Supreme Court Axes Trump Tariffs

Summary

Balance of Power (Bloomberg)

Episode: Supreme Court Axes Trump Tariffs

Date: February 20, 2026
Host: Joe Weisenthal
Key Guests: Tyler Kendall, Mike McKee, Tom Keene, Edward Harrison, Michael O’Hanlon, Jeannie Shanz Zaino, John Seaton

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Episode Overview

This episode covers the breaking Supreme Court decision striking down President Trump’s central tariff program, a crucial component of his economic and trade strategy. The hosts and expert guests analyze the legal, economic, and political ramifications of the ruling—including implications for upcoming trade deals, inflation, market volatility, and the White House’s possible next steps. The show also touches on military tensions with Iran, with expert analysis on potential US actions.

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Key Discussion Points & Insights

1. Immediate Fallout: Supreme Court Strikes Down Tariffs

• Breaking News Context ([01:26]):

  • The Supreme Court’s decision eliminates broad executive authority used by President Trump to maintain widespread tariffs.
  • Trump to give a press briefing at 12:45pm.
  • Tariffs were major to Trump’s campaign and economic agenda; hosts debate whether the decision marks a “huge deal” or not.

• White House Response & Remaining Tools ([02:58]):

  • Tyler Kendall notes the administration is quick to address what comes next, particularly concerning ongoing trade negotiations (e.g., recent deal with Indonesia, talks with India).
  • Trump retains fallback tariff authorities (e.g., Section 232 for national security, Section 301 for unfair trade practices), but the Supreme Court decision curtails preferred flexibility ([03:38]).

Quote:
"They're going to point to the flexibility in the rate and the timeline that has now been taken away."
—Tyler Kendall (03:51)

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2. Market and Economic Reactions

• Market Volatility and Confusion ([06:00], [14:02]):
  • Immediate market reactions were muted and conflicted. Retail stocks and specific companies like Costco fell.
  • Tom Keene, Mike McKee, and Edward Harrison discuss uncertainty over tariff rollback effects; some sectors up, others down.

Quote:
"The market with a Dow up only 40 points right now. But I would focus on the theory behind this, which has been beautifully explained by our arch academic Douglas Irwin at Dartmouth College... The smart people tell me they're going to lose 40%, maybe half of that. That will go away because of this ruling."
—Mike McKee (06:19)

• Tariff Impact on Prices and Inflation ([09:11], [15:39]):
  • Discussion of who really pays tariffs—consumers and importers bear most of the cost.
  • Inflation has increased since tariffs were enacted; rolling them back is expected to offer some relief, but with uncertain timing and magnitude.

Quote:
"Consumers and importers are paying 96% of the tariffs on the US economy. So that's, you know, marginally pro growth. It's also somewhat anti-inflation."
—Edward Harrison (19:20)

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3. Legal and Historical Dimensions

• Court Ruling Significance and Jurisprudence ([07:35]):
  • Discussion of legal underpinnings: Court (with Trump appointees) signals a demand for “guardrails” and stricter separation of powers.
  • Supreme Court opinion highlights that major policy shifts like tariffs should be made legislatively, not by executive fiat.

Quote:
"The president cannot impose tariffs based on a lost silence or vague language. To me, that's the heart of it."
—Mike McKee, quoting Justice Amy Coney Barrett (07:17)

• Political & Historical Parallels ([04:42], [12:21]):
  • Comparison to past tariff controversies, e.g., the McKinley Tariff and 1890 Republican wipeout.
  • Midterm implications: hosts suggest the ruling could actually help Republicans avoid political damage from unpopular tariffs ([12:21]).

Quote:
"I go back to the election of 1890, and the people are going to speak."
—Mike McKee (12:21)

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4. Congressional and Political Analysis

• Republican and Democratic Reactions ([08:33], [34:11]):
  • Speaker Mike Johnson and other Republicans tout revenue benefits and negotiating leverage from tariffs.
  • House/Senate dynamics: slim GOP majority creates challenges for quick legislative fixes. Expect reconciliation efforts, possibly tied to the next “big beautiful bill.”

Quote:
"Trump still has many tariff powers, at least five... He will use them all. Trump is likely to get from Congress an IEPA fix to get the emergency tariff authority he wants. Listen for it on Tuesday."
—Joe Weisenthal paraphrasing Terry Haines (34:11)

• Panel Debate on Midterm Impact ([38:09], [40:08]):
  • Jeannie Shanz Zaino (Dem, Harvard): Ruling could help some Republicans in swing districts, but doesn’t solve the broader “affordability” discontent among voters.
  • John Seaton (GOP): Don’t expect votes for a reconciliation fix; narrow margins/lack of popularity for tariffs signal relief among some Republicans.

Quotes:
"There's certainly got to be some members of Congress on the Republican side who are quietly, very quietly happy about this ruling because... the American public does not feel like he has won the affordability war."
—Jeannie Shanz Zaino (38:09)

"I think that there's a lot of Republicans in swing districts who... are not going to be terribly sad that the tariffs are... likely to go by the wayside."
—John Seaton (40:55)

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5. Trump’s Options & Policy Pathways

• Alternatives to Existing Tariff Authority ([17:39]):
  • Five fallback legal options: Sections 232, 201, 301, 122, 338—all less flexible, with various statutory limits.

Quote:
"There are five obvious fallback options. Section 232 Trade Expansion Act of 1962 comes with limitations. Section 201, Trade Act of 1974, Section 301... and then Section 338 of Smoot Hawley 1930."
—Joe Weisenthal (17:39)

• State of the Union as Policy Reset ([34:11], [43:06]):
  • Anticipation that Trump will use the impending State of the Union to lambast the Supreme Court, demand congressional action, and lay out new tariff or trade enforcement ambitions.

