The Supreme Court Strikes Down Trump’s Tariffs. Now What?

Summary

Plain English with Derek Thompson:

"The Supreme Court Strikes Down Trump’s Tariffs. Now What?"

Date: February 21, 2026
Host: Derek Thompson
Guest: Jason Furman, Harvard Economist

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Episode Overview

In this episode, Derek Thompson and Harvard economist Jason Furman discuss the historic Supreme Court decision that struck down President Donald Trump's tariffs, the legal underpinning of the ruling, what happens to the $200 billion in collected tariffs, the real impact these had on U.S. manufacturing and the economy, and what comes next as Trump quickly imposes a new round of tariffs under a different statute. They examine the implications for Congress, the executive branch, global partners, and the future of U.S. trade policy.

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Key Discussion Points & Insights

1. Supreme Court Strikes Down Trump's Tariffs

• Background: The Supreme Court, in a 6-3 decision, ruled that Trump’s tariffs—imposed via executive order under the International Emergency Economic Powers Act (IEEPA)—exceeded the powers delegated by Congress.
• Derek's Summary (01:10):

  “Trump’s tariffs, which are the centerpiece of his economic policy, exceeded the powers given to the president by Congress under a 1977 law cited by the administration… This decision will have major implications for the US Economy, for American consumers, and for countries around the world.”

• The decision nullifies two-thirds of Trump’s expanded tariffs—approximately $200 billion collected.

2. Trump’s Response & Immediate Workarounds

• Jason Furman (06:18):

  “All of those tariffs are almost immediately null and void… A few hours later, Donald Trump… put under a different legal authority a new set of tariffs of 10 percentage points, basically undoing about 80% of what the Supreme Court had undone.”

• These new tariffs can last only 150 days unless extended by Congress; some uncertainty looms over their fate.

3. The Legal Reasoning Behind the Ruling

• The IEEPA statute doesn’t mention tariffs; it’s about targeted sanctions, not broad trade restrictions.
• Jason (08:32):

  “The law that they invoked doesn’t use the word tariffs, and it’s never used before to justify tariffs… Congress didn’t say tariffs; they meant this for things like very specific sanctions against banks or financial systems…”

4. What Happens to the $200 Billion Collected?

• Uncertainty rules: The Supreme Court did not clarify whether companies would get refunds. Many major companies weren’t party to the lawsuit, perhaps for political reasons.
• Jason (10:11):

  “The Supreme Court did not resolve the issue of whether companies would get paid back… As a macroeconomist, I’m actually not super fascinated by the repayment part of it…”

5. The International Fallout

• Existing trade deals (e.g., with Japan and Korea) likely remain unchanged; the effect will be felt most in future negotiations, particularly with China.
• Under the old rules, Trump could adjust tariffs rapidly and, sometimes, capriciously—a tool mostly lost with the Supreme Court’s decision.
• Jason (11:57):

  “The deals we have… I expect them not to change basically at all. But we’re in the middle of a negotiation with China… he had enormous flexibility of just turning tariffs up and down… that’s gone.”

6. Economic Effects: Reality vs. Rhetoric

• Despite dire predictions, the tariffs modestly slowed growth and raised inflation, but didn’t cause catastrophe.
• Jason (14:41):

  “I think it is perfectly plausible that the tariffs ended up taking about half a point off of US economic growth in 2025 and added… half a point to a percentage point to the inflation rate... It is an awful lot of money. It’s $1,000 for every household.”

• Most indicators of the economy looked much like the prior year, except job growth slowed due to immigration restrictions.

7. Flux as the Economic Status Quo

• Thompson: The unpredictability and volatility (“flux”) have characterized Trump’s trade policy from the start—tariffs up and down, often on a whim.
• Jason (18:04):

  “We’re definitely still in the flux. I think it’s going to be less flux because the tools that he could use really quickly and easily are now gone… Uncertainty’s down a little bit, but still way, way, way, way higher than it was before Donald Trump.”

8. Manufacturing Jobs & Trade Deficit: Did the Tariffs Achieve Their Goal?

• Trump justified executive action by citing the need to shore up manufacturing.
• Jason (20:31):

  “The trade deficit in goods looked almost exactly the same in 2025 as it did in 2024… We lost manufacturing jobs in 2024 and then we lost even more manufacturing jobs in 2025.”

• Public claims of manufacturing gains were contradicted by revised statistics.

9. Tariffs as Revenue: Will They Stay?

• Tariffs raised huge sums, tempting for any presidential administration in need of revenue.
• Jason (40:01):

  “Whatever tariffs we have in effect on January 19, 2029, will have a lot of momentum, regardless of who the next president is.”

