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- [00:01]
Benjamin Wittes
The following podcast contains advertising to access an ad free version of the Lawfare Podcast. Become a material supporter of lawfare@patreon.com lawfare that's patreon.com Lawfair also check out Lawfare's other podcast offerings, Rational Security Chatter, Lawfare no Bull and the Aftermath hey there Lawfare listeners. Editor in Chief Benjamin Wittes here with a quick favor to ask. We want to hear from you to make Lawfare as insightful and engaging as possible. Whether you read our in depth national security, law and policy analysis, listen to our podcasts, watch our live streams, whether you're an occasional reader or or a true super fan, your feedback is essential to helping us improve. We've put together a short audience survey and while we know you're busy, we'd really appreciate it if you could take just a few minutes to fill it out. You'll find it@lawfaremedia.org survey and in the show notes of this episode. Your input helps us understand what's working, what's not working, what you want more of, what you want less of, and how we can better serve you. So when you have a moment, please visit lawfairmedia.org survey and let us know what matters most to you. Thanks for your support. And now on to today's show.
- [01:40]
Ryan Reynolds
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- [02:03]
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- [03:06]
Scott R. Andersen
So we're talking about several different delegations of authority from Congress to give the President the power to raise tariffs when the national interest or national security so require. These are largely Cold War geared delegations. And now coming back with a vengeance.
- [03:26]
Kathleen Clausen
It'S the lawfare podcast. I'm Senior editor Scott R. Andersen with Kathleen Clausen, professor of Law at the Georgetown University Law center and Peter Harrell, a contributing editor here at lawfare and non resident fellow at the Carnegie Endowment for International Peace.
- [03:40]
Ryan Reynolds
Either the tariff provides him leverage and the foreign counterparty caves and gives them what he wants and that's obviously a win, or if it doesn't get the foreign counterparty to cave, he gets tariff revenue. And we know he's interested in tariff revenue.
- [03:55]
Kathleen Clausen
Today we're talking about President Trump's tariffs and the law. So we are coming off of what probably I would guess for people who follow tariffs, international economic law and policy like yourselves has been a pretty busy month. Even somebody who only casually follows these developments, like myself, has noted a lot of things things happening in a very tight time frame. This has been true across the Trump administration for its first month in office, but no less true in the trade space. Here's a couple of developments I've been tracking just to lay them out there for listeners who may not be as on top of it that jump out at me as the big items. So January 26th we saw a spat pop up with Colombia over flights of migrants where the President leveled briefly or threatened to level AIPA based tariffs as part of a bigger package of sanctions that quickly got a concession. That was kind of the first salvo that I can recall of tariff actions. February 1st we had set of IPA based tariffs leveled against Canada, China and Mexico. Canada and Mexico delayed for 30 days after some quick negotiations concessions. China rolled in a few days later. So we now have a new set of tariffs against China based on that on top of preexisting ones. February 10th we got announcement of expansion of a different type of tariffs on steel and aluminum imports that goes into effect later this coming month, I think on March 12, if I recall. February 13 we see a request for the set of recommendations for reciprocal tariffs or tariffs in response to unfair trade and taxation practices. That report's due on April 1st. February 14th we saw an announcement of tariffs on automobiles, semiconductors, pharmaceuticals of up to 25% that are set to kick in on April 2nd. And then just this past week I Am told there's a whole set of talks about Chinese ships and a whole separate potential set of terrorist authorities that I have just not had the opportunity to even wrap my head around to really dig into. So there's a lot going on in this space for just 30 days, the first 30 days of Trump 2.0. Peter, let me start with you with this first question, just to orient us. How exceptional is this set of actions? How big a departure is this from the trend we saw from Trump 1.0 and the Biden administration and maybe the longer trajectory of US policy as well? Tariffs were a reality under Trump 1.0. The Biden administration kept a number in place, kept some continuity there. Is this a continuation of that trajectory or are we now turning in a new direction as well on top of that?
