U.S. LAW & GLOBAL TRADE RELATIONS.

      The De Minimis Exception (that provide no tariffs on imports less than $800 sent directly to individuals) has been terminated by the Trump administration for goods imported from China and Hong Kong.  (This revocation has been somewhat lessened as part of the subsequent U.S.-China truce and would be revoked by the new House budget bill.)  Such imports from China will now be subject to either 30% of their value or a flat fee of $25 that will increase to $50 on June 1st. Trump’s rationale, in part, is to better control Fentanyl imports. This development is another unfortunate trade and tariff step in Trump’s tariff war with China and broad challenge to the global trading system. This new rule applies also to trans-shipped Chinese products through third countries and a promise to extend this termination to other countries directly. Trump’s minimum 145% tariff on Chinese imports, of course, is a much larger problem.

     The De Minimis Exception was enacted by the Hoover administration in the 1930’s as part of the Tariff Act of 1930. Also known as the disastrous Smoot-Hawley legislation that spurred on the Great Depression and global protectionism. However, this exception, very interestingly, was intended to give the Secretary of the Treasury, in fact, some authority to reduce the harshness of the newer, higher U.S. tariffs. Needless to say, this new Trump action is contrary to that intention to reduce trade flows and is a serious blow to trade.

     This newer action by Trump will restrict consumer and small business commerce, increase inflation, harm U.S. consumers (especially low-income ones) and small businesses.  It has already hurt supply chains in the United States, global container shipping and ports in the United States. Significant impact on the U.S. economy is already being felt. Companies, merchants and consumers are already reacting. The next round of economic and trade data, which always lags real-time actual practice, will clearly disclose this. Very, very unfortunate protectionism.

     Unfortunately, some Republicans increasingly support generally these restrictive trade actions — away from free trade and their traditional positions. But courts (over 100 trade cases have been filed against the administration) and even the Senate have now indicated a growing negative reaction to the Trump tariff policies. Both have begun to question the Trump administration’s use of obscure laws, both trade and others (including the Congressional Review Act to overturn administrative regulation by simple majority vote) and self-serving interpretations of delegated trade authority (such as national emergency findings under IEEPA and national security under Section 232[B] of the Trade Expansion Act).

     Both the courts and the congress hold an increasing promise of success in reigning in historically destructive local and international policies of the Trump administration.

     By the way, this new Trump attack on global trade patterns opens new opportunities for criminal activity and rejects many of the benefits and strategies of newer Internet e-commerce platforms (Shein, Temu, Amazon). This will do nothing to increase domestic U.S. production of cheap textiles. No new investment will occur in the textile industry in North Carolina, Virginia or Mississippi. That industry has been dead in the U.S. for many, many decades. The workers and plants have moved on, literally.

     Just an aside. My father was the CEO of an apparel manufacturer in New York City for decades, employing mostly immigrants, and it was a non- union shop. Cheapest wages possible. Nevertheless, factory jobs started leaving 1n the early 1970s to Mississippi and other southern state. Later that decade most of the jobs went to China under long-term supply contracts. My father’s jobs for hundreds of workers disappeared. Again, these jobs are not coming back.

     The future of the U.S. economy is in innovation, technology, services and global trade. We need thoughtful policy and not policy by grievance and threats. That leading to nothing to protectionism, isolationism and abrogation of the rules-based trading system championed by the United States throughout the post-Cold War era — that brought great prosperity to the United States and many countries.

      Of course, the rules-based system that the United States championed since World War Two has been destroyed by the Trump administration. It needs to reenergize that system and to recommit to the rules of trade enacted by Congress and those of the global trading system. 

“The Trump administration officially eliminated a loophole that had allowed American shoppers to buy cheap goods from China without paying tariffs …. The loophole, called the de minimis rule, allowed products up to $800 to avoid tariffs and other red tape as long as they were shipped directly to U.S. consumers or small businesses …. U.S. Customs and Border Protection processed a billion such packages in 2023, the average value of which was $54 …. More than half of all de minimis shipments by value contained textile and apparel products … But opponents of ending the exemption complained that the move would significantly raise prices for American consumers, hurt small companies that had built their businesses around the loophole and slow the flow of trade between the countries …. The Trump administration has also promised to eliminate the loophole for shipments from other countries …. The de minimis exception was created in the 1930s …. Congress raised the threshold for de minimis packages to $5 in 1978 and $200 in 1993, and then to $800 in 2016 …. Current rules appear to create a discrepancy that allows goods moved through the Post Office to be subject to lower tariffs than goods moved using private carriers …. Goods that come into the United States from China via private carriers like DHL or FedEx will be subject to tariffs of at least 145 percent ….. The United States, for now, still offers the de minimis exception for countries other than China. Goods made in China are not supposed to qualify for de minimis, even if they are routed through another country.” “Chinese Tariff Loophole Closed (“De Minimis Exception”). New York Times (5.3.25).