• Even Democrats may be reluctant to dispose of hundreds of billions in annual revenue.

10. Executive Overreach & Rule of Law

• Trump’s reliance on executive orders is an unprecedented shift from Congress to the White House.
• Derek (26:05, on executive orders):

  “We have moved toward a world in which policy is being done by the executive branch, even in ways that explicitly… unconstitutionally contravene the authorities of the legislative branch.”

• Jason (29:22):

  “…It is much, much worse now than it was before. And I get that and it merits more talking about… Here, it is unambiguous that Congress has the power for tariffs. The President doesn’t dispute that.”

11. Trump’s New 10% Tariff under Section 122

• Trump quickly imposed a new round of tariffs under Section 122 of the Trade Act of 1974, citing “serious balance of payments or exchange rate problem.”
• Cap is 15%; Trump picked 10%. These tariffs expire in 150 days unless Congress acts.
• Winners: e.g., China (tariffs drop); Losers: UK (tariffs rise).
• Many industries, like AI hardware, may now lose exemptions.
• Jason (35:41):

  “Semiconductor chips from Taiwan now have a 10% tariff rate. That is my understanding of it…”

12. Policy Implications for the Future

• The lack of congressional action, executive overreach, and uncertainty around new tariffs and their expiration underscore the policy whiplash.
• Most likely, some tariffs will persist for years, baked into the U.S. economic system.

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Notable Quotes & Memorable Moments

• On the logic of rule of law (03:57, Justice Gorsuch via Derek):

  “But the deliberative nature of the legislative process was the whole point of its design. Because laws must each earn such broad support to survive… they tend to endure, allowing ordinary people to plan their lives in a way they cannot when the rules shift from day to day.”

• On the absurdity of Trump’s tariff management (04:59, Derek):

  “It does not make any sense to let the president say that tax rates should be one thing before a country gives him a gold bar and then another number, literally, after they give him a gold bar…”

• On manufacturing jobs and economic claims (21:41, Jason):

  “Well, those numbers have since been revised and that month he had pointed to as the proof point of the plans working. We lost manufacturing jobs that month as well.”

• On the economic cost of abrupt policy changes (37:28, Jason):

  “So the cost here, I think you should think of more as screwing up your timing. As a company, you’d much rather not be constantly pulling things forward, delaying things, shifting things around. But by doing all of that, you can potentially get around this new set of tariffs.”

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Important Timestamps

• 01:10 – Derek’s overview of the Supreme Court ruling
• 05:46 – Introduction of guest, Jason Furman
• 06:18 – Furman explains what just happened and immediate aftermath
• 08:32 – Legal logic behind the ruling
• 10:11 – What happens to tariff refunds
• 11:57 – International ramifications and ongoing China negotiation
• 14:41 – Economic effects of tariffs on growth, inflation, jobs
• 18:04 – Persisting uncertainty in Trump’s economic policy
• 20:31 – Tariffs failed to achieve manufacturing goals
• 26:05 – Discussion of executive orders and rule of law
• 29:22 – Jason on executive overreach vs. congressional authority
• 31:56 – Trump’s new 10% tariff explained
• 35:32 – Industry-level impact of new tariffs
• 40:01 – Likelihood tariffs persist for years

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Conclusion

Derek Thompson and Jason Furman deliver a deep, clear, and timely analysis of the Supreme Court's striking down of Trump’s tariffs. The episode examines executive authority, the mechanics of trade law, the limited success and broad fallout of recent tariffs, the challenge of revenue politics, and the persistent uncertainty for U.S. businesses, consumers, and global trading partners.

Furman’s optimistic note is that some order has been restored and some economic confusion eased. Still, the enduring lesson is that executive overreach and policy volatility—especially on something as fundamental as trade—have real and sometimes chaotic consequences for the world’s largest economy.

Transcript

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Foreign.