- [06:14]
Ryan Reynolds
So I think we are seeing a really quite significant acceleration of the kinds of tariffs that Trump implemented during his first term. I think what we've seen him here in term two is both move much more quickly to begin implementing tariffs and then also, at the very least, threaten much broader tariffs than he implemented in during his first term. I mean, you know, he did, he did run for his second term, promising that he would be even more of a tariff man and, you know, calling tariff the most beautiful word the English language and that kind of thing. And he, I think, is trying to deliver on those campaign commitments. But just to put it a little bit in perspective, if you look at what he actually did in term one, so he imposed tariffs on maybe two thirds or so of US Imports from China. But but it actually took him about a year and a half, really two years for most of those tariffs to come into force. It was not something that he did kind of on day one. And he brought him into force over a period of time and kind of a stay in stages this time around. He's just imposed additional 10% tariffs on China within a first couple of weeks of being in office. During his first term, he imposed 25% tariffs on steel and 10% on aluminum. But he also cut some deals with various countries. So like kind of deal with Mexico, cut a deal with Argentina. He's now brought those back both at a higher rate. It's 25% on both metals, not just on steel. And he's eliminated all the deals. Now questions about will he, you know, strike some new deals on that. But, you know, at least sort of in posture, he's done more. And then he's, you know, threatened tariffs not just on Canada, Mexico over fentanyl, but like a really sweeping range of tariffs that you've talked about on a whole bunch of other countries as he gets into into negotiations. So I, I think that, you know, we are seeing tariffs that are much more extensive both in, in kind of the number of, of of countries are targeted at and also in terms of the product set that he seems to be keen to target target. And the one, the one cautionary note I would say is that while all signs point towards really substantially more tariffs than we saw in first term, he is a negotiator. We, we can't rule out deals. You know, we saw that already with his like 25% tariffs on Canada me getting postponed for a month. That month now is expiring. So we'll see where this goes. But you know, we don't, we don't quite know where it is, but all signs point to more. I also just want to want to say it is not only quite different from what he did during term one, it is also just a, and I mean really, Kathleen should should comment on this more. It is a really dramatic change from many decades of U.S. tariffs. I mean, you just store the story of U.S. tariffs by and large had been a downward trajectory over 30 years or more prior to Trump term one. And we now seem to be moving towards a solid the trajectory of tariff seems to be up. And the only question is, is it up very quickly and very broadly or is it only up a little bit?
- [09:20]
Kathleen Clausen
Well, Kathleen, let me take Peter's invitation there to pull you in on this exact point, because the recent turn in this, you can see some elements of continuity. The ship of state turns slowly and we've seen a shift towards tariffs really since Trump 1.0, and maybe you could even say a little bit before that. But it's coming on decades of a period where tariff was in a lot of ways a bit of an anathema concept. I think growing up in the heydays of kind of American neoliberalism being the dominant economic political view, I definitely was trained and came to understand tariff as a bad thing, a failed set of policies. And we're seeing a little bit obviously of a bit of an evaluation. How dramatic is that shift in the broader view of American policy and the way America has tried to build the architecture for policy around the world? Because of course it for a long time a leading proponent of eliminating trade barriers, and now we're seeing it use them in a very strategic fashion.
- [10:14]
Scott R. Andersen
That's right. No, I think you hit the nail on the head there, Scott, in terms of the leadership role that the United States played in both the setting up of the World Trade organization in the 90s and then really taking the lead in big free trade agreements, 90s and early 2000s. As we all know, the Trans Pacific Partnership Agreement was the last of those big ones. And that really made the news prior to the renegotiation of the nafta. So that was sort of the, maybe the beginning of the fall, as you put it. But to Peter's point and to what both you both said, what we saw immediately, pretty immediately, right in the beginning of the first Trump term, was this rediscovery of these tariff tools, tools that they didn't invent, tools that they didn't come up with. Right. But that have been on the books for a long time, just as you suggested in your question. They've been dormant. They really haven't been used. So we're talking about several different delegations of authority from Congress to give the President the power to raise tariffs when the national interest or national security so require. These are largely Cold War year delegations and now coming back with a vengeance.
- [11:26]
Kathleen Clausen
So this question of these dormant authorities is one of the most interesting parts of this. Cause we hear of the media talk about tariffs as tariffs. They don't differentiate the fact that we have at least half a dozen different types of tariffs that are in play at this point. The biggest divide that I think gets the most conversation, in part because of some work Peter has published with us at Lawfare and some other commentary we have coming out, is this divide between IPA tariffs and statutory tariffs, the kind of three number tariff authorities. But even in that statutory bucket, it's a whole array of different ways we think about how to approach tariffs, where Congress has laid out different approaches and different shapes of delegations. Break that down for us. Kathleen, talk to us about these three number authorities, which ones come into play, which ones we see are most important, and, and the terrain that they presented before we even pull in this IPA question, which has become a more recent phenomena.