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6. Foreign Policy: Military Tensions with Iran

• Escalating Tensions and US Options ([23:26], [25:30]):
  • Reports of a possible “bloody nose” strike on Iran; White House is leveraging military buildup, but the scale is less than 2003.
  • Michael O’Hanlon (Brookings) explains the strategic calculus, potential targets, and the Trump administration’s likely demands for Iran (full cessation of uranium enrichment).

Quotes:
"This is a big capability, but it's something that President Trump can sort of play around with, if you will, can try to use as negotiating leverage, could undertake a brief strike and then follow it up with a larger strike."
—Michael O’Hanlon (25:30)

"They really want a complete, verifiable end to all elements of Iran's nuclear enrichment and potential weapons capabilities."
—Michael O’Hanlon (28:28)

• Timing of Action ([31:20]):
  • O’Hanlon predicts if any major kinetic activity takes place, it’s likely “in 10 to 15 days” but warns that unpredictability is part of Trump’s style.

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Notable Quotes & Memorable Moments

• "The president cannot impose tariffs based on a lost silence or vague language. To me, that's the heart of it."
  — Mike McKee, reading Supreme Court opinion ([07:17])
• "For those who think it is important for the nation to impose more tariffs, I understand today’s decision will be disappointing... Most major decisions... are funneled through the legislative process for a reason. It’s Schoolhouse Rock, Tom."
  — Joe Weisenthal, quoting Justice Gorsuch ([07:35])
• "This gives President Trump a chance to pivot... He can recalibrate his tariff policy to be less onerous... Whereas these tariffs were going to be negative for the Republicans... the court saved the midterms for Republicans—if he uses it the right way. But you know, that’s a big if."
  — Edward Harrison ([16:47]–[17:34])
• "There is nothing, probably even, nothing even beyond his children that he is more committed to during his life for the last 50 years than tariffs... To have that taken away from him is going to sting."
  — Jeannie Shanz Zaino ([41:18])
• "Tuesday is going to be something else. I expect the State of the Union to be very, very interesting."
  — John Seaton ([43:06])

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Timestamps for Key Segments

• [01:26] – Breaking news: Trump to address Supreme Court decision
• [02:58] – Tyler Kendall on White House response and ongoing trade talks
• [04:42] – Mike McKee on historical precedent; big legal/political deal
• [06:19] – Market reaction/uncertainty and import of the legal ruling
• [07:17] – Supreme Court’s legal reasoning (Barrett, Gorsuch opinions)
• [12:21] – Political risk for midterms; historical context
• [13:51] – Edward Harrison on market reactions and inflation data
• [17:39] – Listing of president’s fallback tariff authorities
• [19:20] – Economic analysis: Tariffs’ real cost, growth/inflation
• [23:26] – Joe Weisenthal introduces Iran foreign policy segment
• [25:30] – Michael O’Hanlon on Iran strategy and possible strike
• [34:11] – Terry Haines (via Joe) on legislative path, State of the Union preview
• [38:09] – Jeannie Shanz Zaino, John Seaton: Political panel on ruling’s impact
• [41:18] – Panel: Trump’s likely reaction and future moves
• [43:06] – Anticipation for State of the Union and political implications

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Overall Takeaway

The Supreme Court’s decision to invalidate Trump’s sweeping tariff powers marks a seismic shift in U.S. trade authority, shifting power back toward Congress and opening a fraught set of political and policy challenges ahead of the midterms. The White House faces the dual test of rapidly evolving economic realities and foreign policy brinkmanship. Republicans, while outwardly upset, may find political cover in the ruling as it diffuses unpopular price pressures before key elections. All eyes now turn to Trump’s State of the Union as the stage for his next move—both on tariffs and America’s global posture.

Transcript

[Joe Weisenthal]

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[Bloomberg Host/Announcer]

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[Joe Weisenthal]

The siren the Drudge siren is up, thanks to the press secretary Caroline Levitt on Twitter. Ex president indeed. We'll hold a press briefing, she says, on the supreme court's tariff decision. 12:45pm we'll see if he's late for his own party and when he speaks, we will of course bring it to you live here on Bloomberg. It's going to be one of these days. Let's just open the microphones, clear out the brakes. We've got a lot to do and as I mentioned, we're going to spend a moment with Tom Keene after we get an update from Tyler Kendall, knowing that this, of course, is the centerpiece of the economic agenda that helped to bring this president into office. He's been talking about it since before he was reelected. Listen, we had rich because of tariffs, by the way. I hope everyone understands that tariffs are bringing us hundreds of billions of dollars. Without tariffs, we would be this country would be in such trouble as they were for many years. Every prediction the critics made about our tariff policy has failed to materialize. 78% reduction in our trade deficit. And next year, we're going to be positive in if we keep it all going. Mm. Now, here's the thing. He's going to have much more to say coming up in a little bit more than a half hour's time, knowing, and the market knows this, too. He's got a lot of options at his disposal, at least five fallbacks. And that's where we start our conversation with Tyler Kendall, who decides to leave the nation's capital on one of the most important days in this administration. Tyler, of course, you've been up half the night as well, anchoring coverage from early in the morning, and it's great to have you with us here. The White House quick to respond on this one, huh?

[Tyler Kendall]

Yeah. And we'll get more information later today, Joe, when President Trump apparently is going to brief the press and answer some of these lingering questions, of which there are a lot of them, including what's going to happen to those ongoing trade negotiations that are still out there and how are our trading partners going to respond? Just last night, we saw the US finally ink that deal with Indonesia. And we're hearing from India's trade minister in the last 24 hours that we could be careening towards a deal maybe next month, as soon as possible, given that negotiations have dragged on for so long. But does this threat, as you mentioned, that President Trump has these other federal authorities, these other tools in their toolkit, change that calculus for our trading partners? Section 232, for example, those national security tariffs that have already been levied in many cases, right. Those tariffs against steel, aluminum, autos, pharmaceuticals, those are already baked in. That's not what these end up being extended to. And we know that there are some other authorities to section 301 over alleged unfair trade practices. But, Joe, you're going to hear the White House speak about how their flexibility is now limited. That's why they say they like diepa, though it has never been used for tariffs before. It's typically used for a president to impose sanctions, for example. But they're going to point to the flexibility in the rate and the timeline that has now been taken away.

