Trump's Plan B After Trade Court Setback

Summary

Podcast Summary: The Journal – "Trump's Plan B After Trade Court Setback"

Episode Information:

• Title: Trump's Plan B After Trade Court Setback
• Host/Author: The Wall Street Journal & Gimlet
• Release Date: May 30, 2025
• Description: The most important stories about money, business, and power. Hosted by Ryan Knutson and Jessica Mendoza. The Journal is a co-production of Spotify and The Wall Street Journal.

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Introduction

In the May 30, 2025 episode of The Journal, hosts Annie Minoff and James Finelli delve into a significant legal and economic development affecting former President Donald Trump's trade policies. The episode, titled "Trump's Plan B After Trade Court Setback," explores how an obscure New York court's ruling has disrupted Trump's ambitious tariff strategy and outlines the administration's subsequent plans to navigate this setback.

The US Court of International Trade's Ruling

Background of the Court

Annie Minoff opens the discussion by introducing the US Court of International Trade, an often-overlooked judicial body housed in a modest courthouse in Lower Manhattan. James Finelli emphasizes its national jurisdiction over trade disputes, noting its substantial influence despite its obscurity.

• James Finelli [00:22]: “Trade laws I spoke to about this court said that, you know, most people graduating law school had probably never heard of it.”
• Annie Minoff [00:39]: “The court is obscure, but when it comes to matters of trade, it's powerful.”

The Ruling Against Trump's Tariffs

The crux of the episode centers on a landmark ruling where a three-judge panel deemed President Trump's use of the International Emergency Economic Powers Act (IEEPA) to impose sweeping tariffs unconstitutional.

• James Finelli [01:06]: “The trade court ruling is a big deal. That's a big deal. If this ruling stands, then Trump will have to find a new way to impose tariffs.”

The judges concluded that the emergency declared by Trump exceeded the presidential authority granted by the IEEPA, thereby invalidating the broad tariffs imposed on multiple countries.

Trump's Initial Tariff Strategy

Imposition of Tariffs

On April 2, Trump initiated a series of tariffs known as the "Liberation Day tariffs," marking the beginning of a global trade war. The tariffs included:

• 34% on imports from China (in addition to a previously imposed 20% tariff)

• 24% on imports from Japan

• 20% on imports from the European Union

• At least 10% on all other trading partners

• Annie Minoff [02:43]: “On April 2, Trump imposed his Liberation Day tariffs and kicked off a global trade war.”

Rationale Behind the Tariffs

Trump justified the tariffs by citing persistent trade deficits and their detrimental effects on domestic manufacturing and the military supply chain.

• James Finelli [03:52]: “He said that I can impose these sweeping tariffs, like on basically every nation in the world because there's this emergency happening where the US has a trade deficit and it's affecting our supply chain, it's affecting our domestic manufacturing, and it's affecting our military.”

Legal Challenges and the Court's Decision

Formation of the Lawsuit

The administration's tariff strategy quickly faced legal scrutiny, leading to lawsuits from diverse businesses organized by the liberty-focused Liberty Justice Center. The plaintiffs included:

• A New York-based wine importer

• A Pennsylvania fishing tackle retailer

• A women’s cycling apparel brand in Vermont

• A Utah plastic pipe manufacturer

• A Virginia-based maker of educational electronic kits

• James Finelli [05:05]: “There was five in total, including a New York based wine importer...”

Arguments Against the Tariffs

The plaintiffs contended that the IEEPA did not grant the President authority to impose tariffs, a function traditionally reserved for Congress. They also disputed the existence of a genuine national emergency, arguing that chronic trade deficits had long been a persistent issue without constituting an extraordinary threat.

• James Finelli [06:05]: “They argued that the IPA does not grant any kind of ability for the President to impose tariffs...”
• Annie Minoff [06:46]: “The plaintiff's argument was that this wasn't an emergency. There's been a trade deficit for decades, and this definitely wasn't some unusual and extraordinary threat.”

Government's Defense

The Trump administration countered by asserting that the escalating trade deficit had reached a critical point, adversely impacting national security, manufacturing, and the military. They maintained that the IEEPA provided the necessary authority to act unilaterally in addressing these urgent economic threats.