- [12:17]
Scott R. Andersen
Sure. Well, the IPA and what we call the three digit tariffs, they do have one main thing in common that I alluded to a moment ago, which is that they all turn on some determination of a finding by the President or by an agency, and that distinction will be important in our later discussion. But a finding that there's a threat to US national security, a threat to US Commerce, to the US Economy, some sort of burden or unfairness. Right. So that we've been wronged. We've been wronged and there's a problem, and we need to respond. And so if you look at the history of these delegations, as I said before, they were created at a time to give the President the ability to incrementally add, or maybe we might say temporarily add tariffs when necessary to address those threats. So that's what they all have in common. Now, as you point out, they have slightly different rationales and slightly different processes. So the ones that are very familiar to many people, those ones for steel and aluminum, come under Section 232 of the Trade Expansion act of 1962, which really expressly says that these imports of steel and aluminum must be a threat to our national security. So we have to do something about them. Right, but, but the other one, for example, that is commonly known as Section 301 of the Trade act of 1970, which is framed in a less aggressive way right there, the delegation is if there's an act, policy or practice by a country that's unreasonable or discriminatory, that's unfair to US Commerce, then again, the president may act. So sometimes they're framed in terms of a country doing something bad and we need to respond. Sometimes they're framed in terms of a product being a threat to our products in some way, and we need to respond to that. But overall, that's the theme. And as you mentioned, there are good half dozen. There are more than that out there, but a good half dozen that have certainly been on the table that the president called out in his Day One memo on an America first trade policy where he said, I want these investigations to get going. And that was really the first out of the gate. I think a number of people thought on day one we'd actually see tariffs imposed on these bases. But instead, he sent out the call for investigations by the agencies that are named in these delegations to begin the work to set up the foundation for potential tariffs down the road.
- [14:48]
Kathleen Clausen
So it's very interesting because we know tariffs have been on the menu for a long time for the incoming Trump administration. It's always something that's talked about, something discussed in the campaign trail. Like you said, day one coming in, we saw discussion of these authorities, but nothing kind of rolled out immediately. And then we see the first set of tools that President Trump turns to is not the existing tariff authorities, but the International Emergency Economic Powers act, that is IPA, the 1977 law that I mentioned by short before. Though not everyone listener, I suspect, knows it, although this being lawfare, many of you probably do. Peter, you wrote a phenomenally useful piece for us breaking down the use of IEEPA for tariffs, I think that really highlighted usefully both the reasons why President Trump might like using IPA versus the other tariff authorities, the comparative advantages it provides in certain regards, but also some of the legal risks that it entails. Talk to us a little bit about why has the President turned IPA and what are the potential costs and risks that come with that.
- [15:46]
Ryan Reynolds
So iipa, not something that we've historically thought about as a tariff statute. Its origins are really as an emergency statute passed in 1977 as sort of a part of a package of post Watergate reforms to various presidential emergency powers. And the idea in IIPA was when it was enacted was essentially that when there is an emergency in international relations, whether it's a national security emergency, like a war, you know, something like that, or whether it is a, an economic emergency, the President should have some fairly broad authorities in order to respond to that emergency. So basically, you know, it's been used more than 60 times since it was passed for sanctions purposes. It's also been used for a variety of other purposes, not all of which over the years have been for emergencies. So, for example, for, oh, I guess about 20 years, when Congress let the US export control statutory regime lapse, DIEPA was actually used as legal basis of the, the export controls regime. And the Biden administration also used it somewhat creatively, for example, to impose limitations on Chinese Internet connected cars here in the US because of security risks and also to restrict bulk data transfers to China. So it was originally an emergency statute. It kind of evolved away from an emergency use, but is still, until Trump came along, been used principally for sort of national security purposes. You know, where there is some foreign adversary issue that a President's dealing with. Trump used it as the basis for the 10% tariffs that are currently in force on China, which are allegedly around or the stated reason for which is China's involvement in America's fentanyl crisis. And then he had also used it as the basis for the 25% tariffs that were going to be imposed on Canadian and Mexican imports, basically all imports from Canada and Mexico, but that which he then suspended before those tariffs came into force for, for a month to, to do negotiations. That basis, a sort of stated basis for those tariffs also being to deal with the fentanyl and migration crises that the President has declared on the southern border and with the Canada tariff. He also declared an emergency on the northern border related to fentanyl. As I argued a couple of weeks ago, actually before the executive orders were out that I think there are a number. A, IP has never been used for tariffs, and B, I think there are a number of reasons in the history and structure of the. The statute that mean iipa, in my view, does not grant the president tariff authority. It actually would let him prohibit imports and prohibit exports. It's been used that way many times as part of sanctions. But. But because it's an emergency statute at its core, because of some of the history of it, I don't think Congress, certainly they didn't intend it as a grant of tariff authority, and I think it should be read not to include a grant of tariff authority now that we actually have the executive orders out. I think particularly with respect to the Canadian tariffs, there are probably a number of other arguments you could make with respect to whether that is a valid use of ipa, given the nature of, of the emergency that is declared. I should say, you know, this is my view, it's not been litigated. I think there will be litigated, particularly if, if he does use it to bring tariffs in on Canada in Mexico. I feel fairly confident at that point, industry will challenge it and there will be arguments on the other side and it'll be quite interesting to those of us in the legal community to see how this, this plays out. The final point, what's interesting to me about his use of aipa, there are many things that are interesting about his use of AIPA is that he doesn't have to. I mean, as Kathleen talked about, there are many other statutes that he could use, almost without legal question, to impose tariffs even on a close ally like Canada or, or Mexico. I think the reason he doesn't want to use those is that those other legal authorities would generally require either the U.S. trade Representative or the Commerce Department to undertake a kind of. Of factually driven investigation, you know, into an unfair Canadian trade practice or into the national security implications of, you know, U.S. imports of automobiles or something like that, and then would have to subject the response to the findings of that national security investigation, maybe proposes tariffs as a response, but he then have to subject the response also to notice and comment, at least some chance for public input. Whereas historically, ipa, you know, simply requires a presidential declaration and then provides wide authority for implementation. So I think he likes the flexibility it gives him that these other statutes would, although ultimately actually give him quite a bit of flexibility, impose a bunch of procedural checks and hurdles that I don't think he and his administration have wanted to have to deal with.
