Two Rulings Deal Blow to Key Trump Policies

Summary

WSJ What’s News: Episode Summary – "Two Rulings Deal Blow to Key Trump Policies"

Release Date: March 19, 2025
Host: Kate Bullivant (filling in for Luke Vargas)
Podcast: WSJ What’s News
Title of Episode: Two Rulings Deal Blow to Key Trump Policies

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Introduction to Major Legal Setbacks

Timestamp [00:31] Kate Bullivant:
In today’s episode, host Kate Bullivant delves into two significant legal rulings that challenge key policies of the Trump administration. These rulings mark substantial setbacks in the administration's efforts to reshape federal policies on both military inclusion and international development.

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Blocked Executive Orders: Transgender Military Ban and USAID Dissolution

Transgender Military Ban

Timestamp [02:05] Kate Bullivant:
A federal judge has halted President Trump’s executive order that seeks to exclude transgender individuals from serving openly in the military. This decision is a critical blow to one of the administration’s prominent policy initiatives.

Timestamp [02:15] Kate Bullivant:
Judge Ana Reyes determined that the executive order likely breaches the constitutional guarantee of equal protection. A preliminary injunction was issued, stopping the implementation of the ban until the legal challenges are resolved.

Government and Opposition Responses

Timestamp [02:35] Kate Bullivant:
The Trump administration defends the policy by asserting that military leadership should have the autonomy to set medical criteria for service members. Conversely, current and prospective transgender military personnel have labeled the order as discriminatory, challenging it in court.

Timestamp [02:55] Kate Bullivant:
Judge Reyes’s ruling is set to take effect on Friday. The White House has not yet responded to requests for comment regarding this decision.

Elon Musk and USAID Dissolution

Timestamp [03:00] Kate Bullivant:
In a related development, a federal judge in Maryland has ruled that the Trump administration's attempt to dismantle the U.S. Agency for International Development (USAID) is likely unconstitutional on several grounds.

Role of Elon Musk

Timestamp [03:25] Kate Bullivant:
The judge criticized Elon Musk’s involvement, highlighting that Musk has been acting as the de facto head of Doge (presumably a misstatement of USAID’s altered name under the administration), without proper Senate approval. This likely violates the Constitution’s appointments clause.

Administration’s Defense

Timestamp [03:40] Kate Bullivant:
Trump administration lawyers argue that Musk serves merely as a presidential advisor, providing recommendations without any binding legal authority. Musk, appearing on Fox News, reiterated his stance on the necessity to cut government spending but did not comment directly on the ruling.

Government’s Intention to Appeal

Timestamp [04:10] Kate Bullivant:
White House Deputy Press Secretary Anna Kelly labeled the ruling against Doge as a "miscarriage of justice" and announced the government’s plans to appeal, setting the stage for prolonged legal battles.

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FTC Commissioners Dismissed: War on Independent Agencies

Timestamp [04:30] Kate Bullivant:
President Trump has dismissed two Democratic commissioners from the Federal Trade Commission (FTC), challenging Supreme Court precedents that limit presidential authority to remove FTC commissioners solely for cause.

Impact on FTC’s Structure

Timestamp [04:45] Kate Bullivant:
With the removal of these commissioners, only two Republican members remain on the FTC. FTC Chief Andrew Ferguson asserted that the president has the authority to remove any commissioner, a stance contested by Commissioners Alvaro Bedoyer and Rebecca Slaughter, both of whom have declared their intention to challenge their dismissals legally.

Bipartisan Concerns

Timestamp [05:00] Kate Bullivant:
The FTC, traditionally a bipartisan agency, now faces potential shifts in its regulatory stance, raising concerns about increased presidential control over independent government bodies.

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Economic Outlook and Federal Reserve Insights

Fitch Ratings Downgrades

Timestamp [05:30] Kate Bullivant:
Fitch Ratings has joined other major forecasters in downgrading the economic growth outlook. The agency projects that ongoing global trade tensions, particularly under the Trump administration’s increased tariffs, will dampen both U.S. and global economic growth, elevate U.S. inflation, and delay Federal Reserve rate cuts.

