podcasts:

https://skepticsguidetoinvesting.buzzsprout.com

Disclaimer - These podcasts are not intended as investment advice. Individuals please consult your own investment, tax and legal advisors. They provide these insights for educational purposes only.

Chapters

• 0:00 Setting The Stage On Tariffs
• 2:44 Do Deficits Actually Matter
• 4:36 The AIEEPA Legal Debate
• 6:24 Who Really Pays Tariffs
• 8:54 Market Shock And Goodwill Burn
• 11:54 Supreme Court Signals And Peak Tariffs
• 14:04 Phantom Deals And No Agreements
• 15:54 Why Quick Fixes Fail

Transcript

Steve Davenport: 0:48

Sure. Hello everyone and welcome to Skeptics Guide to Investing. I'm here with Clem Miller and we're trying to put together a series of ideas that we have at the end to recap twenty twenty five. And no recap of twenty twenty five would be complete without the discussion and the over discussion of tariffs. Tariffs, tariffs, tariffs. They're the tool that is going to make America great again. I'm not sure that anybody expected Trump on his first you know two or three months to immediately start um trying to anger everyone in the world. They thought he just focused on angering Democrats in America. But he took out his um his pen and he started thinking about it and he made his list of all of the tariff levels and and ideas he has on how to get back America's balance of trade. And I think like most things, there's a good core to what we're trying to do to try to make sure companies, countries aren't taking advantage of us. But Clem, was this the most thoughtful and um consistent rollout of a concept that you've seen? Or is there some other part of government that you think was better managed in 2025 than the tariff effort? Is that your favorite in terms of what the how government worked well for you?

Clem Miller: 2:19

I think the um I think the tariff issue is based on a number of false premises, , to be honest with you. first of all is the notion that trade deficits and surpluses are all that relevant. they're not all that relevant because every time you have a trade deficit, you have a on the other hand, on the other side of the coin, you have a services surplus or you've got a capital account surplus. and in and in any case, when you're talking about the balance of payments, whether it's trade deficits, services surpluses, capital account surpluses, you're talking about accounting terms. That's all you're talking about. It's it's different than talking about federal budget surpluses and federal budget deficits, , where you're talking about the government being able to fund itself. it's not like it's not like the country is going out and having to borrow a lot in order to cover its the country meaning the government going out to borrow a lot in order to pay for a trade deficit. That's not how it works. Actually, it's based on that false premises about bilateral trade deficits being surpluses being actually an an issue. So that's number one. number two is there it was a legal fiction that was employed to try to allow Trump to do his you know deal making and so on with regard to tariffs. And that legal fiction was that tariffs could be used in the context of an international emergency. and that's where the so-called AIPA Act comes in, International Economic Emergency Powers Act, you know, which normally applies to things like sanctions on Russia for its invasions and you know, things like you know sanctions and and and other kinds of economic emergencies and doesn't really apply to tariffs. I mean you can't you can't have worldwide tariffs and declare that to be an international emergency. It just it just doesn't fit. And that's why you had all this skepticism at you know the various courts, including the Supreme Court, about whether AIPA applied. The third thing I would say is that you know, tariffs have been around, but you know, in the Constitution it says that Congress has to approve tariffs. Congress has approved ways of doing tariffs and has delegated them to the president. mainly these are kind of one-off tariffs are have been in the past applied on kind of a one-off basis, um in the sense of you've got you know, isn't it really a national security interest?

Steve Davenport: 5:27

And there's no national security risk that's being brought up right now because of the tariff levels, is there?

Clem Miller: 5:33

No, there there isn't. The idea that Trump keeps pumping out there that somehow tariffs can be used as a foreign policy tool to coerce foreign behavior is nonsensical because it's not foreign countries, you know, quote unquote countries or foreign governments that are paying the tariffs. it's you know, it's U.S. importers that are paying the tariffs. And sure, the U.S. importers could say, well, you know, we want consumers to pay some of it, we want the foreign sellers to pay some of it, but it's really, you know, when the where the rubber hits the road, it's not foreign companies or foreign governments that are paying these tariffs. It's the U.S. importers who are paying these tariffs. And when the the Supreme Court asked the Solicitor General, who's the U.S. government's attorney about this issue, basically all the U the attorney could say is, well, some of these U.S. importers are actually subsidiaries of foreign companies. So the foreign companies are paying. Well, yeah, some of them, right? But how many U.S. importers are actually subsidiaries of foreign companies? Not not a lot.

Steve Davenport: 6:55

But , you know, the In theory, Clem, this is this whole tariff thing has all been about this theory and messaging and all of this. And I guess what I would say is it started it came out of nowhere in my mind, because I didn't think it was that much of a big deal of his election platform. I thought there were other things like immigration and helping lower affordability that were going to be bigger. Yeah. So this is a not and tariffs work in the opposite, tariffs work in the opposite direction of that. Correct. But all I'm saying is that tariffs came in with a a a real disrupting, you know, the 20% decline in April with the way it was rolled out and the way everything was done was a real risk to markets because it was so out of the blue. And I guess what I'd say is anything you do with government that is going to impact that much of the world in terms of all these countries and all these relationships and all these goodwill has been built up with Canada and Mexico. Goodwill was burned away with the way they approached both of them with these tariff ideas, right? Goodwill existed with Britain. I don't think it exists to the same level today as it did. Maybe we had too much goodwill, maybe we were too nice. I don't know. But as a person in the market, my surprise for this year is once we kind of got it to a place where we started to understand what was actually going to happen, um, it seemed like everybody just went away and took their crayons and and went home. , it it feels to me like this issue um went away in you know, May, June, July as the markets recovered and everybody said, I understand how this works. And then all of a sudden the Supreme Court's you know hearings showed everybody, but there's a possibility they don't even exist. So I guess what I would say is I think tariffs have peaked, and I think they're going down as an impact to the average investor going forward. Is that something you might agree with?