- [20:48]
Kathleen Clausen
And let me ask one question, a slight tangent from a very closely focused tariffs conversation. But on a related question on this, in addition to separate free for using tariffs in a number of cases here, Colombia being the most notable, but also ideally Mexico, Canada, China, the president is using tariffs as a tool, a type of sanction to try and drive a political outcome. Is there a reason why he seems inclined to use tariffs as opposed to economic sanctions or other sorts of means of economic coercion that you could use IEEPA for in a lot of these contexts where other administrations have used that tool somewhat more commonly? Why the tariff application of IEPA versus other potential applications of IPA that we see that are a little more established in past executive branch practice?
- [21:33]
Ryan Reynolds
So I see two answers to that. First, I think with respect, particularly to country like Canada, and you just, you look at Trump's own comments about his concerns on Canada and I think there's, you know, a lot of evidence that his citing the fentanyl crisis and wanting to use these tariffs for negotiation over the fentanyl crisis is actually just protectual for a bunch of trade concerns that he has long had. Right. I mean, he's even said on social media that in order to get an extension of the current kind of tariff ceasefire with Canada, he wants a comprehensive economic agreement or something like that. Right. So I think there is an element of he may be engaging in some protection use of this here. But I think beyond that, I do think, you know, it's interesting. I mean, Trump actually, when he campaigned, he both campaigned on tariffs, talked up tariffs and he actually had several points throughout the campaign said he thinks we're overusing, the US Is overusing sanctions and maybe there'll be long term ramifications from overuse of sanctions, which is interesting given he during his first term used sanctions quite aggressively as well as tariffs. These maximum pressure campaigns on Iran and on and Venezuela and other countries. But, but he seems to have moved away a bit from, from sanctions. I think he thinks that tariffs are kind of a better source of leverage in some ways because I think he may view, you know, tariffs as kind of win win in the following sense, like either the tariff provides him leverage and the foreign counterparty caves and gives him what he wants and that's obviously a win. Or if it doesn't get the foreign counterparty to cave, he gets tariff revenue. And we know he's interested in tariff revenue. And so, you know, he kind of, whereas if he sanctioned the Colombians and they failed to cave, I'm not sure he'd think he was getting anything out of that. Whereas this way, if they fail to cave. He at least, you know, gets whatever a few hundred million, few billion dollars tariff revenue out of it.
- [23:32]
Scott R. Andersen
So I agree largely with what what Peter said. I mean firstly, AIPA is the low hanging fruit for the reason he described, right, that the you don't need to go through the agencies like you do for many of these other things. And likewise on why pick the tariff? It looks tough, it sounds tough and perhaps easy. It's far reaching, right? You can get a lot of stuff in one. You could just say everything from coming from that place. And to Peter's point about the revenue, that's I think a long standing debate about longstanding, at least for these five weeks as to what really is the point for some of these initiatives. Is it to change behavior? Is it to reset the entire system? Particularly with his thread about reciprocal tariffs across the board. I mean could this be an entire reconstruction of the US Tariff schedule as we call it, or is it revenue? And I think one, it depends who you ask, Two, it depends on the day or maybe even the minute. And three, some of those goals are shared by even in a bipartisan way, right by members of Congress. And I know we'll come back to Congress as well. So I think for all those reasons AIPA is attractive and perhaps there's some feeling that it's also insulated from judicial review if it comes to that. Just to note that Scott, you and I wrote a post as well back in 2019 when he first threatened to use IPA for tariffs on products from Mexico and that got walked back. And so to your very first question, the top of our time together, what's different now is that there's no one holding him back from using these tools as there might have been. Or at least those people haven't gotten into their offices yet. So that I think is a notable departure that we did see the threat of this before, but just like we thought we might see 232 tariffs on cars and again now sort of everything's on the table in a way that wasn't before. And so we'll just have to see how it all plays out.