Growth Projections and Recession Fears

Timestamp [05:50] Kate Bullivant:
The U.S. economic growth forecast has been revised downward to 1.6% for the current year, a significant drop from the previous estimates of nearly 3% in both 2023 and 2024. Concerns over a potential U.S. recession have intensified, fueled by the administration’s escalation of tariffs on Canada, Mexico, China, and the extension to steel and aluminum imports.

Federal Reserve’s Upcoming Decisions

Timestamp [06:15] Kate Bullivant:
Market attention is also focused on Federal Reserve Chair Jerome Powell’s upcoming speech, which is expected to provide critical insights for investors. According to Finance Editor Alex Frangos, Powell’s remarks will be pivotal in determining the Fed’s stance on future interest rate adjustments.

Insights from an Unnamed Guest

Timestamp [04:34] Unnamed Guest:
An unnamed expert discussed the dual possibilities stemming from Powell’s forthcoming speech. If Powell emphasizes signs of economic slowdown—such as declining consumer sentiment and retail sales—this might signal an impending need for more supportive measures or even rate cuts by the Fed. Conversely, if Powell highlights the risks associated with tariffs reigniting inflation, it may indicate a more cautious approach to cutting rates.

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Historical Context: The Chicken Tax and Modern Tariffs

Introduction to the Chicken Tax

Timestamp [06:44] Kate Bullivant:
Kate introduces the historical context of tariffs, referencing the "chicken tax," a 25% tariff imposed in the 1960s on imported trucks as retaliation against European tariffs on American poultry.

Stephen Wilmot Explains the Chicken Tax

Timestamp [07:20] Stephen Wilmot:
Stephen Wilmot provides an in-depth explanation of the chicken tax’s origins and its long-term impacts. The tax was a direct response to the European Union’s Common Agricultural Policy, which had increased tariffs on American poultry, severely affecting exports to Western Germany and leading to a sharp decline in American poultry exports in 1963.

Impact on Automotive Imports

Timestamp [07:40] Stephen Wilmot:
In retaliation, President Lyndon B. Johnson imposed a 25% tariff specifically targeting goods vehicles from West Germany, particularly impacting Volkswagen’s Type 2 minivans exported to the U.S. This move effectively blocked a significant segment of German goods vehicle imports, forcing Volkswagen to focus on passenger cars like the Beetle and Campervan for the American market.

Comparison to Modern Tariffs

Timestamp [08:31] Kate Bullivant:
Kate draws parallels between the chicken tax and the Trump administration’s current tariff strategies, particularly the 25% rates on automotive imports.

Stephen Wilmot on Modern Tariffs

Timestamp [08:39] Stephen Wilmot:
Wilmot notes that the 25% tariff rate—the hallmark of the chicken tax—is also being applied to contemporary tariffs on both passenger and goods vehicles. Such high tariffs render imported vehicles non-competitive, leading to a situation where nearly all vehicles in the U.S. market are domestically produced, with few exceptions.

Workarounds and Industry Adaptations

Timestamp [09:16] Kate Bullivant:
Kate inquires about how the industry has historically circumvented such high tariffs.

Timestamp [09:20] Stephen Wilmot:
Wilmot recounts inventive strategies employed by manufacturers to bypass tariffs. For instance, Subaru imported small trucks with backward-facing seats to classify them as passenger vehicles, while Mercedes shipped Sprinter vans in kits, reassembling them in the U.S. to avoid the 25% goods vehicle tariff.

Lessons from the Chicken Tax

Timestamp [09:54] Stephen Wilmot:
Wilmot outlines key lessons from the chicken tax’s history:

1. Effectiveness in Limiting Imports: The 25% tariff effectively eliminated the import of certain goods trucks, encouraging domestic production.
2. Revenue Generation: Unlike tariffs on goods vehicles, tariffs on passenger cars at lower rates (e.g., 2.5%) can generate significant revenue without completely discouraging imports.
3. Long-term and Unpredictable Consequences: The chicken tax had enduring and unforeseen effects, such as protecting the U.S. automotive industry from Japanese competition over a decade later.
4. Challenges in Tariff Reversal: Tariffs can become entrenched and difficult to remove once established, underscoring the need for humility regarding their far-reaching impacts.