• James Finelli [07:00]: “The government argued that this was an emergency, that in the last five years, the trade deficit had ballooned...”

Court’s Verdict and Immediate Aftermath

Judicial Skepticism

During the hearings, the judges exhibited skepticism towards the administration's stance, questioning the breadth of executive power and the criteria for declaring a national emergency.

• James Finelli [08:08]: “...one of the judges, I think maybe she did it in a tongue in cheek kind of manner. She posed this scenario, what about if there was this shortage of peanut butter?”

Ruling and Reactions

The court ultimately ruled that Trump lacked the authority to impose the tariffs under IEEPA, a decision that prompted immediate backlash from the White House.

• Annie Minoff [08:53]: “The court issued its ruling on Wednesday night. Its verdict, Trump did not have the authority to impose tariffs under the Emergency Economic Powers Act.”
• White House Spokesman [Post-Ruling]: “It is not for unelected judges to decide how to properly address a national emergency.”

The administration swiftly appealed the decision and secured a temporary stay to maintain the tariffs while the case advances through the judicial system.

• James Finelli [09:35]: “I think a lot of legal experts feel like this case is eventually going to end up in the Supreme Court and will be decided there.”

Trump's Plan B: Leveraging the Trade Act of 1974

Introduction to Plan B

Following the setback, the administration has developed an alternative strategy that pivots away from the now-challenged IEEPA, instead utilizing the more established Trade Act of 1974.

• Annie Minoff [12:28]: “But in the meantime, the Trump administration does have a Plan B.”

Components of Plan B

1. Section 122 – Temporary Tariffs

   • Allows the President to impose tariffs for 150 days without the need for a notice-and-comment period.

   • Designed to address balance of payments issues related to trade deficits.

   • Gavin Bade [12:49]: “This is specifically to address what the law calls balance of payment issues with the other countries.”

2. Section 301 – Combatting Unfair Trade Practices

   • Involves a more prolonged process including investigations, hearings, and tailored tariffs for each trading partner.

   • Requires a detailed fact-finding mission and industry consultations.

   • Gavin Bade [13:28]: “The second part is during those 150 days, he would prepare action under a different section of the law. This is section 301...”

Advantages and Challenges

• Advantages:

  • Immediate implementation of tariffs via Section 122.
  • Utilizes a well-established legal framework previously employed by presidents.

• Challenges:

  • Temporary nature of tariffs requires continuous reauthorization.
  • The Section 301 process is time-consuming and resource-intensive.

• Annie Minoff [14:12]: “Oh, man. So you gotta do this individually, country by country.”

Implications for Trade Negotiations and Economic Policy

Impact on Ongoing Negotiations

Gavin Bade, the Trade and Economic Policy Reporter, discusses how this legal turmoil affects the Trump administration's trade negotiations with major partners such as the European Union and China.

• Gavin Bade [10:45]: “The administration has said it doesn't impact them at all. Right. That the trading partners are calling up and still eager to do deals.”

However, discrepancies in the administration’s public statements versus their legal filings indicate potential strains in maintaining effective negotiation leverage.

• Gavin Bade [11:04]: “That contrasts a little bit with their position in court, their actual court filings.”

Economic Uncertainty

The ongoing legal battles and the introduction of Plan B contribute to heightened uncertainty within the U.S. economic landscape, complicating investment decisions and supply chain management for businesses.

• Gavin Bade [14:41]: “I think uncertainty has reigned for... cloudier than ever.”

Conclusion

The episode of The Journal meticulously outlines the significant legal challenges faced by Trump's tariff strategy and the administration's responsive measures to sustain its trade agenda. With the initial court ruling posing a substantial obstacle, the introduction of Plan B under the Trade Act of 1974 represents a strategic pivot aimed at maintaining economic leverage amidst legal constraints. As the situation evolves, the potential Supreme Court involvement and the broader economic implications remain critical areas to watch.

Notable Quotes:

• James Finelli [01:06]: “The trade court ruling is a big deal. That's a big deal.”
• Annie Minoff [06:46]: “The plaintiff's argument was that this wasn't an emergency...”
• Gavin Bade [12:49]: “This is specifically to address what the law calls balance of payment issues...”