- [25:34]
Ryan Reynolds
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- [25:43]
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- [25:46]
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- [27:37]
Kathleen Clausen
So let's dig into that question of pushback because I think that's the next question, right? In a lot of ways, while we're going to see probably more tariffs rolled out then the next thing we're going to start seeing in the next few weeks, to the extent we haven't already, is DACA of legal challenges. Maybe people in Congress will say this has gone far enough. This pendulum will swing back to some extent eventually. Who knows what effect it'll have. So let's start with that question of insulation from judicial review raised. Kathleen I'll put this to you first though, Peter. I definitely want to hear your thoughts as well. Where is the judicial risk here? I mean, IEEPA methods are litigated when they impact US citizens, right? We saw a ton of IIPA related litigation 10 years after 9, 11 about sanctioning mostly like Islamic charities, right? Because that's where the biggest kind of universe of US national entities were targeted with sanctions and notably treasury kind of stopped doing it after a while, in part because that litigation proved costly and annoying. And they mostly won, but Never like quite 100%. There was pushback in various regards. So what is the risk here on the legal side, both for IPA tariffs and statutory tariffs? And is there a possibility of, you know, saving measures, a handoff, for example, is it something they can use IPA for in the short term and then shift to 232 or 301 down the road to insulate themselves judicially? Like, is there a bigger legal strategy here? Maybe we just haven't seen all of yet?
- [28:54]
Scott R. Andersen
Well, there's a lot one could say there. So let's start with the fact that, as you point out, there have not been. There's one case that's been filed against the China tariffs, these particular recent China tariffs, but we haven't seen yet. Right. An outpouring of cases. We can speculate why that might be, but let me give you a couple possible reasons. One is not a lot of willing plaintiffs who want to raise their hand at a time of uncertainty, at a time of change. And of course, many of these tariffs haven't come into foreseea, haven't come into effect.
- [29:28]
Ryan Reynolds
Right.
- [29:28]
Scott R. Andersen
We just have the one set. And so there's a little bit of a wait and see. There's secondly, the fact, and perhaps more importantly the fact that the government almost always wins these cases, whether we're talking about the three digits or whether we're talking about even ipa. To the extent that IEEPA challenges have been brought on other areas, as many listeners know, those have mostly failed or they haven't changed the outcome. And then the one challenge we had back in the 70s to something that looked like an IPA tariff. Right. Was also not successful. So not a great track record here. Now, why is that? Well, my colleague Tim Meyer and I have written about this. It's multifaceted. But one particularly strong point is the domination of security related arguments by the Justice Department on behalf of the executive branch across these cases that courts have accepted. That is this sort of association of these tariff moves with broader forms of executive authority, a sort of constitutionalization of the tariff power in a way that Tim and I don't think was intended, of course, by the Constitution or intended by Congress. So whether we're talking about the difficulties of the texts themselves or trying to win under these statutes, and particularly for ipa, or whether we're talking about the arguments that the executive branch has brought throughout the Biden administration, Administration, I will add, in defending these tariffs in Both instances, across both reasons, the government tends to win. So that's true when we're talking largely about the sort of heart of what's going on, the places where companies have been successful and we're talking these are importers, right, for the most part who are challenging these things is with respect to procedural missteps. So procedural missteps or nuances or novelties, how the agencies are actually carrying out this work, work that has been a place where companies have tried and had some success in pushing back, where the courts have said, no, you got to follow the letter of the law and you haven't followed it here, Agency X. So bottom line, I think, will we see cases? Peters thought we probably will if these come to pass. And that may be the case. But a lot is going to turn on what part of the law is used, what part of the president's action, the importer challenges, on what grounds and in what court. So a lot of different choices here for lawyers and plaintiffs in trying to navigate their legal strategies when the time comes.
- [32:00]
Ryan Reynolds
Let me just add to what Kathleen said, that I very much agree. We are seeing companies, potential plaintiffs, at least sort of big potential plaintiffs, big importers, the trade associations that have a lot of big importers as members. I think, just based on my informal discussions with some of these guys, that they understand the challenges they will face in bringing legal challenge. And as a result, they want to wait and by and large, until they see the strongest possible case. And that's why I think, you know, if it's an IPA challenge against use of IPA for terror tariffs, you'd want to wait to see it, you know, on Canada tariffs or just sort of what you think. Both kind of from a legal perspective, from a, a procedural perspective, and also just from a kind of a, you know, atmospheric of what's going to influence the judge kind of outside the, you know, four, four corners of the brief itself, you want to make sure you have your strongest case. So I'm not surprised we're seeing companies wait here, by and large weight here. That said, you know, if these tariffs do come in as much as Trump has threatened them, the economic stakes are going to be quite high for a bunch of companies. And I think they will ultimately bring various challenges, even with, in some cases, some uphill battles, because the economic stakes are just going to be such that the pressure to do so is going to be quite high.