[B]

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[A]

areas

[B]

One of the hallmarks of the presidency of Donald Trump is that insane stuff keeps happening, but also that insane stuff keeps unhappening, if that's a word, which it technically is not. In his first month in office, Trump moved to end birthright citizenship, which was struck down by a federal judge. He offered a buyout to federal employees, which was paused by a federal judge. He attempted to pause all grants and loans from federal agencies, a move which was blocked by a federal judge. In the realm of tariffs, Trump announced a North American tariff rate of 25% in January, which he paused the very next day. Then he announced an extraordinary set of tariffs on so called Liberation Day, many of which he unwound. And then today, Friday, February 20th, as I'm recording this open, the Supreme Court struck down all of the tariffs that Donald Trump imposed by executive orders that claimed unprecedented emergency powers. By a vote of 6 to 3, the justices ruled that Trump's tariffs, which are the centerpiece of his economic policy, exceeded the powers given to the president by Congress under a 1977 law cited by the administration. The court did not say exactly how the feds should provide refunds to importers that may have paid more than $200 billion at the border. This decision will have major implications for the US Economy, for American consumers, and for countries around the world. The government has collected, As I said, $200 billion in tariff revenue already, and it's hard to see exactly where those funds go in the near future. Trump today called this decision a disgrace, threw insults and epithets at the judges, suggested they might be under foreign influence, and insisted that he would not work with Congress to impose new tariffs Because I don't have to. I have the right to do tariffs. In his concurring opinion, Justice Gorsuch wrote the. For those who think it important for the nation to impose more tariffs, I understand that 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, including the duty to pay tariffs and taxes, are funneled through the legislative process for a reason. Yes, legislating can be hard and take time, and yes, it can be tempting to bypass Congress when some pressing problem arises. But the deliberative nature of the legislative process was the whole point of its design. Because laws must each earn such broad support to survive the legislative process, they tend to endure, allowing ordinary people to plan their lives in a way they cannot when the rules shift from day to day. End quote. I'm sorry, that was a long quote. I myself am as frustrated as many people by the slowness and often pathetic inactivity of the US Congress. But Trump's own behavior in the last few months has demonstrated how categorically irresponsible and downright absurd it can be to give the President alone the right to tax other countries. Consider the example of Switzerland. Trump slapped a 30% tariff on Switzerland, then received from the Swiss a personalized gold bar from their delegation. Soon thereafter, he cut the tariff rate of Switzerland in half. It is categorically insane to do public policy this way. It does not make any sense to let the president say that tax rates should be one thing before a country gives him a gold bar and then another number, literally, after they give him a gold bar. There's no way to even pretend that this kind of public policy is for the public benefit. It is so, obviously, clearly for his own private benefit, and I'm glad the Supreme Court finally said so. Today's guest is Harvard economist Jason Furman. We talk about the tariffs, the Supreme Court decision, and what comes next. I'm Derek Thompson. This is Plain English. Jason Furman, welcome back to the show.

[A]

Great to be back.

[B]

So this is now a video podcast, which means that people can see your famously lustrous head of hair, which is wonderful. Do I have it right? That. Or remember correctly that you were Matt Damon's roommate freshman year of college?

[A]

I was. Just a little bit away from where I'm sitting right now.

[B]

Wow. Yeah. Something about the follicular blessings of that particular room at Harvard, clearly. Well, let's jump right in the news at the moment, I suppose. In your own words, what just happened today?

[A]

Well, what happened today was, I was caught totally by surprise. There were multiple days starting in January we where I was at 10am Refreshing SCOTUS blog waiting for this decision and then I think I had just entirely given up, forgotten about it and then got a text at like 1010 that it had come out. So it finally came. The Chief Justice John Roberts wrote the decision and completely and totally took away the authority that President Trump was using for for about two thirds of his tariff increases, something called the International Emergency Economic Powers act iepa. And so all of those tariffs are almost immediately null and void. That was done under that a few hours later Donald Trump who maybe he had also forgotten about it, maybe he had stopped refreshing SCOTUS blog. Maybe he got a text too reminding him put under a different legal authority a new set of tariffs of 10 percentage points, basically undoing about 80% of what the Supreme Court had undone with his tariffs. So they leaving them a little bit lower than they were before, but only a little bit. But the thing is the new thing that Donald Trump did can only last for 150 days and unless it's extended by Congress, it goes away. So that's where we are now. One set of tariffs gone, a new set of tariffs here, but some uncertainty about what will happen going forward.

[B]

I appreciate that you introduced the very funny possibility that on Trump's Chrome browser he has one website bookmarked which is just SCOTUS blog and he's just constantly refreshing to read SCOTUS analysis, which is quite good there, but it seems a little bit unlikely. Can you go a little bit deeper into why by a 63 vote AIPA was thrown out as a justification for these tariffs? I mean we're having you on as the macroeconomics expert here, but if you put on the legal hat, even briefly, like what fundamentally was the reasoning behind this ruling?