Timestamp [10:41] Kate Bullivant:
Kate thanks Stephen Wilmot for his insights into the historical and contemporary implications of the chicken tax and tariffs.

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Activist Investor Moves in the Market

Proxy Fight at Autodesk

Timestamp [10:52] Kate Bullivant:
Shifting focus to market news, Kate reports that activist investor Starboard Value is gearing up for a proxy fight at Autodesk, a prominent design software company. Starboard holds over a $500 million stake in Autodesk and plans to nominate a minority slate of directors ahead of the company’s annual meeting. This move comes as Autodesk’s shares have experienced a significant decline, down approximately 12% this year.

Rio Tinto’s Corporate Structure Challenge

Timestamp [11:10] Kate Bullivant:
Additionally, activist investor Palliser Capital is urging Rio Tinto to unify its dual-listed corporate structure into a single entity based in Australia and London. Palliser Capital is advocating for an independent review to assess whether this unification serves shareholders' best interests. Despite these efforts, Rio Tinto’s Board unanimously recommended that shareholders vote against the proposal.

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Conclusion and Production Credits

Timestamp [11:30] Kate Bullivant:
Kate Bullivant wraps up the episode by acknowledging the production team, including producer Daniel Bark and supervising producer Sandra Kilhoff. She reiterates the key topics discussed and signs off, promising the return of the show later that evening.

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Notable Quotes with Attribution and Timestamps

1. Judge Ana Reyes on the Transgender Ban:
   "The order likely violated the constitutional guarantee of equal protection."
   — Judge Ana Reyes [02:20]

2. White House Deputy Press Secretary Anna Kelly on USAID Ruling:
   "This is a miscarriage of justice."
   — Anna Kelly [04:10]

3. Stephen Wilmot on the Chicken Tax’s Impact:
   "The chicken tax really means there aren't any imports of those vehicles which are taxed at 25% because it's impossible to make them competitive at that level."
   — Stephen Wilmot [08:39]

4. Unnamed Guest on Federal Reserve Expectations:
   "If he highlights that [economic slowdown], it may indicate that his inclination is that the economy is going to need more support, need rate cuts, you know, sooner than people are expecting."
   — Unnamed Guest [04:34]

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Key Takeaways

• Legal Challenges to Trump Policies: Two major judicial rulings have stymied key Trump administration policies, including the transgender military ban and the dismantling of USAID, highlighting ongoing legal battles over executive authority and civil rights.

• Federal Trade Commission Undermined: The President’s removal of Democratic FTC commissioners raises significant concerns about the independence of regulatory bodies and could lead to increased political influence over agency decisions.

• Economic Downturn Fears: Fitch Ratings’ downgrade of global economic growth, combined with heightened tariff tensions, points to a challenging economic landscape with potential recession risks.

• Historical Lessons Informing Present Policies: The discussion of the chicken tax underscores the long-term and often unintended consequences of tariff policies, emphasizing the complexity of global trade dynamics.

• Activist Investors' Influence: Active engagements by investors like Starboard Value and Palliser Capital reflect ongoing struggles within major corporations to align management decisions with shareholder interests.

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This comprehensive summary encapsulates the key discussions, insights, and conclusions from the WSJ What’s News episode titled "Two Rulings Deal Blow to Key Trump Policies." It provides an in-depth overview suitable for listeners and non-listeners alike, complete with notable quotes and clear sectioning for ease of understanding.

Transcript

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[Kate Bullivant]

In a blow to Elon Musk, a judge rules Doge's move to dismantle USAID was likely unconstitutional plus how a decades old chicken tax sheds light on the barrage of new tariffs being pursued by the Trump administration.

[Stephen Wilmot]

What the history of the chicken tax shows is that it really means there aren't any imports of vehicles which are taxed at 25% because it's impossible to make them competitive at that level.