- [33:31]
Kathleen Clausen
In discussing pushbacks as well, I think we have to bring in the international dimension as well, because, of course, the United States played an instrumental role in setting up up a global treaty architecture and a set of institutions that for a long time was intended to push back against the arbitrary imposition of trade barriers among states that had joined this architecture. It's been under somewhere between assault and neglect for a long time in a lot of ways. But to what extent are we seeing the architecture even coming into play here, Kathleen? Like, do we expect any sort of pushback to come from that? Or is it at a state now where that's just not a consideration that really is entering into the calculus? Because frankly, it's not one that gets a lot of public consideration, certainly, or public discussion?
- [34:15]
Scott R. Andersen
That's true. That's true. Three different responses, I think, primarily from foreign governments. Let's start with the first one that you teed up. That is the potential for using that international architecture to push back primarily. Could they bring a dispute settlement proceeding, basically, could they sue us to put it colloquially at the WTO? And the answer is yes. And China has already February 5 launched what we call a request for consultations to begin proceedings there. Now, where will that go? Well, it's a difficult conversation to have these days for trade lawyers because we know that the World Trade Organization's dispute settlement mechanism is not working as perhaps originally intended, one might say, in that there is no appellate body, so cases actually cannot go to complaints completion because there are no members there in the United States is responsible for that situation. So in a way it's almost symbolic, right, that what China has done there is that. Yes. And probably the US Trade Representative's office will defend the case. Right. As they do for all cases brought against the United States in the wto. But will it actually lead to an outcome? Well, they can't complete the process is the long and short of it. But we saw Canada and Mexico also threatened to bring WTO proceedings because these governments want to show that the system is still there. They want to assert that even if they know they can't reach the final stage. They also talked about Canada and Mexico said they would bring proceedings under the usmca, the replacement for the NAFTA North American Free Trade Agreement that of course, President Trump negotiated. So in that instance, if they work to come to pass those tariffs on products from Canada and Mexico, maybe we'll see proceedings under the usmca. Those do not suffer from the same problem that the WTO has. There is no appellate body there. And that's how it's by design. So you could have an outcome. So that's the first possibility, is that would they use these things. And the answer is yes, China already has. And would we see more? Probably yes. Second possibility is retaliation. Again, we've already seen that.
- [36:29]
Kathleen Clausen
Right.
- [36:29]
Scott R. Andersen
Threats from Canada and Mexico. And China has indeed retaliated in, I think, what some people have thought is kind of a soft touch way. But who knows, there may be more on the way, depending how this goes. And the third thing I would add is the deals. Again, we've kind of referred to deals a little bit and how much the president likes deals. Obviously, Canada and Mexico were able to negotiate this suspension. That's sort of a deal in itself. But we might expect to see more of those as we did in his first term. What cannot these sort of friends and family plan get these governments that the president is willing to negotiate on? So we'll have to watch across all three areas and then some.
- [37:10]
Kathleen Clausen
So this question of retaliation and response obviously does play out on the international plane. And Peter, I want to ask you if you have any thoughts about where we're going to see that sort of pushback coming in the near future. But I want to pull in the other major actor here, and that is, of course, the corporations that are going to be affected, at least in the first instance, by a lot of these policies that are going to feel the pinch of these additional taxes affecting their operations, their supply chains. How do we expect them to be responding as well and adapting around the imposition of these different trade barriers? And how is that going to impact the impact of those down the line and the relationship with these companies, not just with U.S. government, foreign governments, but also with U.S. consumers?