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Transcript

[Annie Minoff]

There's a squat, boxy building in New York City, a relatively unimposing courthouse tucked into lower Manhattan. It's called the US Court of International Trade, and you'd be forgiven if you've never heard of it. Neither had our legal reporter, James Finelli.

[James Finelli]

You know what? I had not heard of it until these tariffs and potential legal challenges to them started percolating. Trade laws I spoke to about this court said that, you know, most people graduating law school had probably never heard of it.

[Annie Minoff]

The court is obscure, but when it comes to matters of trade, it's powerful.

[James Finelli]

This court has national jurisdiction, so that means that, you know, it can hear cases all over the country involving any kind of trade dispute. And when they issue a decision, it can affect everything.

[Annie Minoff]

And this week it did.

[James Finelli]

Tonight, a three judge panel ruling that the emergency declared by President Trump to impose those sweeping tariffs, quote, exceeds any tariff authority delegated to the president, one of those judges appointed by the president. The trade court ruling is a big deal. That's a big deal. If this ruling stands, then Trump will have to find a new way to impose tariffs. He wouldn't be able to declare a national emergency and then enact these broad levies around the world.

[Annie Minoff]

Welcome to the Journal, our show about money, business and power. I'm Annie Minoff. It's Friday, May 30th. Coming up on the show, how an obscure court upended Trump's trade agenda.

[James Finelli]

Gender.

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[Annie Minoff]

On April 2, Trump imposed his Liberation Day tariffs and kicked off a global trade war. The president announced goods from every nation we trade with will be subject to import taxes. A 34% tax on imports from China. That's on top of the 20% tariff already imposed. 24% on Japan and 20% on the European Union.

[James Finelli]

He's also announcing 10% at least, tariffs on all countries.

[Annie Minoff]

And then what he's called, how soon after Trump began imposing sweeping tariffs did people in your world, the legal world, start asking, wait a second, can he do that?

[James Finelli]

I think they started asking that question fairly quickly. And the question that they focused on was whether he had the full reach of the Constitution to be allowed to make these sweeping tariffs.

[Annie Minoff]

Typically, Congress regulates tariffs, but in this case, Trump argued that he could do it. His administration invoked a 1970s era law, the International Emergency Economic Powers Act, IPA for short.

[James Finelli]

And he said that I can impose these sweeping tariffs, like on basically every nation in the world because there's this emergency happening where the US Has a trade deficit and it's affecting our supply chain, it's affecting our domestic manufacturing, and it's affecting our military. Chronic trade deficits are no longer merely an economic problem. They're a national emergency that threatens our.

[Annie Minoff]

Security and our very. When President Trump invoked the Emergency Economic Powers act, had we ever seen anything like that before? How new was that?

[James Finelli]

It was brand new. This law had never been used in this way before. No previous president had ever tried to impose tariffs under ieepa.

[Annie Minoff]

It was a first. And the move raised eyebrows. Some academics and legal groups started looking into whether the tariffs could be challenged in court. That led to a few lawsuits, including one brought by a libertarian nonprofit law firm called the Liberty Justice Center. That suit brought together a group of small businesses to sue the government.

[James Finelli]

There was five in total, including a New York based wine importer. There was a fishing tackle retailer in Pennsylvania. There was a women's cycling apparel brand based in Verm, a Utah manufacturer of plastic pipes, and a company called Microkits, which was a Virginia based maker of educational electronic kits.

[Annie Minoff]

That is quite a motley assortment of businesses.

[James Finelli]

Yes, you're right. And they chose those five because I think all those five businesses, they had stuff that they were importing from like over 30 different countries around the world.

[Annie Minoff]

So they could really cover their ground with these five companies.

[James Finelli]

So they could cover their ground. That's right, yes.

[Annie Minoff]

A few weeks ago, James visited the Court of International Trade, that obscure court in Lower Manhattan. He was there to watch as the plaintiffs and the Trump administration made their case before a panel of three judges. And what argument did those five businesses make?

