A (3:30)

We're a little over a year into Trump's second term and a little bit less than a year since Liberation Day last April when he really announced most of these sweeping tariffs. How have these tariffs actually performed? What impact have they had on the economy, as far as we can tell so far?

B (3:44)

Well, first and foremost, I think they've brought in a lot of money to the Treasury. Right. At last count, you know, tariffs as a whole have brought in about 250 billion. Most of that has been through the IPA tariffs. You've also forced up costs for a lot of American businesses, right. And for American consumers. A lot of factory owners saying, I used to get a widget that I use in my factory, I used to get it for less money. Now I have to pass those costs on to consumers.

A (4:13)

Meanwhile, the tariffs don't seem to have created a big incentive for companies to bring manufacturing back to the U.S. according to the Department of Labor, the U.S. lost over 100,000 manufacturing jobs last year. And then there's the trade deficit, the difference between how much the US Buys from other countries versus how much it sells to other countries. Shrinking the trade deficit has been something Trump has been really focused on, but it actually increased in 2025.

B (4:40)

There's a couple reasons for this. One is that many companies were anticipating the tariffs and trying to front run them. So you'll remember that Trump in April, on Liberation Day, said, we're going to put all these tariffs in place. And then after a bunch of stock market upheaval, bond market upheaval, he paused them for a long time. And so when he paused those tariffs, a lot of companies tried to bring in as much as they could, fill their warehouses so they wouldn't have to pay tariffs in the future. That really ballooned the trade deficit in a few months of 2025. Then after the tariffs got in place, you saw that trade deficit narrow a little bit, but you still saw more than US importing less. What happened instead is that we just switched the places that we were importing from.

A (5:22)

US Businesses switched to other countries with lower tariffs or they'd been part of new trade deals.

B (5:27)

So we had very high tariffs on China For a number of months last year, our imports from China dropped But our imports from India, from Southeast Asia, from other nations actually grew.

A (5:38)

Despite the mixed economic record, tariffs have played a big role in Trump's foreign policy.

B (5:45)

Trump has used this tariff authority to threaten other nations over a variety of issues. Right. It could be a trade issue. It could be something like, I want control of Greenland, so I'm going to threaten tariffs on the European Union, every one of those. He was using this legal authority under the International Emergency Economic Powers Act. He used it because it allowed him to impose tariffs very, very quickly and really at the drop of a hat, whenever he wanted to.

A (6:12)

So in other words, it's not just the economy that hinges on this. It's so many other aspects of Trump's foreign policy that hinge on his ability to use tariffs as a bludgeon.

B (6:21)

Absolutely. I mean, he and his team would say, you know, we've used tariffs to not only get trade deals with other nations. Right. There was one sign with Indonesia yester, and then he's also said, oh, I use tariffs to prevent wars. You know, whether or not that is true in every case, tariffs are a hammer, and every single international issue is a nail to Trump. He's used them for just about everything.

A (6:43)

The law Trump used to justify most of his tariffs, ieba, doesn't specifically mention the word tariff, but it gives the President broad power over foreign imports during emergencies. The Trump administration cited the trade deficit and the fentanyl epidemic as emergencies under the law.

B (7:00)

And they said, well, if you read the IEPA statute, it allows you to regulate imports, it allows you to issue licensing fees. And so although it doesn't say tariff in particular, well, you know, it allows us to do all these other things that should allow us to use tariffs as well. The Supreme Court said, not exactly correct.

A (7:25)

In a 6 to 3 vote, the Supreme Court said that interpretation was wrong. There are plenty of laws that give the President explicit power to impose tariffs, but not this one.

B (7:36)

You can regulate imports, you can put on licensing fees, you can even have an all out blockade of certain imports and, you know, limit them completely, but it does not say tariff. And so that's, you know, the Supreme Court got hung up on that, you know, pretty important distinction there. And they said, you can't, you know, if it doesn't say that, we can't write it into the statute completely.

A (7:56)

Chief Justice John Roberts also wrote in the majority opinion that the power to impose tariffs, a type of tax, rests squarely with Congress.