- [37:53]
Ryan Reynolds
Well, begin just by echoing what Kathleen said on foreign retaliation. I think think when US Tariffs come in, we will definitely see foreign retaliation. As Kathleen said, we're already seeing it with China. They have retaliatory actions in place. And whether it was Canada and Mexico or European Union, America's big trading partners have pretty much all said that if the U.S. in fact, imposes these tariffs, there will be retaliation. In fact, I think we'll probably see European Union retaliation on the steel and aluminum tariffs very shortly. The steel and aluminum tariffs are scheduled to come into Place on March 12. The Europeans had had retaliation on the first round of steel and aluminum tariffs back in 2018. That's going to come back potentially with some modifications. So we're definitely going to see retaliation. You know, most governments, when they're thinking about retaliation, I think are looking to retaliate kind of in a, you know, proportional sort of way. I think most governments are not currently looking to escalate the fight with the Trump administration. But they do need to show. They feel they need to show the Trump administration, you, you hit us, we'll hit you back. What's going to. And traditionally, and I think this will be a lot of retaliation. Traditionally, countries have retaliated and saw this during Trump's first term and other trade disputes. You know, they'll retaliate against politically sensitive sectors. So during the first Trump term, European retaliation on, on, on the steel and aluminum tariffs included tariffs on, you know, bourbon whiskey, because they were trying to get at Mitch McConnell, who was then, you know, Senate majority leader and from Kentucky, and they retaliated against Harley Davidson motorcycles because then Speaker Ryan's district was either included or was adjacent to, you know, Harley Davidson's headquarters. And I think you'll see some of that. You know, how do they find Republican leaning states, Republican leaning constituencies to retaliate against? The other thing that's going to be interesting, and you're seeing foreign leaders talk about this quite directly, is targeting particular people and firms that they see as close to President Trump. So, for example, Canadian political leadership has talked quite directly about going after Tesla as a way of going after Elon Musk, who obviously is playing a major role in the administration. It'll be interesting to see how they, the weather and how countries may engage in some of this. More like personally oriented retaliation as opposed to just politically, politically sensitive retaliation. The other thing I want to pick up on, Scott, is, you know, we're talking about other stakeholders here, and I would like to think Congress is going to be a stakeholder here. I mean, it's been kind of remarkable to see how supine Congress has been on the early Trump trade moves. I mean, you've seen a little bit of, of criticism and a little bit of worry, for example, out of farm state lawmakers. You know, retaliation often falls on US Ag exports, and this could be bad for them. But, you know, so far, most members of Congress, whether Democrat or Republican, have held their fire to a substantial degree. You know, it's actually kind of hard legally for Congress to do things because actually take these powers away from Trump would require passing legislation, presumably over a presidential veto. But, but they haven't even begun kind of really gearing up. And I think it will be interesting to see if, as the cost of these tariffs rise, we begin to see, you know, Congress get more seriously engaged in this fight. On your question about companies, Scott, I think a lot of companies are kind of waiting to see what actually happens here. I mean, the uncertainty actually Makes it quite challenging because if you are a rational, self interested company and you think there's going to be a deal to be had in a couple of months, your incentive is actually probably just to you know, sit, you know, sit on your hands and like pay the tariffs for a couple of months and hope this goes away. Since you don't really know what countries are going to be hit at what rates currently, it's hard to know whether long term you want to re reshore production or not. I mean, you know, I sort of think about, you know, electronic devices for example. Right. Like if you only are ever going to see be a 5 or 10% tariff on electronic devices, it's probably just cheaper to pay the tariff than to actually onshore that production. Right. You know, because like the cost differential US is actually more than 5 or 10%. What a difference beyond what it would be in Vietnam. On the other hand, at some rate it obviously becomes financially advantageous to re onshore production. But you don't yet know what that rate is. Should you move it from Vietnam to Mexico? Like it's just a little too chaotic I think right now for, for most companies to engage in that kind of, that kind of planning.
- [42:37]
Scott R. Andersen
So on Peter's point about the companies, totally agree. It's interesting in my again anecdotal conversations with many companies, some of them seem to say that this is just another thing we're used to. Now back to what we were saying before. How is this different from the first term? Actually it's kind of similar post Covid. Now in this era we're prepared for war, we're prepared for disease, we're prepared for port strikes, we're prepared for tariffs, we. Right. So, so those that are able to perhaps see this, some of them see this as you know, as part of the normal calculus of doing business. Now of course that's not true for some smaller businesses but at least for some of the bigger ones they're doing that. They're also obviously lobbying on the back end in ways that we cannot see and they're running campaigns I've received, I don't know if you all have, but messages from, from some of the companies from which I regularly buy saying letting you know our prices are going up, here's why. And so the consumer is now increasingly informed and that's one way to do it. Right. We saw the market crash of course just before the Canada Mexico tariff announcement, the suspension announcement was made. And so there was some thinking about well you know, is there going to be a response from the market. And that's going to change how things happen. So the best example might be also the de minimis announcement which without getting into the details of this, some may recall that when these tariffs on products from China were announced, the expectation that it was that it would apply to every