[James Finelli]

The plaintiffs argued that this law, that Trump's use of IEEPA had never been used before by any other president. It was the first time that any president had ever said that I can impose tariffs on another country based on this emergency that I believe is happening. They said that the IPA does not grant any kind of ability for the President to impose tariffs. That's the job of Congress. And Congress created this law. And they argued that there was no language in that law that said that Trump had the ability to impose tariffs.

[Annie Minoff]

The businesses also disputed Trump's claim that the country is in the middle of an emergency.

[James Finelli]

The plaintiff's argument was that this wasn't an emergency. There's been a trade deficit for decades, and this definitely wasn't some unusual and extraordinary threat.

[Annie Minoff]

And what did the government argue in response to that?

[James Finelli]

The government argued that this was an emergency, that in the last five years, the trade deficit had ballooned, and that cumulatively, this was affecting domestic manufacturing and was affecting our military supply chain.

[Annie Minoff]

But there was also a larger argument that the government wanted to make an argument about executive power.

[James Finelli]

The main argument for the Justice Department was that Trump had this power to unilaterally impose these tariffs and that the court had a very limited role in even reviewing his use of that authority. They said that the court didn't have any right to decide whether or not Trump's emergency was a real emergency or not. And that was something that was left up for him to decide and that Congress could potentially review his actions. But it wasn't the court's role.

[Annie Minoff]

That seems like a hard argument to make to a bunch of judges that you have no place here.

[James Finelli]

It's a hard argument to make. And, you know, I think even during some of the hearings, they, you know, were very skeptical of that argument and were even wondering aloud, like, well, what role should the court have? The judges were also a little skeptical about, you know, how do you measure what is a national emergency? And, you know, one of the judges, I think maybe she did it in a tongue in cheek kind of manner. She posed this scenario, what about if there was this shortage of peanut butter? So she wanted to know, like, where the president's, yeah, what's the line between a national emergency and just some kind of inconvenience to some people?

[Annie Minoff]

The government's lawyer responded that AIPA set out clear boundaries for exercising presidential power. The court issued its ruling on Wednesday night. Its verdict, Trump did not have the authority to impose tariffs under the Emergency Economic Powers Act. In response to the ruling, a White House spokesman said it is not for unelected judges to decide how to properly address a national emergency. Lawyers for the Trump administration immediately appealed the court's decision. They also requested a stay that would keep the tariffs in place temporarily. Yesterday they got that stay, which will remain in place as the case works its way through the courts.

[James Finelli]

And I think a lot of legal experts feel like this case is eventually going to end up in the Supreme Court and will be decided there. I would say it has the potential to be a big loss for Trump.

[Annie Minoff]

But in the meantime, the Trump administration does have a Plan B. That plan is after the break.

[Gavin Bade]

So.

[Annie Minoff]

Could you start by introducing yourself?

[Gavin Bade]

Yeah. I'm Gavin Bade. I'm the Trade and Economic policy reporter here at the Wall Street Journal, based in Washington, D.C. so you're not busy at all? Not at all. It's been a quiet start to the year for me. Quiet start to the Trump administration.

[Annie Minoff]

Gavin has been tracking the administration's moves in the aftermath of the International Trade Court's decision. Gavin, the administration is in the middle of trade negotiations right now with the European Union, with China. How could this ruling impact those talks?

[Gavin Bade]

Well, the administration has said it doesn't impact them at all. Right. That the trading partners are calling up and still eager to do deals. We've heard Jamison Greer, the trade representatives.

[James Finelli]

Say that all the other countries I'm dealing with in negotiations are treating this as just kind of a bump in the road rather than any fundamental change. So I feel pretty confident about the case.

[Gavin Bade]

That contrasts a little bit with their position in court, their actual court filings. In their petition for the stay, the administration was very clear that they thought that putting these tariffs on hold would undermine their leverage in all of these trade talks, they said, really jeopardize everything that they were trying to do. So they're kind of talking out of both sides of their mouth here.

[Annie Minoff]

So was the administration right in that court filing? Like, does this decision make it less likely that countries will want to make a deal?

