Trump's Tariff Policy Deemed Unconstitutional by Supreme Court
In a landmark decision, the conservative-majority US Supreme Court ruled that former President Donald Trump's tariff policies violated the Constitution. By a six-to-three vote, the Court upheld a lower court ruling that Trump exceeded his authority by invoking a 1977 law intended for national emergencies to impose tariffs. This judgment underscores the legal overreach in his economic strategy, which he touted as a means to revive American manufacturing.
Manufacturing Realities vs. Tariff Promises
Trump's tariff policy was built on the promise of bringing industrial jobs back to the United States through high import duties. However, this approach faces significant practical challenges. Manufacturing in the US remains costly, as evidenced by Motorola's failed smartphone factory in Texas, which closed after just 12 months. Similarly, analysts estimate that relocating a mere ten percent of Apple's Asian supply chain to the US would require three years and approximately $30 billion. In response to Trump's tariffs on China, Apple shifted production to India, not America, prompting further tariff threats from Trump.
Debunking the $18 Trillion Investment Claim
In a Wall Street Journal article titled "My Tariffs Have Brought America Back," Trump claimed to have secured over $18 trillion in investments due to his tariffs, calling it an "unfathomable" achievement. This assertion has been widely discredited by economists. Prior to this, his administration cited a lower figure of $9.6 trillion, which US economist Alan Reynolds exposed as fabricated. Reynolds noted that many items on the White House list were not investments but rather foreign purchases of US products, such as Japan's JERA pledging to buy $200 billion in LNG, or agreements for mutual trade expansion with India.
Other entries included routine business activities like R&D spending by pharmaceutical companies, manufacturing upgrades by firms like Heinz and Kraft-Heinz (mistakenly listed as separate entities), and workforce hiring by McDonald's. By inflating these figures, Trump presented a misleading narrative of an investment boom driven by his tariffs, despite evidence showing these activities were ongoing or unrelated to tariff policies.
Political Appeal vs. Economic Reality
Trump's message resonates politically by blaming foreigners for economic challenges and promising a return to past industrial glory. This contrasts with the harsh truth of globalization, the internet, and artificial intelligence, which require workers to adapt and acquire new skills. American businesses, including the Footwear Distributors and Retailers of America, have warned that tariffs threaten survival and could lead to closures. Farmers, severely impacted by the trade war, received billions in subsidies to offset damages, illustrating the unintended consequences of government intervention.
The Intervention Spiral in Action
This scenario exemplifies what economist Ludwig von Mises termed the "intervention spiral." Government actions like tariffs distort market signals, leading to new problems that prompt further interventions, such as subsidies, creating a cycle of state involvement. Trump's tariff policy, while politically attractive, has proven constitutionally flawed and economically misleading, with fabricated figures masking its true impact on trade and industry.