shipment, no matter how big or small. And of course, we all know that because of E Commerce, so much comes in now at very small amounts, very small amounts in value, and those are normally not subject to as much paperwork as bigger shipments. But the implementation of actually managing that on the side of the executive branch, for customs to actually be able to process that, for the U.S. postal Service to process these things, it was so overwhelming. So I raised that because either between forces sort of outside everyone's control or the actual day to day disruption that this is causing, those might be some of the bigger push factors here on change. Right. As a sort of flashpoint to look, look for going forward. Part of it is the difficulties of implementation. It was the difficulties of implementation in part that led to the setup of an exemption or exclusion process for some of the tariffs in the first term. Again, the President said we're not doing that this round, but maybe there will be just enough pressure to say, hey, we don't have the staff at Customs, Customs is running a staff shortage. We can't actually do what you want to do, Mr. President. And so we have to make adjustments in certain places in certain ways to either keep industry going, keep the wheels of the economy turning, and that might make a difference. Secondly, on Congress, just to say, certainly Congress is where I think most action should be at this stage. As we said, courts are just too slow and it's not working over there as well as I think people had hoped. And I think there is a lot of, of interest among members, certain members of Congress to do something. The question is what and how. I think there are many members of Congress who have for many years said we're not comfortable with this level of delegation, but to get the political capital that's necessary to make the changes in the law, that's the struggle. So whether we can do it by looking tough on China, maybe dealing with China's WTO status, that's part of the discussion now, right? Both on the President's side as well as in Congress. Whether we can do it by actually empowering the President to make deals in an easier way so that we avoid the tariff disruptions, that might be something. It's just worth saying that some of these delegations we've been talking about tariffs for the last hour, but they go beyond that. And so Congress right now I think is a critical touch point to be able to say, hey, okay, we don't like what we're seeing and we don't like the direction this is going. It could get a lot worse. So we have to address the delegations, we have to rechannel the president's energy in a particular way that we think is going to be fruitful for the country.
- [46:53]
Kathleen Clausen
So we are just about at time. But before we part, I want to turn to both of you for one last closing question, which is that this is a fast moving topic. We are only a month in to a four year presidency. We're going to see a lot more action around this. What are the big flashpoints you are looking for in the next few days, next few weeks, next few months as people watch this closely? If listeners want to understand what the next big moves are, where should they be looking? Kathleen, I'll start with you.
- [47:19]
Scott R. Andersen
I think the biggest question is whether these investigations that are all underway will lead to action. And you mentioned that those deadlines for so many of them are coming up. So we've got in March, several, we've got in April, several, several more. And so by that point we will have more of the administration officials in office. We should have a little bit more of a, I want to say, ordinary running of the wheels of the executive branch that will allow them to deliberate over these issues. And so maybe, you know, at those as those dates fall, we will either see some pullback from some of these steps, it may be an extension of time in other instances. But if to the extent we see more tariffs in those moments, then I think the landscape is going to change very quickly.
- [48:07]
Ryan Reynolds
Awesome.
- [48:07]
Kathleen Clausen
Thank you, Kathleen. Peter, turn over to you.
- [48:10]
Ryan Reynolds
I think in addition to the points Kathleen made, I am watching for whether we get a kind of clear thesis of how the Trump administration sees these tariffs interacting with each other and with the different goals that Trump has articulated for these tariffs. You know, he's talked about tariffs as a revenue source, talked about tariffs as a way of rebuilding American manufacturing and having onshoring. And then he's talked about tariffs and we've seen him talk about tariffs as kind of a, you know, economic bazooka. He'll point at the Canadians over fentanyl. You can kind of conceptually see how you might fit that together into a coherent story. But we haven't yet actually seen the Trump administration do. So what we've seen them do is kind of a lot of you know, seemingly piecemeal moves against different countries are kind of opportunistic and driven by, you know, the president's sort of week to week priorities and events. And so what I'm really looking for is do we, as the team settles in, as Kathleen says, as the team settles in, do we, do we see these actions kind of emerge into a, you know, coherent theory? Or is this ultimately just going to be kind of a whole bunch of of either country by country actions and ordeals that'll just kind of be out there for a while without really laddering up into a coherent vision?
- [49:30]
Kathleen Clausen
Well, we'll have to all keep our eyes peeled on what developments are coming down the road, as I'm sure there are some. Until then, we are out of time. Peter and Kathleen, thank you for joining us here today on the Lawfare Podcast.
- [49:41]
Ryan Reynolds
Thank you, Scott.
- [49:45]
Kathleen Clausen
The Lawfare Podcast is produced in cooperation with the Brookings Institution. You can get ad free versions of this and other Lawfare Podcasts by becoming a Lawfare material supporter through our website, lawfaremedia.org support. You'll also get access to special events and other content available only to our supporters. Please rate and review us wherever you get your podcasts. Look out for our other podcasts including Rational Security, Chatter, Allies and the Aftermath, our latest Lawfare Presents podcast series on the government's response to January 6th. And be sure to check out our written work@lawfirmedia.org this podcast is edited by Jen Patio. Our theme song is from Alibi Music. As always, thank you for listening.
- [50:27]
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