[A]

The law that they invoked doesn't use the word tariffs and it's never used before to justify tariffs. And the justices didn't think it applied to tariffs. Now the administration made arguments that there were other words that could be understood as possibly implying or meaning tariffs. Three of the justices accepted that, but six of them just said simply no, Congress didn't say tariffs. They meant this for things like very specific sanctions against banks or financial system for a country you're trying to punish for some sort of reason, but that this was just not allowed under that law. And that's why it was quite sweeping, at least as far as that law is concerned. It does not give them a path back using the IIPA law.

[B]

What Kind of a mess are we looking at right now, given that these tariffs have collected $200 billion already at the border? I mean, if these tariffs have now been struck down, then, and I believe this was a part of the decision itself, even if it was left a little bit unclear, the companies who paid those tariffs might expect refunds. Is there an orderly process by which refunds would be paid by the government back to the companies who have been paying these tariffs? Or is this basically, hey, if you're a company that's been paying tariffs on stuff coming over from China and Europe, you know, time to lawyer up and start begging the government for money. I mean, is there any playbook here for these companies to make their money back?

[A]

Another thing that we just don't know the answer to. The Supreme Court did not resolve the issue of whether companies would get paid back. Moreover, not necessarily every company is going to want to get paid back. This lawsuit itself was brought by some smaller, more random companies. The big companies we've all heard of were not a party to this lawsuit. Maybe because they didn't want to anger Donald Trump with it. As a macroeconomist, I'm actually not super fascinated by the repayment part of it. I think it doesn't have a big effect on the macroeconomy because when you give money to a corporation, they just don't go out and spend it the same way. If you give money to a middle class family, they go out and spend it. Doesn't really change their investment behavior that much because mostly they need things with a good rate of return. It's not cash. That's usually the constraint on investment and they probably don't pass the savings on to consumers either. So I find it interesting. I'm going to enjoy the drama of it, but very little of the macroeconomist part of me feels any need to pay attention to it.

[B]

Maybe this next question will instigate and galvanize the macroeconomist in you. I mean, the decision isn't just going to have an effect on companies in the US that pay these tariffs. It's also going to have an effect on folks outside the U.S. i mean, the U.S. has been out signing trade agreements for the last few years under the auspices of, under the sort of Damocles of these tariffs in a weird way, because these tariffs are now wiped out. It's the companies, excuse me, the countries that were paying the highest tariff rates that are gonna benefit the most from this decision. Countries like China. So what does this mean for other countries that we're trading with.

[A]

So with everything we don't know. But I'm not going to keep saying that. So I'll give you my best guess, which is that all the deals we've already struck will stay in place and largely be unchanged, but that this could have a very large impact on deals going forward with China, as you just alluded to, and your question being the most important part. So, for example, Japan and Korea have both agreed to make investments in into the United States. I don't think they're going to turn around and say AIPA was struck down. So Donald Trump were not making these investments in the United States anymore. They don't want to anger the United States. And by the way, a lot of the concessions we've gotten from different countries around the world were both relatively small and often in the interests of those countries or maybe repackaging, something they were perfectly happy to do or going to do anyway. So the deals we have, which include places like Japan and Korea, I expect them not to change basically at all. But we're in the middle of a negotiation with China. We have sort of an interim truce, but we have President Trump going there in April under aipa. He had enormous flexibility of just turning tariffs up and down. In some cases, that was on a whim in a quite terrible way, if he didn't like the tone of voice of the leader of Switzerland or a television advertisement done by what is effectively a, you know, a local official in Canada. But with China, there was some benefit to having that he doesn't like. He still has tools. There's something called Section 301, which lets you investigate a country, decide it's been unfair, and do tariffs on it. That's what most of our China tariffs that we did in Trump's first term that Biden kept and expanded on, were done under. So he has tools like that that he could do more, but they all take more time, more effort. And so this will mean both less chaotic randomness, but maybe a little bit less leverage for future negotiations, too.

[B]

I want to spend some time talking about the legacy of these tariffs. We had you on the show last summer to talk a little bit about the gap between the catastrophic effect that some people assumed that these tariffs might have and the fact that the economy was still technically adding jobs, still more or less growing. I mean, how would you summarize the effect that these Trump tariffs have had on the economy in the last year? Because maybe that can guide us toward understanding what effect there they're being ruled out will have on the next year's economy.