[Joe Weisenthal]

And, Tyler, thank you so much. Tyler Kendall, live from world headquarters in New York. They're already talking about that flexibility. Can you imagine, by the way, what happened to Tom Keene's friend Peter Navarro when this news dropped?

[Mike McKee]

Oh, my. We'll be hearing from him thinking of this as well.

[Joe Weisenthal]

I mean, the heads exploded in the White House, right?

[Mike McKee]

Yeah, I think that's accurate. I, you know, I heard. I heard Terry Haines, very carefully there about the idea, folks, that this is not a big deal. I'm going to go against that. I think it is a huge deal on a legal basis. I'll defer to June Grasso, who has prodigious chops, all the people at Bloomberg Opinion. But what I look at, frankly more, Joe, is your area, which is the politics of it. And I think there's been a huge historical struggle here with we've done this before. And I'm going to go back to 1890 when the arch protectionist William McKinley in Congress lost his seat in a complete Republican white wipeout because the people of America were fed up with paying higher prices. Joe, that sounds a little familiar, does.

[Joe Weisenthal]

Yes. And then someone's going to come on this show and say that the Supreme Court just saved the midterms for Donald Trump and we'll see if that's true. But stick with me on flexibility for a moment. Earlier today, FOX Business Kevin Hassett, right, talking about the options they have at hand. Here he is. Should the Supreme Court make the wrong move is we're going to adjust and use other authorities that we have because we've now seen the proof is in the pudding that these tariffs work.

[Mike McKee]

They do exactly what President Trump says.

[Joe Weisenthal]

I think the IPA is the cleanest. But if the Supreme Court doesn't like that one, then Jameson Greer has a backup plan that's just as good. Is this Tom keene, why the Dow's only up 37 points? Why retail is down? How is retail down? How is Nike negative on a day when this was supposed to be a celebration?

[Mike McKee]

A lot of uncertainty. Stephen Stanley publishing at Santander did a wonderful job of gauging the uncertainty here. I would focus, Joe. And yes, that uncertainty. And we see the market with a dow up only 40 points right now. But I would focus on the theory behind this, which has been beautifully explained by our arch academic Douglas Irwin at Dartmouth College. And Professor Irwin talks about the revenue side, as the president will in his press conference here in 40 minutes. They brought in a quarter of a trillion. The smart people tell me they're going to lose 40%, maybe half of that. That will go away because of this ruling. Then there's a whole idea of restriction infant industry. We want to keep business in America. But what Justice Roberts focused on, Joe, Matthew, was reciprocity. And that's part of the Douglas Irwin calculation. And what the way I read it is an amateur is this is a court including Trump appointees screaming for guardrails. Joe, I love I love the sentence here if I can find it right now. Amy Coni Barrett in the group, the president cannot impose tariffs based on a lost silence or vague language. To me, that's the heart of it.

[Joe Weisenthal]

You know, while we're reading from some of these opinions, look at Justice Gorsuch. For those who think it is important for the nation to impose more tariffs, I understand today's decision will be disappointing. All I can offer them is that most major decisions affecting the rights and responsibilities of the American people are funneled through the legislative process for a reason. It's Schoolhouse Rock, Tom.

[Mike McKee]

Well, it is, but I again, I'm going to go. This is widely anticipated. We've seen the market reaction and frankly churning right now NASDAQ up 7. 10 of a percent. But the heart of the matter is, is because in the president act in an assertive manner as President Trump has the appeals courts, as you know better than me, Joe has said no one ruling was 7 to 4. And for the first time the Supreme Court weighs in. I would suggest Joe and the arc of this, they'll, they'll be back. We haven't heard the last from the Supreme Court.

[Joe Weisenthal]

Okay, there you go. Enter Mike Johnson, speaker of the House. Probably got a phone call from Donald Trump this morning. No one can deny he writes that the president's use of tariffs has brought in billions of dollars and created immen leverage for America's trade strategy and for securing strong reciprocal America first trade agreements with countries that have been taking advantage of American workers for decades. That is, that's fact for you?

[Mike McKee]

Well, yeah, we brought in a quarter of a trillion dollars so far. And guess what, it's additive every month. Let me get it up here. McKee has this memorized. I don't, Joe. I'm sorry, I just can't.

[Joe Weisenthal]

Did we bring in a quarter or did consumers have to hand that over?

[Mike McKee]

Oh, no, consumer. I think there's wide agreement against Kevin Hassett that Dr. Hasset of Pennsyl that, that we in some way are paying for this. Before Liberation Day. You were in the Rose Garden, Joe, when that happened. Our tariff was 1 or 2%, 2%, maybe 3%. The peak, the worst case was 28%. Then we've backed it off, including. You had a tizzy about bananas, Joe. So the president for Joe Matthew backed off bananas. We went down to 14 and a half percent like 20 days ago. Now after this ruling, I've seen two numbers. I've seen 6%. And I believe Martha Gimbel at the budget lab at Yale has 9%. So we've almost round tripped from. Keep the Math simple, folks. 2% to 28% to 9%. What's the next path, Joe? Down from 9%.

[Joe Weisenthal]

About that. Okay, so you got a 10 year. That moves 2, 10.

