A trip through America’s constitution – and an explanation of how it got us to Trump – teaches us to beware the pull of executive power, writes Harrison Griffiths
With the stroke of a pen, President Trump imposed one of the largest tax rises in America’s peacetime history. With another stroke he drew them back. The new tariffs, however they settle, will no doubt damage American consumers, disrupt global trade and undermine America’s position as a global superpower.
In a constitutional republic defined by separation of powers, how can something like this happen? The catastrophic impacts of these tariffs on America’s economy, global trade and the US-led international order will all be the consequence of presidential fiat.
But this is one area where Trump isn’t attempting some kind of dictatorial power grab. Over the last 80 years, Congress has been ceding more and more of its tariff power to the executive.
How did we get to Trump?
It started off with noble intentions. The Trade Expansion Act of 1962 was packed full of provisions to give the President authority to quickly negotiate trade barrier reductions in the name of Cold War expediency. But Section 232 of the Act gave the President wide latitude to impose tariffs if “an article is being imported into the United States in such quantities or under such circumstances as to threaten or impair the national security”.
Section 232 was used only twice and was dormant after 1982 as the world began breaking down trade barriers en masse. That was until 2018, when President Trump invoked the measure as the basis for starting a trade war with China by implementing steel and aluminium tariffs. So what was the big national security justification? In Trump’s words, it was that “automobiles and automotive parts are critical to our strength as a nation”.
If that doesn’t sound like a particularly convincing pretext for exercising power based on national security concerns, that’s because it isn’t. But the President is under no obligation to cite a genuine national security concern to invoke Section 232’s powers.
The President is not obliged to be reasonable
Nor is he required to do so in order to invoke the International Emergency Economic Powers Act of 1977 (IEEPA). Originally intended to give the President powers to act quickly in sanctioning hostile foreign powers, Trump first invoked the EEPA to threaten Mexico with tariffs over an immigration dispute in 2019. He is now relying on the EEPA to implement his sweeping general tariffs which rise from a 10 per cent baseline to 54 per cent on Chinese imports.
The IEEPA states that “any authority granted to the President by section 1702 of this title may only be exercised to deal with an unusual and extraordinary threat”. The extraordinary threats in this case are persistent trade deficits and non-reciprocal trade barriers, according to Trump.
The balance of trade refers to the difference between a country’s imports and exports over a given period. Having a trade deficit means that a country imports more than it exports. The clear view from economic theory and empirical evidence is that they are neither extraordinary or a threat. The term refers only to investment flows and trade patterns, not economic exploitation or weakness.
Likewise, non-reciprocal trade barriers are not ideal but they should not dictate trade policy. If another country imposes tariffs on American exports, that’s a bad thing. But responding to that by imposing costs on Americans through reciprocal import tariffs just makes everyone poorer. The best way to deal with other countries’ bad trade policy is to ignore them.
The 1983 Supreme Court decision which emboldened the President
But it gets much worse. The administration has based its new tariffs estimates of the trade barriers imposed by other countries. Those estimates are based on a crude formula which depicts the US trade deficit in goods with each country as indicative of unfair trade practices, and derives a tariff rate by dividing the size of the deficit by the total value of goods imported from that country. This also rests on the flawed assumption that trade deficits are inherently bad and wildly misrepresents the reality of America’s bilateral trade.
But once again, the President is under no obligation to be correct or even vaguely reasonable. He need only declare that trade deficits and non-reciprocal trade barriers are an emergency to start wielding the IEEPA’s powers.
What makes the legal situation even worse is a Supreme Court decision from 1983 known as Immigration and Naturalization Service v. Chadha. The Supreme Court resolved 7-2 that measures in law permitting a streamlined process for Congress to vote down declarations of emergency by the President were unconstitutional. Known as the ‘Congressional Veto’, these provisions allowed Congress to directly check the President’s use of broad authorities delegated to the executive in law. In Chadha, the Court struck down Congress’ ability to effectively block executive actions but left the President’s broad powers intact.
This now means that Congress must pass laws to strike down a declaration of emergency or rein in the President’s powers. That requires passing legislation through both houses after which the President can veto the legislation stripping him of power. Congress can override the President’s veto with a 2/3rds majority in each house, but the political incentives are clearly against parties voting to limit executive power when their man is in the White House.
Trump’s tariffs: A warning against executive power
The principled free trader Senator Rand Paul (R-Ky) led an effort to stop Trump’s tariffs on Canada which passed 51-48 with all Democrats voting with Paul and three of his Republican colleagues. But this is dead on arrival in the House and even then, Trump would veto any legislation. The chances of a veto override are zero.
In short, this is how a constitutional republic founded on separation of powers allows enormous and damaging tax increases to go into effect by presidential fiat. Well-intentioned but poorly drafted laws delegate too much power and discretion to the President. With some help from the Supreme Court, the executive retained delegated power while Congress was prevented from effectively regulating its use.
This is a lesson for politicians around the world about the temptations of executive power. In particular, figures across the UK’s political spectrum who call for large transfers of power to the executive as a solution to their favourite pet issue, whether it be Covid-19 mitigation, controlling immigration or reducing the influence of quangos. The golden rule is to always assume that laws you support will one day be interpreted and executed by your worst political enemy.
Harrison Griffiths is International Programmes Manager at the Institute of Economic Affairs