B (8:05)

If Congress was going to give away that authority to the executive branch, it would have had to state it Very explicitly. And they said, this is just not the case. They did not explicitly give away tariffing authority to the executive branch with this law. If they were to do that, it would have to be, you know, clear as day. It wouldn't be that they. Oh, they didn't write in tariff, but they meant tariff. It wouldn't be an oblique mention.

A (8:31)

And does that leave any of Trump's tariffs intact?

B (8:34)

Yes, absolutely. When you think about the tariffs on specific industries, the tariffs on steel and aluminum products, for instance, on cars and car parts, on trucks, on lumber, all of these things were promulgated under what's called Section 232. It's a much more often used, much more durable and familiar earlier statute. All of those are going to stay in place. So, you know, the tariffs on steel and aluminum and products made out of them, those are still in place. The ones on cars and trucks still in place, lumber, et cetera. And there are a number of other investigations that are still being worked through by the Trump administration under this law. So none of those are going away.

A (9:15)

The three justices that dissented in today's ruling were Clarence Thomas, Samuel Alito, and Brett Kavanaugh.

B (9:22)

Kavanaugh, who has been very deferential to presidential powers, saying, well, I think they should have this authority. It's under emergency authorities.

A (9:30)

Kavanaugh wrote in his dissent that, quote, tariffs are a traditional and common tool to regulate importation, end quote. He said, AIPA allows the president to impose tariffs more efficiently.

B (9:40)

Basically, he has a more expansive view of what the executive branch should be able to do with economic powers. So not entirely surprising that the justices who dissented decided to do that in this case.

A (9:54)

A few hours after the court's ruling, Trump slammed the decision at a press conference.

D (9:59)

The Supreme Court's ruling on tariffs is deeply disappointing, and I'm ashamed of certain members of the court, absolutely ashamed, for not having the courage to do what's right for our country.

A (10:15)

Then Trump laid out his new plan for how to keep the tariffs in place. That's next. The Supreme Court has ruled that these tariffs are illegal. So what happens to all the tariff money that's already been collected?

B (10:39)

So this is a big, open question. The majority opinion does not explicitly address the issue of refunds. Right. Typically, in a smaller tariff case, if the government, you know, take some tariff money from a company and then it's, you know, ruled that it was improper to do so, there's a whole process that you go through with customs to get that tariff money back. Those processes are probably not adequate for Just this scale for hundreds of billions of dollars of tariff revenue that's come in.

A (11:06)

Gavin says that a more likely scenario, though it's still unclear, is that the government could set up some kind of online portal where companies can submit a claim for a refund. By not addressing the question directly, the Supreme Court effectively punted the issue back to a lower court. Is it possible that this lower court might just say, you know what? Water under the bridge, we're not gonna make anybody repay this stuff, but it's just illegal going forward?

B (11:29)

I would be surprised if that were the case, just because there's obvious material harm that these companies can show. And there have been thousands of claims already filed in court by these companies. They've preemptively gone and filed in federal court and said, if this decision comes down, I want just lodge my claim for a refund now because I've been materially harmed by this.

A (11:52)

And a lot of companies raise their prices as a result of these tariffs and pass those costs onto consumers. So if they end up getting a refund for those tariffs, I suspect they're not going to pass that on to consumers. So it could end up being a pretty nice payday for corporate America.

B (12:06)

Exactly. Really, it could be a pretty big windfall for a lot of firms because if you think about it, they have adjust their pricing to react to these tariffs. And now if we get all that tariff money back, they probably won't adjust their prices downward.

A (12:23)

The Trump administration knew it was possible the Supreme Court could rule this way. So it's been working on a backup plan. Here's Trump during his press conference today.

D (12:32)

So we can use other of the statutes, other of the tariff authorities, which have also been confirmed and are fully allowed.

A (12:44)

Trump said the US would impose a new 10% across the board tariff, leaning on a different section of US US trade law, Section 122, that allows for

B (12:54)

tariffs up to 15% for up to 150 days and that laws to address persistent trade imbalances. So the type of trade deficit issues that Trump doesn't like, he could instantly put these tariffs in place under section 122, up to 15%, up to 150 days. That is what is going to happen in the short term is just to reconstitute some of these tariffs, just put that in really quickly. And then in those 150 days, you use that time to issue new tariff investigations under more lasting legal authorities.