      Numerous tariff lawsuits have now been filed against the Trump administration’s numerous tariffs actions. Most interesting, they have been filed by smaller firms, conservative groups and a broad range of other groups (including states and governors). Bigger firms have not done so yet. Nor has the U.S. Chamber of Commerce. Not sure why.

       These suits now seem to be the best bet in having the Trump tariffs declared unconstitutional. Trump administration recently argued (in the Court of International Trade) that courts cannot review the legality of presidential tariffs. However, a federal district court just denied Trump’s use of emergency presidential foreign affairs power under the 1798 Aliens Enemy Act, as to deportations.  Reigning in his excessive and related executive actions concerning foreign affairs (relying on old legislation) — which is much broader than his delegated tariff authority.

     My guess, the tariff litigation will succeed. It should be noted that the Senate recently failed by a tied vote (two anti-tariff senators were absent) in repealing various Trump tariffs. This was just a start of congressional action to repeal Trump’s tariffs. Of course, the Congress may yet still be able to reclaim its exclusive authority over trade (that it has delegated away since the 1930’s). My guess is, sooner than later.

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“There is a growing roster of opponents now legally challenging Trump’s ability to issue some of the tariffs in the first place.  Trump is facing a barrage of lawsuits from state officials, small businesses and even once-allied political groups, all contending that the president cannot sidestep Congress and tax virtually any import …. None of the lawsuits filed this month are supported by major business lobbying groups, even though many organizations — including the U.S. Chamber of Commerce and the Business Roundtable — have been sharply critical of the president’s tariff…. Instead, the battle has been left to a scattered yet growing roster of litigants …. Last week, a dozen Democratic attorneys general from states including Colorado, New York and Oregon also asked a federal judge to block many of Trump’s tariffs …. At the heart of the legal wrangling is a 1970s law, the International Emergency Economic Powers Act, which enables the president to order trade embargoes, set sanctions and limit foreign investment …. Trump invoked that law to impose his initial duties on Chinese exports, in what he described as an effort to stop the flow of fentanyl into the United States. He also used those powers to establish a 10 percent tax on exports from nearly every other country and to justify what he calls “reciprocal” tariffs. For evidence of an emergency, Trump primarily pointed to the trade deficit — the difference between what the United States exports to other nations and what it imports …. The latest lawsuit arrived Thursday from the Pacific Legal Foundation, a group with reported ties to the conservative donor Charles Koch. On behalf of a clothing company, a board game designer and other small businesses, the group faulted Trump for imposing an “unlawful and unconstitutional” 145 percent tariff on Chinese goods …. Another legal group with ties to Mr. Koch and the conservative financier Leonard A. Leo sued early this month on behalf of a Florida company facing high costs from the president’s tariffs on China. Leo is a co-chairman of the Federalist Society, which has advised Mr. Trump on judicial appointments. The organization behind the lawsuit, the New Civil Liberties Alliance, does not disclose its full range of donors …. In a separate lawsuit, two members of one of the largest tribes in the United States claimed that Mr. Trump’s tariffs on Canada violated treaty rights …. Without the economic emergency law, the president could have been forced to use much slower and narrower paths to tariffs, as he did with sector-specific levies including those on the auto industry …. In enacting the economic emergency law in 1977, Congress sought to curtail presidential powers after past commanders in chief had overused emergency declarations. Nixon had even tapped a precursor trade statute to impose his own 10 percent duty on imports, which similarly drew a court challenge, though the president prevailed …. The Liberty Justice Center, a nonprofit with past ties to Richard Uihlein, an Illinois industrialist and a Republican megadonor this month, the group sued the Trump administration on behalf of small businesses that say the recent tariffs have harmed them. That included Victor Schwartz, the founder of VOS Selections, a New York City company that imports specialty wine, spirits and sake.” “Businesses and States Sues Trump Tariffs Over Use of Emergency Power.” New York Times (April 28, 2025).