[Kate Bullivant]

And Fitch Ratings adds its name to a slew of prominent forecasters downgrading the outlook for economic growth. It's Wednesday, March 19th. I'm Kate Bullivant for the Wall Street Journal, filling in for Luke Vargas. And here is the AM edition of what's News, the top headlines and business stories moving your world today. A federal judge has blocked the Pentagon from implementing President Trump's executive order that excludes transgender individuals from serving openly in the military, marking a major legal setback for one of the administration's policy priorities. Judge Ana Reyes ruled the order likely violated the constitutional guarantee of equal protection and issued a preliminary injunction that halted it while litigation continues. The government defended the policy, saying that military leadership has the broad authority to decide medical criteria for service members, while current and prospective transgender service members challenge the executive order as discriminatory. Reyes ruling is set to go into effect Friday. The White House didn't immediately respond to a request for comment. Meanwhile, a federal judge in Maryland has similarly ruled that the Department of Government Efficiency's move to dismantle the U.S. agency for International Development was likely unconstitutional on multiple fronts. The ruling directed Doge to halt halt its work in closing down USAID and ordered it to reinstate access to electronic systems for employees and contractors who were shut out. The judge took particular issue with Elon Musk's role, saying the billionaire has acted as the de facto head of Doge without having been properly appointed with Senate approval, likely in violation of the appointments clause in the Constitution. The Trump administration's lawyers have maintained that Musk is a presidential advisor, giving recommendations with no finding legal effect. Without comment on the specific ruling. Musk appeared on Fox News last night and again defended the need to cut government spending.

[Stephen Wilmot]

The reason I'm here is because I'm.

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[Unnamed Guest]

Due to the corruption and waste, and.

[Stephen Wilmot]

If we don't do something about it, the ship of America is going to.

[Unnamed Guest]

Sink and we're all on that ship.

[Kate Bullivant]

White House Deputy press secretary Anna Kelly called the ruling against Doge a, quote, miscarriage of justice and said the government plans to appeal the decision. And setting up yet another legal fight. President Trump has fired two Democratic commissioners from the Federal Trade Commission, countering Supreme Court precedent that says the FTC's commissioners can only be removed for cause. It's the latest move in Trump's campaign to exert more control over independent government agencies. The FTC has a bipartisan structure, but Tuesday's dismissals mean only two members remain, both of whom are Republican. FTC chief Andrew Ferguson maintains that any of the FTC's commissioners can be removed by the president. Alvaro Bedoyer and Rebecca Slaughter have both called their dismissal illegal, with Bedoyer saying that he will challenge it. An FTC spokesman declined to comment. In market news today, it's all about the Fed, with policymakers widely expected to keep rates on hold. But as finance editor Alex Frangos explains, it'll be Federal Reserve Chair Jerome Powell's speech today that really, really matters to investors.

[Unnamed Guest]

One of the things that people really are looking out for with Powell this week is how much is he going to talk about the economy slowing down. We're seeing it in a whole bunch of different indicators in terms of consumer sentiment and retail sales. People in all income spectrums are sort of starting to feel a little bit of a pinch. So if he highlights that, it may indicate that his inclination is that the economy is going to need more support, need rate cuts, you know, sooner than people are expecting. On the other hand, if he highlights the risks of tariffs in terms of reigniting inflation, maybe they're not going to cut so quickly. So those are the things people are looking out for.

[Kate Bullivant]

Fitch Ratings has added its name to a slew of prominent forecasters downgrading the outlook for world economic growth. Its economic outlook predicts that the global trade war will reduce US and world growth, push up US inflation, and delay Federal Reserve rate cuts. The US is now expected to grow 1.6% 7% this year, well below growth rates of closer to 3% in both 2023 and 2024. Fears of a recession in the US have grown sharply in the last month, with the Trump administration ramping up tariffs on Canada, Mexico and China while extending tariffs to imports of steel and aluminum. Coming up, tariffs might be roiling markets and the economic outlook right now, but they're not a new phenomenon. We look at what a decades old chicken tax tells us tariff plans. That story after the break.