[A]

Yeah. So to a first approximation, most everything about the economy in 2025 looked an awful lot like 2024. A quite similar growth rate, a similar inflation rate, similar interest rates, similar unemployment rate. The biggest economic variable that changed was the pace of job growth. Slowed quite a lot, a lot of that due to immigration restrictions. So, to a first approximation, the US is sort of like a supertanker. 90% of that supertanker is actually domestic. And so these things just don't change it very quickly, and they don't change it very much. I think it is perfectly plausible that the tariffs ended up taking about half a point off of US economic growth in 2025 and added something like half a point to a percentage point to the inflation rate in 2025. So we had growth of 2.2. Maybe we would have had growth of 2.7. Those aren't, to most mortals, 2.2 and 2.7 sound exactly the same, but it is an awful lot of money. It's $1,000 for every household. So, me, I care quite a lot about 2.2 versus 2.7. What does this mean going forward? Well. Well, it means we'll get back some of that, but it depends on how much President Trump finds other ways to get at the tariffs. If you look at the two things that happened, the Supreme Court decision and the new Donald Trump tariffs, the tariff rate is down from about 14.5% to about 13%. So it's not that big a change. But the new tariffs will end after 150 days, so maybe they'll come down. But on the other hand, the 301s, the other legal authorities for tariffs, those take time. Maybe we'll have more of those 150 days from now. So how much of that, say, half point that we lost do we get back, will depend on Donald Trump's decisions going forward.

[B]

Right. It's funny, because there's a way in which the world changed dramatically this morning because these tariffs, which were a centerpiece of Trump's economic policy, were essentially ruled unconstitutional. And so you would think, well, if one of the foundations of Trump's economic policy is essentially kicked out from under it, well, then doesn't that change the picture dramatically? But at the same time, maybe the core principle of Trump's economic policy is things keep happening and things keep unhappening, and then things keep rehappening, and then Trump changes his mind again. I mean, tariffs on Switzerland, you mentioned they went up, up on Liberation Day, and then they went down when the Swiss offered him some bars of gold. And then maybe they bounced around for some other countries because, as you said, they released advertisements that had language he didn't like. I mean, tariffs have been going up and down and up and down on various countries now for basically the entirety of the last 13 months. So, in a way, am I wrong in saying that despite the fact that this is an important decision, there's a way in which the status quo of Trump's economic policy, and in particular his sort of international economic policy, has always been in flux. It's just we're still in the flux in which it's always already been.

[A]

Yeah, we're definitely still in the flux. I think it's going to be less flux because the tools that he could use really quickly and easily is now gone. The other ones take more time or they're more time limited, so there's somewhat less flux. So I think both uncertainty's down a little bit, but still way, way, way, way higher than it was before Donald Trump, and tariffs are down a little bit, but still way, way, way higher than they were before Donald Trump. So economically, things are a little bit better. I want to, though, go a little bit beyond economics, which I care an awful lot about gdp. I think GDP is a wonderful thing. The more of it, the better. But I also do care about rule of law, sort of, you could call it no kings whatever else. And let me give you a totally different example from tariffs, which is the strikes on boats in the Caribbean and the Pacific. I personally hate those. I think maybe they're illegal. I'm not an expert on that, but I'm not going to make an argument that they're going to hurt the stock market or lower gdp. My guess is they don't affect the US Economy and at all. If the court tomorrow said they weren't allowed, I would emotionally be really quite happy because it felt like you were a bunch of people that we were killing. Bad thing that I personally think we're doing, we wouldn't be allowed to do anymore. I think part of my own personal reaction on the tariff case was a little bit like it would be on that some of this is good for the economy and helps, but some of it just feels like the order we should have in this country, where there's just a limit to how much arbitrary stuff the president can do, and this one just happens to be an arbitrary thing that is in the space of the economy.

[B]

I'm glad you went there, and I want to get to the extensive and extending powers of the executive branch in just a second. But one last question on the effect the tariffs were having on the economy the last 12 months. The President claimed that one of the emergencies that justified the invocation of the International Emergency Economic Powers act was that trade deficits had led to, and I believe this is a direct quote of the administration, a hollowing out of America's manufacturing base. So one would certainly hope that the tariffs had contributed to a resurgence in manufacturing and manufacturing employment. What have we in fact seen in terms of the direction of manufacturing employment in the last 12 to 13 months?

[A]

Yes, well, I said most things in 2025 look an awful lot like 2024. Let me add two to the list. The first is the trade deficit in goods looked almost exactly the same in 2025 as it did in 2024. That's not surprising because economic theory broadly predicts that tariffs aren't what determine and cause trade deficits and they don't really change trade deficits. And then the other thing that was quite similar is we lost manufacturing jobs in 2024 and then we lost even more manufacturing jobs in 2025. And just to you know, one that I find just sort of amusing is in early March, Kevin Hassett, who's the director of the National Economic Council, went out and said our plans are already working because of the tariffs and the anticipation manufacturing added. I believe he cited 10,000 jobs in February when he said it, it was factually correct. I'm not sure it was the correct causal analysis, but it's factually correct. Well, those numbers have since been revised and that month he had pointed to as the proof point of the plans working. We lost manufacturing jobs that month as well.