“U.S. President Donald Trump is accused of having started a global trade war. That’s wrong. The U.S. Congress is responsible for it, and only the U.S. Congress can stop it. If the core institution of American democracy cannot reassert its clear constitutional authority over U.S. trade policy, then the chaos of the past two months will continue for the next four years …. But trade also represents the best opportunity for Congress to find its voice …. But on trade, the divisions are less clear …. The erosion of Congress’s sovereignty over trade has been decades in the making …. The abdication of power by Congress has three chapters. Each one did a little more to erode congressional authority for what seemed perfectly sound reasons at the time. But in total, they have left Congress neutered as Trump creates growing chaos in the global trading system …. Until April 2 of this year, Congress’s passage of the Smoot-Hawley Tariff Act in 1930 was the most infamous day in U.S. trade history …. As the Depression ground on, Congress began to look for a way out of the mess it had made. The result was the Reciprocal Tariff Act of 1934—no, Trump did not invent the concept of “reciprocity”—which for the first time handed significant congressional tariff authority to the president. The bill authorized presidents to cut U.S. tariffs as long as other countries agreed to do the same …. The 1934 act launched the era of modern free trade negotiations …. The 1934 Reciprocal Tariff Act was the first great abdication of congressional trade authority, but the goal was to expand trade, not restrict it …. starting in the late 1960s and 1970s, however, as U.S. imports from Japan and Germany began to rise and the trade deficit widened, Congress gave the president brand-new powers to fight back with tariffs. Section 301, a provision of the Trade Act of 1974, as well as subsequent trade bills, gave the Office of the U.S. Trade Representative (USTR) authority to threaten tariffs against countries with “unjustifiable” and “unreasonable” trade practices deemed harmful to U.S. economic interests …. The biggest loophole exploited by Trump in his frenzy of new tariffs is the variety of emergency powers granted to the president by Congress over many decades. Some were intended to be used for tariffs, but in much narrower ways than the administration has acted; others stretch existing emergency powers beyond recognition and may be struck down by the courts. The Trump administration has used two core statutes—Section 232 of the 1962 Trade Expansion Act and the 1977 International Emergency Economic Powers Act (IEEPA)—in unprecedented ways …. Barring a temporary injunction, the court cases will likely take many months or more to resolve, leaving the Trump administration unfettered in its use of tariffs. That leaves Congress as the only branch of the U.S. government with the ability to stop Trump before massive damage is done to the U.S. and global economies.” “Trump’s Tariff War and Congress.” Foreign Policy (April 2025).

“National security is clearly not a genuine concern here. There is no “emergency” or “predatory incursion” by a foreign government at the border; protesting or writing op-eds does not turn students into terrorists …. The administration hopes that its actions will not be subject to judicial review because they supposedly involve the president’s core constitutional powers. Judges have begun to reject the executive’s claims ….  History has not looked kindly on the Supreme Court’s upholding of the internment of Japanese Americans as a constitutional exercise of executive national security power, even during wartime.” “Fake Emergencies.”  Washington Post (April 29, 2025).

” A bid to reject President Trump’s worldwide “Liberation Day” tariffs fell short in the Senate as most Republicans stayed aligned with the White House.  The measure championed by Republican Sen. Rand Paul (R., Ky.) failed to win a majority, with 49 in favor and 49 against, hurt by the absences of two tariff opponents—Sen. Sheldon Whitehouse (D., R.I.), who was returning from an event in South Korea, and Sen. Mitch McConnell (R., Ky.) …. The resolution sought to repeal America’s broad 10% tariffs on almost every nation and the higher tariffs on China and other “bad actors” by terminating the emergency declaration Trump used to impose the levies. The administration has argued that persistent trade deficits constitute an emergency under the International Emergency Economic Powers Act.” “Senate and Trump’s Tariffs.” Wall Street Journal (May 1, 2025).

The Trump administration argued in the Court of International Trade that it has no jurisdiction to review the legality of presidential tariffs. “Trump Tells CIT Can’t Review Tariffs.” Bloomberg (May 1, 2025).

“A federal judge permanently barred the Trump administration from invoking the Alien Enemies Act, an 18th-century wartime law, to deport Venezuelans it has deemed to be criminals saying that the White House’s use of the statute was illegal …. The court found that the “plain ordinary meaning” of the act’s language, like “invasion” and “predatory incursion,” referred to an attack by “military forces” and did not line up with Trump’s claims about the activities of Tren de Aragua …. While the A.C.L.U. has largely been successful in stopping the Trump administration from continuing to deport people under the act.” “Federal Court Rejects Presidential Use of  Wartime Legislation (1798 Alien Enemies Act) – No Invasion.” New York Times (May 2, 2025).

      The legality of Trump’s recent tariffs under U.S. statutory law is very questionable. To me, it’s an abuse of the International Emergency Economics Power Act (‘national emergency’) and Section 301 (‘retaliation’). The Congress needs to reclaim its authority under Article 1, Section 8, Clause 3 (exclusive authority to regulate foreign commerce tariffs’. The federal courts need to exercise their authority to review these executive actions impacting trade and taxes. We will undoubtedly see litigation and hopefully congressional action. For the first time, the Congress is now trying to reclaim some of its authority. (Will also see more WTO litigation — China and Canada have recently filed cases before the dispute resolution system. Look for future cases by Mexico and the EU)

      Trump’s tariffs are a reversal of decades of American foreign policy. They particularly will hurt U.S. farmers. His explanations for them often have nothing to do with economics but different political and foreign policy objectives and surely for other reasons. Often trying to squeeze his action into foreign policy and national security focused economic legislation (IEEPA and Section 232). Obviously, for Trump the two most beautiful words are ‘tariffs’ and ‘threats.’

