Prof G Markets: Federal Appeals Court Strikes Down Trump’s Tariffs & De Minimis Loophole is Closed

Date: September 2, 2025
Hosts: Ed Elson & Scott Galloway (Prof G), with interviews featuring Prof. David Gantz (Univ. of Arizona) & Prof. Amit Khandiwal (Yale)

Episode Overview

This episode dives into two major developments shaking the capital markets:

1. A federal appeals court ruling invalidating many of Trump’s trade tariffs—with a discussion of the broad powers (and limitations) of the President under the International Emergency Economic Powers Act (IEEPA), implications for future policy, and the likely Supreme Court showdown.
2. The closure of the “de minimis” import tax loophole—which previously allowed most sub-$800 foreign shipments into the US duty-free. The hosts analyze the loophole’s growth, the implications for low-income Americans and eCommerce giants, and the complicated connection to forced labor concerns in China.

With their trademark candor, the hosts dissect the real-world consequences for American consumers, big business, and the broader economy.

Key Discussion Points & Insights

U.S. Federal Appeals Court: Trump’s Tariffs Declared Illegal

[01:54-15:47]

• Background & Immediate Impact

  • Trump imposed sweeping tariffs under IEEPA, arguing “trade deficits” and fentanyl constituted “extraordinary threats.”
  • The appeals court affirmed these tariffs overstepped presidential authority; IEEPA’s use for tariffs is historically unprecedented.
  • Tariffs remain in place pending the Supreme Court’s review—decision expected after October 14.

• Prof. Ed Elson on Precedent & Emergency Powers

  • The “unusual and extraordinary threat” language was stretched to justify tariffs out of line with historical use, which was “to restrict financial transactions [...] with specific countries” (10:27).
  • Historically, presidents used IEEPA to freeze assets or block certain transfers, not to impose tariffs unilaterally on global trade.

• Legal Analysis: David Gantz, Univ. of Arizona

  • “The International Emergency Economic Powers act essentially says presidents can regulate the importation of goods... It does not say you can use tariffs, but it doesn't say you can't use tariffs either. So the judges have to struggle with how broad this delegation of power... actually is.” [05:01]
  • Gantz predicts the Supreme Court might side with Trump, given the Court’s Republican tilt and the historically broad “delegation” of power to presidents.
    • “I think it's very likely... they will find a basis, perhaps in the dissent, to say to Mr. Trump, yes, you can go ahead with the tariffs on this basis.” [07:32]
  • Regardless of a IEEPA ruling, the Trump administration is likely to find alternative statutory grounds to maintain tariffs on most global imports.
    • “During all, or almost all, of that period, there will still be substantial tariffs… unless the IEEPA is thrown out. They will find other grounds to do what I think they want to do.” [09:24]

• Implications for Congressional Power

  • Elson emphasizes the philosophical stakes, quoting James Madison:
    • “The power of the purse is the most complete and effectual weapon with which any constitution can arm the immediate representatives of the people.” [13:28]
    • “Congress alone has access to the pockets of the people.” [14:50]
  • Current tariffs function as a tax on American consumers (over 15% “effective tariff rate”), with 61% national disapproval.
  • Elson suggests the principle at stake: taxation—especially on this massive scale—should require Congressional (not unilateral Executive) consent.

The End of the De Minimis Loophole

[17:21-23:46]

• What Was the De Minimis Loophole?

  • Exempted goods under $800 from import duties with little inspection, a policy dating back to the 1930s.
  • Became a prime channel for eCommerce, with much exploitation by Chinese platforms (Shein, Temu).
    • 1.5 billion packages in 2024; 60% from China, half from Shein and Temu.

• Trump’s Executive Order & New Policy

  • Loophole first closed for China/Hong Kong in May, then globally in July; full effect as of this episode.
  • Elson notes moral arguments (“forced labor” links to Xinjiang) and national security claims (drug imports), but underscores broad economic consequences.

• Impact on US Households: Prof. Amit Khandiwal, Yale

  • “Lower income households in particular will be hit harder than richer households... lower income households disproportionately spend more, as a share of their income, on goods that enter through the de minimis channel... poorer households seem to be purchasing relatively more goods from China...” [20:20]
  • De minimis shipments account for 73% of packages to poor zip codes vs. 52% to richer ones; 48% of poor zip de minimis imports are from China (vs. 22% for rich).
  • Removal of exemption acts as a regressive tax, burdening low-income Americans the most.

• Debate Over Targeted Policy vs. Blanket Ban

  • “I think the question we want to think about from a policy design is, is the exemption the best way to address both of those two concerns [forced labor, drugs]?... Do we want to eliminate the de minimis exemption completely or do we want more direct targeting?” [21:55]
  • Khandiwal: A surgical approach (stepped-up enforcement/auditing) might fight illicit goods more effectively than a blanket policy harming all consumers.

Notable Quotes & Memorable Moments

“The idea of saying the world is screwing us, no one in particular, just the world in general, so we're going to tariff the world—at a certain point, if that's your definition of an emergency, well, then the word starts to lose its meaning.”
— Ed Elson, [11:48]

“Congress alone has access to the pockets of the people.”
— James Madison (quoted by Ed Elson), [14:50]

“During all or almost all of that period, there will still be substantial tariffs being imposed on foreign imports from many, many, or if not most countries on various legal grounds, and thus the IEEPA is thrown out. They will find other grounds to do what I think they want to do.”
— David Gantz, [09:24]

“The days of buying $4 sunglasses from Shenzhen with free shipping, the days of buying a $10 dress from Shein or a $10 hoodie off of Temu, those days are over.”
— Ed Elson, [23:46]

Timestamps for Key Segments

• [01:54] – US Market Recap & Tariffs Legal History
• [05:01] – Interview: Prof. David Gantz on IEEPA & Tariffs Future
• [10:25] – Precedent-setting nature of the appeals court decision and Congressional “power of the purse”
• [13:28]/[14:50] – James Madison quotes on taxes and Congressional authority
• [17:21] – De Minimis loophole explained; eCommerce impact
• [20:20] – Interview: Prof. Amit Khandiwal on economic impact and regressive tax consequences
• [23:46] – Wrap-up: Winners, losers, and the future for consumers

Tone & Style

• Analytical, slightly irreverent, data-driven, candid, and occasionally wry—consistent with Prof G’s signature “No Mercy / No Malice” style.
• Emphasis on real-world effects and policy nuance; persistent questioning of the wisdom and justice of regulatory moves.

Takeaways

• The landmark court decision challenges the limits of US presidential trade authority—Supreme Court involvement expected.
• The closure of the de minimis loophole aims to curb abuses but will disproportionately raise costs for low-income Americans.
• Large US retailers (Amazon, Walmart) likely to gain at the expense of fast-fashion upstarts and millions of price-conscious shoppers.
• Both issues raise deeper questions about the balance of power in American governance, the politics of consumerism, and the social costs of global trade policy.

For listeners seeking an in-depth breakdown of complex market-moving news, this episode delivers expert interviews, sharp historical context, and a clear-eyed look at who ultimately wins and loses in the battle over tariffs and trade.