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
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.
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.
Notable Quotes & Memorable Moments
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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.”
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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…”
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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.”
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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.”
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
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.