[C]

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[B]

of play yeah, I don't want to dwell too much on like, you know, spiking the football here in terms of I told you so, but I do maybe just want to spend one second on it. There were so many defenders of the administration that said that claimed that the core purpose of these tariffs was to revitalize manufacturing and bring jobs back to America. And it is just a statistical fact that not only is manufacturing in America been made, I think less, less resilient by the tariffs which raised a lot of the input costs for these manufacturers, but also the Bureau of Labor Statistics under Donald Trump says that month after month after month we keep losing more manufacturing jobs. So the criterion of success that was announced for these tariffs has just so completely been missed by the actual instantiation of the tariffs. I do just want to make sure that that people know that wherever they are on the economic or political spectrum here, the tariffs have very clearly, at least in their first 12 to 13 months before the Supreme Court ruling, failed to achieve one of their critical objectives. You mentioned rule of law.

[A]

Jump right in.

[B]

Before we get back to the subject of rule of law.

[A]

Yeah, yeah, yeah. I mean, now you hear a lot about like how much revenue the tariffs are bringing in. And that, by the way, is true. They have brought in a lot of revenue. That wasn't the core goal. The core goal was manufacturing. And in theory, tariffs can help with a sector we want to make more drones in the United States. We put tariffs on drones coming from China. We will have more drone factories in the United States and buy less drones from China. The problem is if you try to do it for every single sector, because the sectors are super interdependent. So you put a tariff on steel, maybe you get more steel jobs, but now steel is more expensive and you get fewer auto jobs. And so the tariffs we're seeing have winners and losers within the manufacturing sector for the sector as a whole. It certainly hasn't been a panacea. That's solving the problems. I think it's probably on net making the problems even worse. That's because it just isn't a tool that can work for the sector as a whole. It can just work for specific parts you choose for really good reasons.

[B]

Yeah. And look, I've done this rant before on the podcast. Maybe this is the last time that I do it. But the US Economy right now is overwhelmingly being driven by one industrial sector that's artificial intelligence. And the AI industry has tens of billions of dollars worth of tariff exemptions. And so one of the funny things I think about the Trump administration's economic policy is that it has one policy, protectionism, high tariffs for the entire manufacturing base that it theoret theoretically wants to revitalize, and a totally different economic policy that very much resembles the neoliberal globalization that it supposedly hates for the AI industry, which is growing by leaps and bounds. I mean, in a weird way, the last 12 months, I think, have served not as a defense of protectionism, but as a kind of very strange explosion of many of the theories behind why protectionism works. The industry that's growing, we have exempted from, from the tariffs kind of feels like the one industry that America's economic stewards take seriously. They don't want to raise input costs by tariffing all of the supply chain parts. So, anyway, end rant. I don't think the tariffs make a lot of sense. I think it's too bad that we're going back to them. And I think the Supreme Court is absolutely right in overruling them. But that's my own pathetic bias. I want to get back to a subject that you raised earlier, which is rule of law. And one story I think, behind the headline story here is Trump's remarkable reliance on executive orders to conduct public policy in areas that were historically performed by the legislative branch. In a way that is core to the Supreme Court's ruling that tariffs are the job of the legislative branch, not the job of the executive branch. If you go back and look at the number of executive orders signed per year by president, here is the list. Ronald Reagan signed 48 executive orders a year according to the American presidency project. George H.W. bush, 42. Clinton 46. George W. Bush 36. Obama 35. Trump won 55. Joe Biden 41. Now that was an electric 20 seconds of podcasting for people who love to hear numbers recited between 30 and 60. But that actually is the point. The point is that the numbers stayed between 30 and 60. Every year of every presidency since the 1980s. Trump, in his first year and month signed 240 executive orders. We have moved toward a world in which policy is being done by the executive branch, even in ways that explicitly. And now we have the Supreme Court ruling unconstitutionally contravene the authorities of the legislative branch. You worked for President Obama. You, I'm sure, understood the frustrations of sometimes having to rely on the slow footed legislative branch to direct policy. But I wonder, both as an economist and someone who's worked in government, how you see this really remarkable shift of public policy from the lawmaking body to the President's signature on a piece of paper in authorizing executive orders.