[Mike McKee]

That's why I think it's. It's just a tepid reaction on a Friday off of what was anticipated. And again, the response of the president, and critically is. Is my amateur take on this ruling, folks, is the response of Republicans in the House, Republicans in the Senate. And, Joe, I'll let you gauge Democrats in the House, or dare I say Democrats in the House and Senate the first Wednesday of November. Mm. And that would be part of me. Joe. I got to go. This. I did some extensive research here, folks. I have a team of interns that make it go every single day. And I need to bring this up because this is what matters. You look at Yoshida on the Boston Red Sox, and then the guy's underpaid. And the answer is he's one of the few people using the Mizuno Haga pitching glove. The pitchers love it. This is a Mizuno baseball glove, and that thing is popping a 25% tariff until they make it. And so, you know, I mean, you take it as something like, you know, gloves are made in the Philippines, gloves are made in Vietnam. These gorgeous gloves, the Haga gloves made by Mizuno in Japan. Those tariffs, I guess, are going to come down and greatly affect the Red Sox ability to stay in first place after April 30th.

[Joe Weisenthal]

When are you going to Fort Myers?

[Mike McKee]

I want to go. Somebody's going. Mike McKee's going. It's un American. He's, you know.

[Joe Weisenthal]

Is he really?

[Mike McKee]

Oh, yeah, he's. He's. He's got the whole Jeff loose and going.

[Joe Weisenthal]

Oh, exactly. All right. Before you leave us is I am the buy here. How do you make money on this?

[Mike McKee]

I don't do that, Joe. You know, I don't. I don't do that. What I'll say, and I say this firmly, folks, and we do it every day.

[Joe Weisenthal]

What are they going to chase them?

[Mike McKee]

The system will clear. I'm going to go to Friedrich Hayek, who went from Austria over to LSC and then over hugely influential in American economics. The market will clear. And Joe, to balance the power, the arch way we clear is at the ballot box, which means I'm looking at the control room right now. Can we agree that Joe Matthew will be employed the first Wednesday of November? I think so, Joe.

[Joe Weisenthal]

Yeah. I don't Know why I think it's getting in there.

[Mike McKee]

This is just. This is massive midterms. I go back to the election of 1890, and the people are going to speak that.

[Joe Weisenthal]

There you go. And by the way, Tuesday night is going to be a doozy. This State of the Union just took on new meaning. Am I wrong?

[Mike McKee]

I know. I think. I think it's brilliant. I'm not prepared on that. I went a couple times, you know, it was. Well, I'll tell you what, it's like. It's like a plumbing convention in Las Vegas.

[Joe Weisenthal]

Yes. With the chief justice at the front row, Tom Keene. Thank you. I understand you might be around a little bit. We'll see what we learn.

[Mike McKee]

I can stay around this news conference. I had an incredible lunch scheduled with David Gura and it got blown up. He's rehearsing Bloomberg this weekend and Joe Matthews doing Bloomberg. These tariffs.

[Joe Weisenthal]

I hope there was a good surveillance. Now, that's all I can say. The great Tom Keene, ladies and gentlemen. I told you the T Rex of finance was coming in. You know, it's a big day when Tom Kee. Right. We blew off the news at the top, brought Tom Keene in with Tyler Kendall on a Friday. One of the first calls we made. Thank you, Tom. Was to the author of the Everything Risk newsletter. Because, you know, we were just looking at some of the numbers here with Tom. It's somewhat confounding to see the reaction. And Edward Harrison, of course, has been preparing for this day. Bloomberg senior strategist. Yes. The Everything Risk newsletter. It's great to see you. Did you expect a more visceral, a more passionate reaction?

[Edward Harrison]

I did, actually. And by the way, it was great to see that Tom likes the Red Sox, because I'm a Red Sox fan very well.

[Joe Weisenthal]

And I'm surprised. Have the jacket.

[Edward Harrison]

I'm a bit surprised and disappointed that we don't have chili here this time.

[Joe Weisenthal]

Yeah. You know, we didn't have time to put the food together because of the tariff ruling, but we'll. We'll get back on track for you, Edward James. We need to have refreshments for this to work, I think, in the future. For. For Edward. Is this market going to turn negative? Look at this. The Dow's down 100 points now.

[Edward Harrison]

Yeah. I look at this as part of the rotation. I was looking through, you know, the dow, the NASDAQ versus the S&P, and then the equal weight versus the, you know, the normal weight.

[Joe Weisenthal]

Sure.

[Edward Harrison]

And what you see is. Is. Is that S and P equal. Weight is doing. It's not from the last I saw that the equal weight is doing worse than the phenomenal. And that's because you see all the sectors that people were rotating out of now rotating into before now being shunned. And then on the Nasdaq, what you're seeing is people are moving into the more speculative buys. Also see silver going up. Bitcoin is getting a bid. So overall, I think what we're seeing here from the data that we've seen today and from the, the tariffs that people look at it as very positive for more speculative assets.

[Joe Weisenthal]

Really interesting. It's kind of a blah day though, right? Dow's down 98, Nasdaq's up 95s and P, to your point, is higher. It's up dozen points here. There's a fraction of 1% where the equal weight is slightly lower. What do you make of the lack of reaction in the bond market? You get 2, 3, 10. Yeah, I mean 10 or the 30 or.

[Edward Harrison]

I was looking at the bond market to react to the inflation data earlier today. Yeah, because the inflation data, if you parse the data, core PCE inflation has gone up 0.4% since we got these tariffs. We also saw that it's gone up on the headline 0.6% over an eight month period. That's a considerable amount. That means that disinflation basically is over. Inflation is not coming down. It's been going up. But then we had no reaction. Then we got the tariffs which were the, you know, which caused that inflation to be rescinded. So markets really don't know what to do is basically what we're seeing.

