A major warning has been issued by the U.S. Department of Justice (DOJ) regarding the potential economic turmoil if the court overturns tariffs that was imposed by former President Donald Trump under the 1977 International Emergency Economic Powers Act (IEEPA).
On Monday, a letter was sent to the U.S. Court of Appeals for the Federal Circuit. Solicitor General D. John Sauer warned that removing tariffs could potentially lead to a relapse of the Great Depression.
“In such a scenario, people would be forced from their homes, millions of jobs would be eliminated, hard-working Americans would lose their savings, and even Social Security and Medicare could be threatened,” Sauer wrote.
The Legal Battle at Hand
The appellate court is still deciding whether it will stick with a May ruling by the Court of International Trade (CIT). This ruling found that Trump went over and above his authority when applying most of the tariffs. The CIT argued that the IEEPA does not grant the president “unbounded authority” and took down the contested duties.
Understanding the IEEPA
When a national emergency is declared that presents an unusual threat to the U.S., the IEEPA grants Presidents’ the authority to control commerce. As a result of the ongoing trade deficits and drug trafficking, which is referred to as emergencies, Trump used the law to impose tariffs on Canada, Mexico, China, and dozens of other trading partners.
White House Pushback
After the CIT ruling, the White House had accused the court of forming a “judicial coup” and appealed immediately. On the 29th May, the appellate court granted that the tariffs to remain in place.
Since May, the Trump administration has negotiated trade deals with the European Union, Japan, and South Korea by securing investment commitments more than $1 trillion. These commitments is not money that is coming directly into the government but are linked to private projects that officials from the administration say could impact these sectors if the tariffs are removed.
DOJ’s Economic Argument
In the letter sent on Monday, Sauer and Assistant Attorney General Brett Shumate highlighted that these agreements form an important part of U.S. economic growth. There was an argument that that reversing the tariffs could force the U.S. into economic collapse.
“The President believes that our country would not be able to pay back the trillions of dollars that other countries have already committed,” they wrote, warning of “a 1929-style result” if the agreements dissolved.
Economists Push Back
Scott Lincicome of the Cato Institute gave his views regarding the DOJ’s letter and stated that he struggled to believe this was real.
David L. Ortega, an economist at Michigan State University, told Newsweek that the idea that tariffs are meant to protect Social Security and Medicare is not true. Social Security and Medicare are programs which are funded by taxes from payroll and not tariffs.
Robert B. Koopman, a senior lecturer at American University, called the DOJ’s statements “pure political hyperbole” with “no factual basis in economic reality.” He noted that removing the tariffs could potentially increase consumer spending and improve economic growth in America.
What’s The Way Forward?
It is possible that this case might reach the U.S. Supreme Court, but the appellate court has not provided a timeframe for when its decision will be made.
It is important to note that the impact of this legal battle go well beyond the courtroom. It is likely to affect the economy as well as international trade relations. Therefore, great consideration needs to be taken when these decisions are m