[Gavin Bade]

I do think a number of countries will still be eager to do a deal with the US because maybe they will feel that they have a little more leverage in these negotiations now. And I think that they see that they may have a little bit more time as well. All of these court proceedings kind of throw into question the deadline that Trump had set to complete all of these trade negotiations that was actually on July 9th. So if you're gonna do a deal with the US you just got a little bit more breathing room and you got a little bit of leverage in these negotiations. Maybe Trump can't drive as hard of a bargain as he would have otherwise.

[Annie Minoff]

The Trump administration will continue to pursue the case through the courts. But according to people Gavin's talked to, the administration is also working on a potential plan B. This plan wouldn't rely on IIPA. It would rely on yet another law from the 1970s, the Trade act of 1974.

[Gavin Bade]

It's a different law and actually a much more commonly used law, both by the Trump administration in its first term and numerous presidents. This is a really tried and tested law, and so the plan is kind of twofold. The first part would be utilizing what's called section 122 of the Trade Act.

[Annie Minoff]

This section, the first part of the plan, allows the President to put tariffs in place for 150 days.

[Gavin Bade]

And this is specifically to address what the law calls balance of payment issues with the other countries. This is kind of like the trade deficit that Trump always has.

[Annie Minoff]

The trade imbalance that Trump has been talking about.

[Gavin Bade]

Yeah, that he always harps on, that he's always. That he's always hated. Right. So the advantage of that is that you can put that in place immediately. You don't have to do a notice and comment period. And Trump likes that. He wants to be able to put things in place, wants to move bronze, to move fast.

[Annie Minoff]

The problem, of course, is that those tariffs would be temporary unless they're reauthorized by Congress.

[Gavin Bade]

And so that's where the second part of the plan comes in. The second part is during those 150 days, he would prepare action under a different section of the law. This is section 301, and this is designed to combat unfair trade practices in other nations.

[Annie Minoff]

Trump has actually used this section of the law before. He used it to impose tariffs on China during his first term. But implementing tariffs this way takes time and work.

[Gavin Bade]

You need to do a lengthy notice and comment period. You need to have hearings. And the idea is they would tailor these 301 tariffs as they're called for each and every major trading partner that he wanted to hit with tariffs.

[Annie Minoff]

Oh, man. So you gotta do this individually, country by country.

[Gavin Bade]

Exactly. And it's a lengthy. You have to do a lengthy fact finding investigation. You've got to notify the other countries. You've got to give industries time to comment. It takes a long time, but they could do that. If these emergency tariffs get thrown out in court, that could help them get back to basically the same place where they're at now.

[Annie Minoff]

So, Gavin, where does this all leave Trump's signature economic policy of these sweeping tariffs?

[Gavin Bade]

Very much in limbo now. Right. I think uncertainty has reigned for, for months on this tariff front. I just only, I think it only deepened this week. Right. You know, if you're a company trying to think about, am I going to invest in the U.S. can I get, you know, maybe components that I need from another nation, what is the tariff going to be? That situation is cloudier than ever. The waters are murkier than ever. And I think that you see foreign governments just kind of scratching their head at us. I think it's just, you know, another day rolling with the punches here. We're just trying to, you know, kind of take it as it comes here, but there's. There's really no end to the drama in sight.

[Annie Minoff]

That's all for today. Friday, May 30th. The Journal is a co production of Spotify and the Wall Street Journal. The shows made by Kathryn Brewer, Pia Gadkari, Carlos Garcia, Rachel Humphries, Ryan Knudsen, Sophie Kodner, Matt Kwong, Kate Linebaugh, Colin McNulty, Jessica Mendoza, Laura Morris, Enrique Perez de la Rosa, Sarah Platt, Alan Rodriguez Espinoza, Heather Rogers, Pierce Singhe, Jeevika Verma, Lisa Wang, Katherine Whelan, Tatiana Zemis and me, Annie Minoff. Our engineers are Griffin Tanner, Nathan Singapak and Peter Leonard. Our theme music is by so Wiley. Additional music this week from Katherine Anderson, Peter Leonard, Billy Libby, Nathan Singapak, Haley Shaw, Griffin Tanner and Blue Dot Sessions. Fact checking this week by Kate Gallagher and Mary Mathis. Thanks for listening. See you Monday.