[A]

Yeah. So first of all, it's important to understand it hasn't gone from 0 under previous presidents to 100 under Donald Trump. Right. It went from something under previous to more. For example, Biden's student loan emergency relief. It may have been good policy, it may have been bad policy. I happen to think it was bad policy. It's pretty hard to think that the law entitled them to give away $500 billion in that way. It just wasn't written that way. And that's what the court said. So I do sometimes think that progressives, I wish it patrolled the principle of congressional authority and lack of presidential overreach rather than just talking about it. Now, that being said, it is much, much worse now than it was before. And I get that and it merits more. Talking about the tariff one is an interesting place because here it is unambiguous that Congress has the power for tariffs. The President doesn't dispute that. The question is, did the Congress pass a law that delegated a choice to the President and the court said no, when it comes to some other things. The Congress has passed laws about how the FTC functions, for example, and when you can and can't fire the head of the ftc, the court may end up ruling on that, that Congress basically wasn't within its rights to pass those laws. That the law itself was unconstitutional. The president is unitary. He can control all the different agencies except the Federal Reserve. They seem to have an exception for that. And so some of these things lend themselves to easier solutions going forward where Congress just takes back its rights. It could pass a law tomorrow saying it's in charge of tariffs again, and there'd be no debate about that. Other things, the unitary executive are trickier because it might take a constitutional amendment or a new Supreme Court to change, which is to say, I don't expect them to change.

[B]

So let's go to the news of the day number two, which is that after Donald Trump checked SCOTUS blog for the 70th time in the last week, he issued a press conference in which he said, I've read the Supreme Court decision. He claimed he read every word of it. But he has a backup plan. He'll issue a new 10% global tariff under Section 122 of the Trade act of 1974. Those words don't mean a whole lot to me. So in language as plain as you possibly can, what is this new tariff plan that we can all look forward to?

[A]

So the original across the board tariff was Richard Nixon in 1971, and it was considered not to have worked out well. So the Congress basically took away the power that Nixon had used, but replaced it with a very limited one, which is the 122 that President Trump invoked today. It says in the case of a serious balance of payments or exchange rate problem, which I personally as an economist don't think is there at all, we've had these trade deficits for decades now. I wish they were a little bit smaller, but they're not anything resembling a crisis. But anyway, President Trump invoked it, pointing to them. My guess is that that's not a totally legally dubious thing, even though as an economist I wouldn't agree with it and don't like it to put in 10% tariffs on every country in the world. Now, what's different about this than IIPA is two things. One is it was capped at 15%. He chose to only do 10%. What that means is that for China, its tariffs are going down because it was under a much higher one before. And the UK Its tariffs are going up because we had negotiated down on the tariffs with the UK So this ends up more. So there's winners and losers in tariff rates for different countries. But then the second thing that's really important here is that Congress in its infinite wisdom, said, in an emergency, the president can use this, but he can Just do it for 150 days and then if it's really bad, Congress will pass a law extending it. And so now around July 20, these new tariffs will expire unless Congress by then passes a law extending them or replacing them with something else. And I'd be willing to bet Congress in an election year is not going to be passing that law.

[B]

So one thing I'm not sure I understand yet, and this news is just a few hours old, but I really want to get a sense of the winners and losers under this new section 122 plan. You mentioned that from a country perspective, a winner is China whose preexisting tariff rate was much higher than 10%. But the losers are countries like the UK whose negotiated tariffs were lower than 10%. Because now everyone is being pushed to that one number. And I'm sure because it's a Trump White House, we're going to have a lot of negotiations forthcoming, a lot of gold bars exchanged in order for countries to get their number down below 10. Is there a way to think about how not just at the country level, but also at the industrial level, at the company level, an across the board 10% tariff will have surprising second order effects? I mean, I mentioned on this show, and I don't know yet how this works, but there are tens of billions of dollars of tariff exemptions for computer parts. Basically anything in the artificial intelligence supply chain system. Do all of those exemptions now go from an effective tariff rate of 0 to an effective tariff rate of 10? And we have to essentially carve out new exemptions, carve new holes into a new Swiss cheese? How at the American industrial level does a new 10% across the board tariff create new winners and losers?

[A]

So once again, the stock answer is we do not know. The law is not supposed to really allow exemptions. This one is not that flexible. It's supposed to be on everything and on every country, but who knows what they'll actually do.

[B]

So just to pause you there, under your understanding, semiconductor chips from Taiwan now have a 10% tariff rate.