A (13:29)

More lasting legal authorities, like Section 301 of U.S. trade law. That section lets the president use Tariffs to address discriminatory practices from other countries. Trump said that's what his administration would use to justify additional tariffs now.

D (13:44)

And we're also initiating several Section 301 and other investigations to protect our country from unfair trading practices of other countries and companies.

A (13:57)

The Trump administration used this justification for tariffs on China during Trump's first term.

B (14:02)

There was never any real legal jeopardy for that because it's such a well established portion of trade law. It just takes a lot longer.

A (14:10)

Trump said existing laws will allow him to keep his entire tariff regime in place. It could just be a bit more complicated to implement.

D (14:17)

It's a little bit longer process. I thought I'd make things simple, but they didn't let us do that. I would like to thank.

A (14:31)

Why not just go to Congress, which is right now controlled by Republicans in the House and Senate, to pass a law that gives the President all the power he wants?

B (14:40)

Ideally, I think they would love to pass a law that gave them the AIP of tariff authority explicitly. I don't think you can see that pass Congress right now, though, because a

A (14:48)

lot of Republicans are pretty wary of these tariff policies.

B (14:52)

Yeah. Even if Republicans aren't willing to pop their head up and say that they don't like the tariffs, a lot of them do. Not a lot of their constituents are being hurt by this. Remember, we saw both chambers of Congress have separately taken votes against at least some of Trump's tariffs. Right. Just a couple weeks ago, the House voted a disapproval resolution on Trump's IPA tariffs on Canada. And that was, you know, Republican controlled House. So there's not a lot of appetite in Congress to go and legislate these things, especially in election year when your opponent's going to be able to hit you over the head for increasing prices to consumers if you voted for those tariffs. So, yeah, it's a theoretical option, but probably not a practical one.

A (15:32)

If there's skepticism in Congress, if tariffs are not having much impact on the trade deficit, if there are studies saying that it's raising prices for businesses and consumers, and now the Supreme Court says the way it's been implemented is illegal, why not just back away from this tariff policy entirely?

B (15:50)

I think in a way, they've been doing that in fits and starts already. Right. We've seen in the last few months, Trump has really carved a lot of holes, a lot of exemptions in these IPA tariffs. You know, when he enters into a new trade agreement with another nation, he often will exempt many of their products from tariffs. Right. Just yesterday we signed a trade deal with Indonesia, a lot of their farm goods, like, you know, coconut oil, palm oil, those will be able to come in under duty free, no tariffs under this new deal. So they've already been pushing those back a little bit, but I don't think that you'll see them just throw up their hands and say, we're not doing tariffs anymore. Right. They're going to reinstitute most of these tariffs. They want the revenue from it. They want to have the political symbolism of sticking up for US Manufacturers and US Workers. But I do think you'll find that they're not going to be quite as aggressive as they were before. And yeah, there may be a few more holes in this tariff regime as they try to reconstitute it.

A (16:48)

Even if Trump is able to reimpose all of his tariffs, it's unlikely that his new justification will give him as much power as AIPA did.

B (16:56)

Using IIPA for tariffs was really a silver bullet for the Trump administration. It allowed them to impose these things at a drop of a hat. It allowed them really unilateral authority over access to the US Market, which is just such a prized thing for every country in the world. Right. And so I'm going to be very interested to see not just how they react economically, but how do they react to having their power constrained in a very big way. How do they react to an outside institution saying, you can't do that, your power is actually constrained? I think it's going to be very interesting and I don't think it will make them recede. I'll just be interested to see how they do that.

A (17:49)

That's all for today. Friday, february 20 the journal is a co production of Spotify and the wall street journal. The show is made by kathryn brewer, victoria dominguez, pia gadkari, isabella japal, sophie codner, matt kwong, colin mcnulty, jessica mendoza, annie minoff, laura morris, enrique perez de la rosa, sarah platt, allen rodriguez espinosa, heather rogers, piers singhy, jeevika verma, lisa wang, catherine whalen, tatiana zamis and me, ryan knudson. Our engineers are griffin tanner, nathan singapak and peter leonard. Our theme music is by so wiley. Additional music this week from peter leonard, billy libby, nathan singapok, so wiley and blue dot sessions. Fact checking this week by mary mathis. Thanks for listening. See you Monday.

E (18:53)

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