[Joe Weisenthal]

That's where we are. The smart analysis today, people expected maybe a little bit more. And I'll be curious to see by the way we'll be looking at the markets as the President is speaking. He's set himself up for a heck of a split screen here. You want to, you want to come in off the top rope in the 12 o' clock hour while trading is active after a ruling like this. Every news organization is going to have the Dow and the President on the screen today. What, what will the reaction be like? Depending on what we hear?

[Edward Harrison]

Well, really what we should be thinking is this gives President Trump a chance to pivot because he knows that, just as you were talking to Tom, that the midterms are a problem. Affordability is potentially a problem for those midterms. He can recalibrate his tariff policy to be less onerous because he obviously is going to do tariffs Again of a different ilk. But this gives him a chance to actually do it in a way that helps him in the midterms. Whereas these tariffs were going to be negative for the Republicans and, and, and the potential suggested in the House, the

[Joe Weisenthal]

court saved the midterms for Republicans.

[Edward Harrison]

If, if he uses it the right way. But you know, that's a big if.

[Joe Weisenthal]

That's a big if. God knows there are. We've got a number of fallbacks here. In fact, we had listed them in advance of the ruling. There are five obvious fallback options. Section 232 Trade Expansion act of 1962 comes with limitations. Section 201, Trade act of 1974. Section 301, Trade Act 1974, section 122, same Trade Act. And then we've got section 338 of Smoot Hawley 1930.

[Edward Harrison]

Well, as soon as you mentioned Smooth Holly, suddenly you're just like, hello, yeah,

[Joe Weisenthal]

yeah, well, now, now, what do we think in the market? This is why, though everyone knows that there's something else is about to drop here. Right? Does he delineate that?

[Edward Harrison]

We think maybe, perhaps this is why we've had the muted reaction from markets right now so far, is that we're waiting for what he's going to say because they already have a game plan. They knew that this was going to happen, was likely to happen, and therefore they've, you know, developed a different way to deal with it. Obviously we have to deal with the refunds and so forth, but you know, tariffs themselves haven't even mentioned that yet. Have not. Are not off the table. Yeah, they're still going to be in place. And what that obviously means is given the inflation numbers that we saw today, we still have an inflation problem relative to where we were before tariffs became an issue.

[Joe Weisenthal]

Wal Mart's down 3%. TJX is lower. Costco, which is already suing over the refunds, is down 1%. When you step back, think about the market this year from your 30,000 foot everything risk standpoint here. Does it change your calculus? For what we might see in 2026,

[Edward Harrison]

it might be slightly more pro growth because to the degree that recalibrating the tariffs is difficult, really what you're doing is you're increasing the deficit and you're decreasing the drag that tariffs have on because we know that consumers and importers are paying 96% of the tariffs on the U.S. economy. And so that's, you know, marginally pro growth. It's also somewhat anti inflation. So that should be A positive. And that's why I think the initial reaction was slightly to the, you know, risk on side earlier today. But people are still sort of trying to figure out what it means over the long term. And then we have President Trump who's going to tell us what his reaction to this is.

[Joe Weisenthal]

Does this make waters even muddier for the Fed?

[Edward Harrison]

I think it does because, you know, you even saw someone who was very pro Trump aligned like Stephen Myron saying that, you know, actually the employment mandate is not as problematic as I thought it was. I still want to do 100 basis points of cuts, however, you know, I could have done even more than that had, you know, had we not seen this issue.

[Joe Weisenthal]

Would you have answered that the same way if the ruling had not come today and you had only seen the data?

[Edward Harrison]

You know, I would say that it would be even more the case that inflation was a problem. I think inflation is a problem. It would have been more of a problem without the tariffs being rescinded.

[Joe Weisenthal]

Great. Did you kick out your newsletter already on Wednesday?

[Edward Harrison]

I did. I have a macro view.

[Joe Weisenthal]

Do you have a special on on the ruling? You do? All right. Beautiful. Look for it on the terminal or online. You're so good at this. I appreciate your walking us through it. Edward Harrison, live in our Washington bureau here. On Balance of Power. Kailey Leinz picked a pretty good day to not be here, it seems to me. I bet she's enjoying all of this right now. Big tariff ruling. If you're just joining us, this is the day we've been waiting for. The big Kahuna happened at 10am and the court has struck down the tariffs across the board, ending the tariff regiment until, of course, we hear next from the president, which is going to be about 20 minutes from now if things are on time. 12:45 Washington time, a news briefing at the White House that we will bring you live here on Bloomberg. I'm going to remind everybody this is not the only story in the world here, not just the data, not just the ruling. We are also on watch for a potential series of strikes, military strikes against Iran. And we're going to involve ourselves in that part of the conversation coming up next. Michael o', Hanlon, Brookings Institution, will join us for what to watch this weekend. Stay with us. On Balance of Power will have much more coming up after this.

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[Bloomberg Host/Announcer]

you're listening to the Bloomberg Balance of Power podcast. Catch us live weekdays at noon and 5pm Eastern on Apple CarPlay and Android Auto with the Bloomberg Business app Listen on demand wherever you get your podcasts or watch us live on YouTube on

[Joe Weisenthal]

Bloomberg radio, streaming live on YouTube and of course on Bloomberg Originals. If you're in the car, we're channel 121 on your satellite radio. We'll welcome our global television audience to the program about a half an hour from now. We will likely be underway at that time in a news conference at the White House, a news briefing as it's been billed by the press secretary. And of course, sometimes those don't involve questions. We'll just have to find out what form this is going to take. Together with more than just the Supreme Court to talk about, the president is being asked very serious questions about his plans, his motivations when it comes to Iran. Last evening, a series of reports, beginning with the Wall Street Journal that the White House is considering a bloody nose strike, as they call it, a little punch in the face, Tony Soprano style, to wake everybody up and in this case pressure Iran to cut a deal knowing that we have the largest buildup of military forces in the region since 2003. Right? So bloody nose strike, then you give them a timeline and let them wait to sign the deal. Unless you want to feel the full force of the American military. That's at least the report. Now it's one of the options being weighed by this president who says he'll make up his mind and I don't know, 10 days, he says maybe 12. He was asked about it on Air Force One just yesterday.