Clem Miller: 9:06

, I think the Supreme Court, I think it's highly likely the Supreme Court is going to rule these latest tariffs, you know, the ones from April, , and subsequently, I think they're gonna rule them illegal, unconstitutional. And then I think Trump and team will try to use existing authorities, you know, pre-existing authorities, , to try to do as much as they can to recover as much as they can from the old terror from their pre prior tariffs regime. And I don't think they'll be able to get that far with those individual tariffs. So I think what we're gonna see in 2026 is a reversal of much of Trump's tariff agenda.

Steve Davenport: 9:57

Yeah, I'm just saying I think that we we've seen a peak, just like we just talked about, a peak in AI. I think we've I've heard the word tariff enough. I don't need to hear it again. I I don't think it usually is not something that is permanent. It is usually a short-term blip, and it usually is based on something that um we're trying to make a military or other point in terms of our own resources and our own ability to use the materials we can for our national defense and for our development of technology. I feel there's a real waste of time that we've had in this subtopic. And as I say, whenever a topic is a waste of time, I think it's our job to try to say ignore it and move forward. There's other more important things to do with your time. And I think that the tariff bluster was really more of a mistake than it was a a real concept. If he had thought about this, he would have immediately started with our closest and greatest allies and negotiated things instead of trying to do it through blame and boist, you know, boisterous attitudes on social. He's he's playing a game to get more attention to an issue that he wants to then say is he's the savior of. Yes. Guess what? Every every trade agreement has two people at the table. And in order to be in agreement, you got to get other people on the on board. He's not getting people on board with his methodology, so therefore, I don't think it's gonna improve. I don't think we're going forward.

Clem Miller: 11:36

And and he and when they reach these so-called agreements with foreign countries, , and I'm putting that in air quotes, , there's nothing written down. There are no agreements.

Steve Davenport: 11:48

Because he met with China and talked about a successful agreement, and no agreement was there. Right. Does that mean that we we think that China is not agreeing, or does it mean that the US didn't agree? Or does it mean that nobody agreed and there really isn't an agreement? I think that it's the both reality.

Clem Miller: 12:05

In reality, there is no agreement because nothing's been written down. I mean, the Chinese didn't even talk about it and talk about their meeting with Trump in in their press release about the meeting. They just said many difficult, something along the lines of, and I'm kind of paraphrasing, , many difficult issues were discussed. That's really all they said.

Steve Davenport: 12:28

I agree, there's many difficult issues discussed on this podcast, and I don't think it necessarily means there was agreement. I think there was multiple opinions, and there might be if if there wasn't at the end some consensus, then there should have been a common statement, but there wasn't. So if there was no commonality in the statements coming out of these things, I think it's it's like Trump's, I'm gonna end the Ukraine war on the first day in office when I call Putin. Well, that didn't work. He didn't call Putin on the first day, he didn't get the UK resolved. It's a much harder and deeper issue that's been going on for hundreds of years. How do we expect his his one phone call? I don't know why he's you know talking about Greenland and Canada as US, you know, state number 51 and 52. , I think that Panama was 53. We could go through the list, Clem. The the the amount of things that were said prior to the administration and the one amount of things that are are happening. it's it's just all smoke and mirrors and bluster. And I would say that, you know, if I look at tariffs, to me, they're not as big an issue and they're not as big a concern. And I think we probably wasted good people's time going after a miscommunicated and misunderstood issue because it was going to allow Trump. He thought he could make some quick deals, and quick deals would lead to quick benefits for US. And I'm not sure the countries were willing and able to make that quick change that he wanted. I think we are in a deeper and larger funk than can be resolved by phone calls and threats. I think you probably need a little bit more um in the benefit and the long term to really create something that's gonna be lasting. And if it's not lasting, if it's a presidential directive, it's gonna disappear in the next administration. So I I'm not sure how we we make some of these ideas seem like they are significant and permanent, but um, as with the tariffs, I think we see it go away, as you said, with the Supreme Court ruling in the beginning of the year. Yeah. Or even even in the next week or two. Could be. But I guess what I'm saying is we saw it, we we reacted to it, we evaluated it, and now it's the end of the year. And the question is, is it gonna be another year like that next year? I think we're gonna see it drip and dri and go away slowly into you know, from a torrential fire high to a dripping faucet. I I don't see the impact, and I see this as an issue that's gonna become a non-issue going forward. Do you have anything else to wrap it up? Nope. All right, folks. , this is short and sweet, and I think you get our point. We're skeptical that this becomes an issue going forward, and it probably shouldn't have been an issue as it was um as it unearthed itself in 2025. So put this one to bed. It's over.