[A]

That is my understanding of it. And just to be clear, there's a chance my understanding is wrong and there's a chance they will do something different from what a reasonable understanding is. So I wouldn't go out and bet large amounts of money on that, but that's my understanding. So there are winners and losers here. Like on cars, for example, it looks like the tariff rate will stay about the same because most of the motor vehicle stuff was coming under a different thing called 232 that was not affected by today's decision on energy. Looks like we're going from a tariff of about 1%, maybe up to 5% part because a lot of the energy exporting countries were, weren't seriously affected or had exemptions under the previous, and they don't right now. So you're absolutely right that there'll be all sorts of both country winners and losers, sector winners and losers, and company winners and losers. And some of them we know right now, like China and energy, some of them will depend on the details and what happens over time.

[B]

So, again, I'm just thinking about this out loud right now. Your earlier critique of the tariff regime of the last 12 months, that was just ruled unconstitutional. Your critique of that tariff plan was that it was too overly broad. Rather than protect narrow, specific sectors like American drone manufacturers, we tariffed across the board, which raised the price of steel, which raised the price of manufacturing anything made with steel, including drones. But it sounds like this tariff plan is even more overly broad than the already problematically overly broad tariff plan that it's replacing. Is that an irresponsible interpretation of events?

[A]

It is a little bit lower overall and probably in some things it's better, but definitely in some things it's worse. The time limit is the really important part, that if you can just delay what you're buying until the second half of July, you're not going to have to pay the new 10% tariffs that President Trump. So we're going to once again see all sorts of enormous amounts of shifting in the data, just like we saw as companies imported a lot of stuff in advance of the Liberation Day tariffs. Now they're going to delay their imports in anticipation that these tariffs will go away. So the cost here, I think you should think of more as screwing up your timing. As a company, you'd much rather not be constantly pulling things forward, delaying things, shifting things around. But by doing all of that, you can potentially get around this new set of tariffs. It obviously is its own cost, but I don't think you want to think of that cost as 10%, the tariff rate. You want to think of it as what's the cost of delaying.

[B]

Last piece on the revenue. These tariffs. Love them or hate them, they were raising hundreds of billions of dollars for treasury that desperately needs money. I mean, our deficits are huge, they're growing, our debt is increasing. And this is before I think Medicare and Social Security are going to continue to significantly grow in terms of the amount of money that we need to direct toward them. I had always wondered whether the tariffs were raising so much money that it would be very difficult even for a Democratic president to entirely undo them, because several hundred billions of dollars of a year is just too nice a chunk of revenue to throw out entirely. Do you think that today's decision changes in the long run the durability of tariffs as a part of America's revenue picture? Because if you asked me three months ago, will the Democratic president in the mid-2030s continue to enforce some of the tariffs that just happen to fall out of the Liberation Day project, I would have said, overall, possibly yes, because the U.S. treasury will be so desperate for money and very reluctant to raise taxes on especially the American middle class. Do you think this raises or significantly changes the long term likelihood that tariffs remain in the revenue picture for the

[A]

US I very much agree with your instinct, which is whatever tariffs we have in effect on January 19, 2029, will have a lot of momentum, regardless of who the next president is. Now, maybe they could exempt some really popular consumer items and make a show of that, but the bulk of them, and that's a combination of both the reliance on the revenue that we will have developed by then and also just the reliance that certain industries have built themselves around in that they would face concentrated losses, even if I think the economy as a whole would face diffuse gains that add up to something larger than those losses. So I don't think this changes the political economy of the persistence of tariffs. This does, though, mean that on January 19, 2029, I think we probably will have somewhat lower tariffs than we would have had absent the Supreme Court decision. Not way, way lower, but these other authorities are harder. They're more time limited. Maybe President Trump wants to use this as an excuse. That's not how he sounded after the Supreme Court decision. But he can bluster one day and then quietly let things fade away the next. So I think we'll probably end his term with a little bit less tariffs, but a lot more than we had before his term and a lot of persistence and momentum to whatever it is we do end up with.

[B]

Yeah, I think we'll wrap there. I mean, I definitely strongly believed that in a strange way, and despite the fact that a lot of Democrats immediately came out against the tariffs, I've just thought, man, if tariffs are raising 300 to $400 billion by President AOC's inaugural address in January 2029, it's just going to be so difficult for her to say, no, I want to essentially reduce treasury revenues by another quarter. Of a trillion dollars. That's going to be very, very tough to say given where I think deficits are going to be in the near future. But I don't know so much to look out for. Jason Furman, I appreciate you coming on the show for the emergency pod. Thank you very much.

[A]

Great to be with you.