[Bloomberg Host/Announcer]

Listen, what is the goal if there is a US military to make a

[Joe Weisenthal]

deal or we're going to get a deal. One way or the other. We're either going to get a deal or it's going to be unfortunate for them. I would think there would be enough time, 10, 15 days, pretty much maximum. 10, 15, pretty much maximum. Last time he said two weeks, it was a strike three days later. So we're trying to read tea leaves and we're glad to involve Michael o' Hanlon in our conversation today. It's been some time. The director of Foreign Policy Research at Brookings Institution joins us now. Michael, it's great to see you. Welcome back to Bloomberg. Where's your head this weekend? What are you going to be watching for? Thank you.

[Michael O'Hanlon]

Nice to be with you. First of all, I think that we need to put the build up in perspective because you quoted the Wall Street Journal article that said biggest buildup since 2003. In a way, that headline was a little misleading in the sense that this is not a huge armada. The buildup in 2003 was probably five to ten times greater than this one. And then we kept forces in the broader Middle east that were much larger than what we've got there right now throughout the entire Iraq war for seven or eight years. And so this is a couple hundred aircraft, maybe a little more. That's a lot. It's partly, I think, designed to handle any retaliation by Iran against American bases, Jordan, Israel, should we undertake various strikes. And of course, President Trump's happy to see it discussed as an absolutely huge armada. But I think we need to keep that in perspective, which means that we're not really committed to any immediate the reason why I make that distinction is we're not therefore committed to any near term quick action just because we've somehow leveraged ourselves exclusively on this particular moment with a buildup that cannot otherwise be sustained. This is a big capability, but it's something that President Trump can sort of play around with, if you will, can try to use as negotiating leverage, could undertake a brief strike and then follow it up with a larger strike. And so the bloody nose option, quote, unquote, raises the obvious question, which targets are you going after and which are you withholding or and I think that if there were going to be a bloody nose strike, quote, unquote, it would probably involve maybe some of the air defenses or the beginnings of new work around the nuclear sites that we struck last June. Or it could possibly aim at one or two of the missile launching test sites or production facilities of which Iran probably has dozens total and Therefore, send the message that if you don't do a deal soon, we can attack the full range of targets. And then, of course, the last piece, sorry for the long answer, but the last piece is the Iranian leadership itself. And whether now that Israel has killed so many Hamas leaders and killed the leader of Hezbollah and thought about going after the, you know, the Supreme Leader in Iran last spring, according to reports, maybe this would be the time that President Trump and Prime Minister Netanyahu would agree it's time to go after the political leadership in Iran. That would be a huge step. But I think they want to put the fear of God or fear of Allah into the Supreme Leader and his close confidants with this sort of talk of a bloody nose. And then maybe a bigger strike later.

[Joe Weisenthal]

Fear of God strike. So interesting, and you set that out really nicely. The fact that the Trump team has not at least publicly made explicit what Iran needs to do to cut a deal to avoid a strike, I find interesting. Do you think that's being delineated privately between the two nations?

[Michael O'Hanlon]

Yeah, I do. My sense is that they really want a complete, verifiable end to all elements of Iran's nuclear enrichment and potential weapons capabilities. So, in other words, as you know, for many years we watched Iran enrich and we agreed at what point they should stop what concentration of uranium 235. As you know, you need 90% U235 to sustain a nuclear reaction, but it's only 0.7% in natural uranium. That's one why you enrich and you do it in several stages. So the first stage, getting it up to maybe 3.5percent U235, is no big deal. It's nowhere near weapons grade. That's what you do to get fuel ready for reactors. And so we've had inspectors watching that process. But of course, after President Trump pulled out of the Iran nuclear deal in his first term, the constraints have sort of been off. And Iran's exceeded previous agreed thresholds and gotten up to 60% U235. We don't know where all that U235 is right now. Some of it might have been destroyed or at least rendered inaccessible in the June strikes. The United States could demand of Iran, let's find all that 60% U235.

[Joe Weisenthal]

And we want it.

[Michael O'Hanlon]

And also we want verifiable confirmation going forward that you don't reconstitute any of your centrifuge facilities that can be used to further enrich uranium. So that would be the basic deal thereafter. They don't want Iran to have any ability to enrich any uranium at all. That's my understanding of their goal. And on the missile issue and other issues, they're a little bit more flexible, but they're adamant on the nuclear enrichment question.

[Joe Weisenthal]

If there is a strike, does the US do this alone or do we have Israeli planes in the air as well or some other type of support?

[Michael O'Hanlon]

You know, that's an excellent question in the sense that we've tended to prioritize the nuclear issue and Israel, of course, prioritizes it too, but has let the United States sort of drive that debate with the Joint Comprehensive Plan of Action negotiated under President Obama with the strikes last June where we did the major damage to the underground facilities. So in a sense, it would make a logical division of labor for Israel to keep doing the kind of things it did last spring in regard to ballistic missile launchers and air defenses and the United States to handle the nuclear portfolio. And so if you just did a strike against nuclear targets, it's maybe the United States does that by itself, but I'm really speculating here. I think, you know, it could go either way.

[Joe Weisenthal]

Interesting. Only got about 90 seconds here, Michael, and I loathe to cut you off. Are you, are you concerned that there might be some sort of kinetic activity this weekend or would it be next weekend once the carrier strike group arrives, once Iran has a chance to present, as it says, its detailed proposals?