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[Kate Bullivant]

Since the 1960s, the US has imposed a 25% tariff on imported trucks after President Lyndon B. Johnson introduced a tax hitting back at European levies on American poultry. The so called chicken tax may be from the history books, but as the Trump administration pursued a barrage of new tariffs, autos reporter Stephen Wilmot explains how it shows the power of tariffs to reshape global trade, competition and industry over decades. Stephen, take us back to the 1960s. What is the chicken tax?

[Stephen Wilmot]

Well, it all started in 1962 when what was the predecessor organization to the European Union created the Common Agricultural Policy and that involved increasing tariffs on American poultry. And Germans in particular had been buying increasing amounts of chickens from American farmers. And then suddenly the tariff increases hit the volumes that they were exporting to Western Germany in particular, very hard exports plunged in the first half of 1963. So there was a lot of diplomacy. But eventually Lyndon Johnson did hit back with retaliatory tariffs of 25% on trucks, on goods vehicles specifically. And that was very specifically targeted at West Germany because Volkswagen was exporting its so called type 2 minivan to the US and what the tariff did was it blocked just the goods vehicles. So Volkswagen continued to grow very strongly in the US with the Campervan and with the Beetle, but its goods vehicles were hit. And so the chicken tax, as it became known, had a huge impact on the exports of goods vehicles from West Germany to the U.S. how does the.

[Kate Bullivant]

Chicken tax compare to the different types of tariffs we're seeing being rolled out today by the Trump administration?

[Stephen Wilmot]

One similarity is the rate. 25% seems to be a golden number. It was the rate for the chicken tax and it's also the rate that Trump is talking about with automotive tariffs expanded to the whole, to all US Vehicle imports, passenger vehicles as well as goods vehicles. And that's a high level. So it really what the history of the chicken tax shows is it it really means there aren't any imports of those vehicles which are taxed at 25% because it's impossible to make them competitive at that level. You don't get trucks imported to the us. They're all essentially made in the us with very few exceptions.

[Kate Bullivant]

Stephen, what were some of the workarounds to the chicken tax in the 60s?

[Stephen Wilmot]

There is this really colourful history of so called tariff engineering that the chicken tax engendered. One classic example is Subaru, which used to import these small trucks with seats facing backwards on the flatbed so that it could classify them as passenger vehicles for customs purposes. Another example is Mercedes, which used to ship its Sprinter vans to the US in kits and then kind of reassemble them.

[Kate Bullivant]

So what are the learnings here from looking back at the chicken tax and how it's impacted US industry?

[Stephen Wilmot]

So I think one lesson is that it does work in a sense. There are no imported goods trucks in that category, essentially. So it has kept production of pickups in the us, but it hasn't worked in raising any revenue. Whereas the 2.5% tariff on passenger cars does raise quite a lot more money because it's not such a disincentive to pay. Another lesson really is just how long lasting and unpredictable the consequences can be. It ended up essentially protecting Detroit from an influx of Japanese cars more than a decade later. And the chief lesson, and therefore is humility in terms of what the consequences of this will be. Potentially, tariffs can become very hard to unwind for that reason.

[Kate Bullivant]

Stephen, thanks so much for taking us on this history lesson and how that's impacting what we're seeing today.

[Stephen Wilmot]

Thank you.

[Kate Bullivant]

And in other market news, we're exclusively reporting that activist investor Starboard Value is preparing to wage a proxy fight at the design software maker Autodesk. Starboard Ford reportedly has a more than $500 million stake in Autodesk and intends to nominate a minority slate of director candidates ahead of the tech company's coming annual meeting. Autodesk's shares have fallen steeply since touching a record high in August 2021. The stock is down about 12% so far this year. Meanwhile, an activist investor is pushing for Rio Tinto to unify its dual listed corporate structure into a single Australian, London based hedge fund. Palliser Capital wants an independent review into whether unification would be in the best interest of shareholders, but the Mining Giants Board has unanimously recommended that shareholders vote against the resolution. And that's it for what's news for this Wednesday morning. Today's show was produced by Daniel Bark with supervising producer Sandra Kilhoff. And I'm Kate Bullivant for the Wall Street Journal, filling in for Luke Vargas. We will be back tonight with a new show. Until then, thanks for listening.