[Michael O'Hanlon]

Feels more like the following weekend to me. But again, President Trump likes to keep us all guessing. I think he does feel that he was an honest negotiator last time and that he gave Iran a certain number of weeks and then once there was no deal, then he struck pretty quickly and green lit Israel striking pretty quickly. So in that regard, I think he likes to have this reputation of a straight shooter, so to speak. And to the extent he's talking about 10 more days, it seems that maybe he would grant that. On the other hand, if his bloody nose idea is meant to tell Iran you better do a real deal within 10 days, and I'm going to change your calculus by giving you some more reason to think I'm serious, then maybe the quote, unquote, you know, smaller strike or bloody no strike does happen in the coming days, my money is against that. I think it's probably more likely to be in 10 to 15 days, but who knows?

[Joe Weisenthal]

It's always a real pleasure to spend time with somebody who knows what they're talking about. And that's the case with Michael o' Hanlon, on this particular story, years of research went into what you just heard from the director of foreign policy Research at Brookings. Michael, thank you. Don't be a stranger because, boy, this is far from over. Bloody nose this weekend. We'll see. That's just what the market's going to want after this ruling on the Supreme Court, Right? We'll assemble our political panel next with a lot to talk about here on Balance of Power. Stay with us. We're live in Washington on Bloomberg. Stay with us on Balance of Power. We'll have much more coming up after this.

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[Bloomberg Host/Announcer]

You're listening to the Bloomberg Balance of Power podcast. Catch us live weekdays at noon and 5pm Eastern on Apple CarPlay and Android Auto with the Bloomberg Business app. You can also listen live on Amazon Alexa from our flagship New York station. Just say Alexa, play Bloomberg 1130.

[Joe Weisenthal]

We're going to get into all of this with the panel in a moment, not just the ruling today. Look, you can be surprised or not, you can have a reaction or not. On Wall street, it is kind of amazing what the reaction has been. As you just heard from Nathan, we're not even positive on the Dow anymore. This is supposed to be party time, but of course the president's got other plans. They saw this coming and so did Terry Haines, the founder of Pangea Policy, who was holding forth on Bloomberg just about an hour ago, just cranked out a new note to clients. And this is really interesting. This is important. I want you to remember this as we watch Mike Johnson make his next move and as we wait to hear from the president. Number one, he says Trump still has many tariff powers, at least five. Right. We talked about his five options earlier this hour, none of which are in dispute. He will use them all. Okay, fine. No shocker there. This is where it gets interesting. Terry says Trump is likely to get from Congress an IEPA fix to get the emergency tariff authority he wants. Listen for it on Tuesday. Yeah, the State of the Union on Tuesday when he's going to call out the justices of the Supreme Court in the front row. Tuesday just got rich. Right. But this is important. Listen for it in the State of the Union or even today, maybe a couple of moments from now when President Trump speaks. The president and the Republicans on Capitol Hill already were likely to use, let me say it out loud, reconciliation for the big beautiful bill 2.0. There were big questions about what would go in it. Well, now you know, even more likely now that it almost certainly includes an IPA tariffs fix. So the playbook is there. They've already got it. Mike Johnson, as we told you earlier on not Truth Social, but the good old fashioned X, he says Congress and the administration will determine the best path forward in the coming weeks. This has already been written into the speech for Tuesday. Right. Or it's going to be going in this weekend. The question is, are the votes there? We already saw Republicans cross the aisle when it came to Canadian tariffs, seen Republicans cross the aisle on a couple of things. Recently we've had a little bit of a jailbreak when it came to the Department of Homeland Security funding, when it came to ACA premiums, Obamacare premiums that were ever rising. And all of this feeds into the same story about affordability. Right. This is about prices. We're talking. And of course, well, yesterday, if you listen to, to the president at his affordability speech in Rome, Georgia, he put up the mission accomplished sign on affordability. Listen, we inherited a mess with high prices and high inflation and we've turned it around and we've made it great. They caused the affordability problem and we've solved it. What word have you not heard over the last two weeks? Affordability. Because I've won. I've won affordability. I've won affordability. Which makes Jeannie Shan Zaino smile ear to ear because they're making the ads right now. Jeannie is, of course, one side of our great panel, Bloomberg Politics contributor, Democratic strategist and democracy visiting fellow at Harvard Kennedy School's Ashe Center. She's joined today by Republican strategist John Seaton, the founder CEO of Echo Canyon Consulting. Great to see you both. Bet you didn't know what you were signing up for today. Jeannie, start me off on this one. We have so many threads that the president will be weaving through in his news conference coming up. And I'll, you know, we're all going to be interrupted at some point here when he begins. Jeannie, he won affordability. Did the Supreme Court just help Republicans maintain the majority?

[Bloomberg Host/Announcer]

Well, we don't know yet. But there's certainly got to be some members of Congress on the Republican side who are quietly, very quietly happy about this ruling because of course, they know what Donald Trump refused to acknowledge yesterday in the speech, which is that the American public does not feel like he has won the affordability war. I mean, we talk frequently about this K shaped economy where people at the top, the kind of people who go to Mar a Lago, who the president hangs out with, they're swimming along. But it's the people at the bottom, the people who helped get Republicans in office who are telling pollsters in really high numbers that the economy is an enormous concern. Affordability, inflation, the cost of living, prices at the grocery, at the groceries, at the pubs, you go on and on. So that is, you do see Republicans may be quietly happy about this. And I love Terry talking about the fact that we're going to have reconciliation because what does that mean? Or we may have reconciliation. That means those Republicans who just want to go home, Joe, and run for office and say, you know, didn't, you know, increase these tariffs and these taxes? We hear you now are going to be battling with the speaker of the House and potentially the president on fixing IPA or at least changing the language to allow the president to do something that middle class families have suffered from. So all in all, not a good day for the president. That's why he's using choice language. And not a good day for Republicans, at least out loud.

[Joe Weisenthal]

I saw something about that choice language. The front of the Drudge Report is wild at the moment. So. All right, John, how do we get to this? This is huge for the midterms. Did you break into a sweat when you heard this because it was good or bad news? And I guess there's a chance that this IPA fix could happen in reconciliation. But does the president have the votes?

[John Seaton]

You know, I'm not sure about that. And as you've noted, there has been, I wouldn't say a full jailbreak. But when you have such a narrow majority, when you have resignations when you have the House Republican Conference really only having one or two votes to spare on any given issue, assuming the Democrats continue to vote in lockstep, the margin for error is very, very small. So I am skeptical that Speaker Johnson will be able to get the votes to force this fix through a reconciliation bill. Time will tell. But I have to tell you, to your point, I think that there's a lot of Republicans in swing districts who are already starting to see signs of economic confidence getting a little bit higher, who I think are not going to be terribly sad that the tariffs are very well, likely to go by the wayside.

[Joe Weisenthal]

Really interesting. What do you think the president's going to say here in a couple of minutes, Jeannie? We don't have a two minute warning yet, but at some point he's going to emerge. We understand he's very upset. I guess you could assume that based on the ruling today. But does he actually call on Congress to draft a reconciliation plan to fix iipa?

[Bloomberg Host/Announcer]

You know, I think strategically, if I would do it was to advise him, I would say absolutely not. I mean, John just mentioned it. These margins, margins are so tight. Congress doing anything, heck, Joe, these people cannot even pass a budget on time. Are they really going to do this during an election year with margins this tight on something this wildly unpopular in swing districts? I don't think it makes sense politically. He may ask for it. He does have, and you were just listing those earlier, these five avenues by which to do this. The problem for the president and, and I'm so curious about how he comes out. He's certainly angry is that there is nothing, probably even, nothing even beyond his children that he is more committed to during his life for the last 50 years than tariffs. 28 times in Georgia yesterday he said the word tariffs. He loves tariffs. It is a tool for him economically. It is a foreign policy tool. It is a carrot. It is a stick. He holds them and lords them over people's heads. To have that taken away for him is from him rather is going to sting. And while he has these five other paths and he could certainly try to push for reconciliation, none of those are as smooth as what he had with emergency power. Because all the sections that you listed, 338-12-2221, the whole litany, they all are limited in one way or another. They either have time limitations or you have to pass a lot of reports. And you know, it's the usual mumble jumbo of government. And the things Donald Trump doesn't like. He wants to impose tariffs. And he wants to do it quickly. He was able to do that. And two people who he appointed to the court have taken that away along with four others. And I think he's going to have some choice words for them maybe.

[Joe Weisenthal]

Boy, yeah, Tuesday is going to be something else. John Seaton, I don't know what you're expecting from the State of the Union, but is there a world in which the White House might want to slow roll this out after talking with John Thune and Mike Johnson to say, yeah, we'll get you this fixed, but it sure would be great to time it after November. If we're voting on this in the House of Representatives before voters weigh in on the midterms, it's going to obviously make things a little more complicated. Could, could this end up being good news, this ruling for Republicans if the timing helps? Candidates on the midterm trail?

[John Seaton]

Well, and you've noted that the market is still kind of in wait and see mode right now. But I would not be at all surprised if economic sentiment does get marginally or even much better as a result of this. As you noted, the tariffs are not terribly popular. There are Republicans in swing districts who are going to be running on the economy and that's what voters clearly care about. So I'm sure there will be discussions in the White House about how to roll this out and when to roll this out. At the same time, as Jeannie noted, the president has a very long history, long before he was the president of the United States, of being strongly supportive of tariffs. I don't expect for him to just let this go, especially knowing that there's a at least 50, 50 chance that he won't have a House majority in after November of this year. So I expect the State of the Union to be very, very interesting. I expect for him to have a number of choice words and I do expect him to call on Republican majorities to act quickly.

[Joe Weisenthal]

We just got a statement from Taxpayers for Common Sense, Jeannie. This is the other side of the coin. Taxpayers now need Congress to use this ruling as a prompt to reassert its constitutionally mandated power to raise revenue. Our country is 38 trillion dollars in debt with an annual budget deficit around 2 trillion projected to rise. Our country is on an unsustainable fiscal path. That would be the opposite approach here, Jeannie. And of course, this is a pretty good mantra for Democrats on the midterm trail. What about congressional authority? Is this the opportunity that members of Congress have been waiting for?

[Bloomberg Host/Announcer]

You know, I think many particularly on the Democratic side, some Republicans, more traditional Republicans. And you know, Mike Pence's statement, I think is a good reminder of where the party used used to be. But I do think it is important to remember what the majority said in this decision, which is that separation of powers was put in for a reason. There's the reason the framers gave the people's branch the ability to raise taxes. Nothing is more close to all of our hearts as we face down April 15th than taxes and the IRS. They wanted to ensure that it was the people closest to the people of the United States that were making these decisions, not a president. And that's why I think even the idea of reconciliation and changing this language on the Republican side in normal circumstances would be very difficult. So I do think we're going to hear a lot of this on the trail. We have ICE out there. It has three times the budget it usually has and we're facing the deficit. The trade group just talked, I mean the tax group just talked about all of that is going to come into play as people on the middle, in the middle class and the lower class feel like they can't afford child care and groceries.

[Joe Weisenthal]

Boy, to think I, I thought we were going to be talking about aliens today. You know, like UFOs president says he'll declassify the alien files. We got nothing on this. Thanks for listening to the Balance of Power podcast. Make sure to subscribe if you haven't already at Apple, Spotify or wherever you get your podcasts. And you can find us live every weekday from Washington D.C. at noontime [e-mail] there's no championship league for small business owners, but if there was, you'd be at the top of the standings.

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