      Trump’s illegal reversal of years of U.S. tariffs and trade policy mirrors his even more important abrupt change of U.S. foreign policies. From Munich 2, Trump’s apparent sell out of Ukraine (which mirrors Chamberlain’s appeasement of Nazi Germany in 1938) and then the new Trump – Putin relationship (mirroring the German-Russia Alliance of 1939, leading to Germany’s attack on Poland and the start of World War II). It is interesting to note that Trump’s ancestry is German and his actions mirror that of 1930’s Germany and sympathy his parents had for the American Bund in the 1930’s. 

“A blanket tariff imposed by the president, without an act of Congress, would be more likely to be found to be unconstitutional than a series of retaliatory measures on varying stated grounds. A piecemeal approach is far more likely to be sustained. The effect may be the same. Negotiations with the four major US trading partners—Mexico, Canada, the EU, and China—would by themselves cover almost half of US imports …. The principal constraints on US trade policy are likely to be a combination of foreign responses, economic forces unleashed by the new US tariffs, and the domestic political fallout from them.” “Constraints on Trump’s Trade Policies?” Petersen Institute.” (March 4, 2025).

“Trump’s executive orders imposing tariffs cited as authorities the US Constitution and several laws. The two key provisions cited are Section 301 of the Trade Act of 1974, which grants authority to retaliate against other countries for unreasonable acts that burden US commerce, and the International Emergency Economic Powers Act, which gives presidents wide latitude to respond to national emergencies. Both were cited in President Trump’s tariff executive orders. The retaliatory authority may have been included because it has been used in the past to deal with China, and the order called for additional 10 percent tariffs on Chinese goods as well. It is likely that the IEEPA is the primary authority included for the tariffs aimed at Canada and Mexico. The IEEPA has never been used for imposing tariffs. However, its language is extraordinarily broad—the enumerated authorities granted to the president by Congress is virtually unlimited—including the seizure of property to deal with a national emergency …. The IEEPA is not being used here to try to halt fentanyl shipments directly (e.g., applying sanctions to the shippers) but to force Canada and Mexico to deploy extra resources to crack down on this illicit trade. Similarly, the law is cited to force Canada and Mexico to stop illegal immigration across the Canadian and Mexican borders into the US. The new tariffs will apply to all products—fruits and vegetables, prepared foodstuffs, lumber, steel, home appliances, fuel, clothing, footwear, electrical machinery and electronic goods, toys and sports equipment, to name a few …. The one precedent related even tangentially to Trump’s Mexico and Canada tariffs is the 10 percent import surcharge that President Richard Nixon levied on August 15, 1971, under the predecessor authority to the IEEPA.  “Trade Wars Authorized? Petersen Institute (Feb. 4, 2025).

“Even the trade war, outrageous though it is, pales by comparison with the ambush of Volodymyr Zelenskyy in the Oval Office by the US president and vice-president and the subsequent suspension of military aid to Ukraine (and intelligence sharing).” “Trump’s Global Order Assault.” Financial Times (March 5, 2025).

“The U.S. tariffs were a stark turnabout from the free-trade evangelism that has marked much of postwar American foreign policy. The measures amounted to 25 percent tariffs on all imports from Canada and Mexico and a 10 percent tariff on all imports from China. They came on top of a 10 percent tariff on Chinese goods put into effect one month ago and a variety of older levies, including those that remain from the China trade war during Trump’s first term.” “Trump’s Tariffs.” New York Times (March 5, 2025).

“The President also professes to love American farmers, but he apparently loves tariffs more. U.S. farmers are already being squeezed by low crop prices and inflation. The American Farm Bureau Federation (AFBF) says farmers are losing money on almost every major crop planted for the third straight year. Tariffs will increase their pain. About 85% of the U.S. potash supply for fertilizer is imported from Canada. China is hitting U.S. farm exports with a 15% tariff, which will let farmers in Brazil and Australia grab market share.” “Trump’s Tariffs and Trump Voters.” Wall Street Journal (March 5, 2025).

“Trump has offered up a variety of explanations for the tariffs, saying they are punishment for other countries’ failure to stop drugs and migrants from flowing into the United States, a way to force manufacturing back to America and retribution for countries that take advantage of the United States.” “Trump’s Tariffs and Economic Gamble” New York Times (March 5,  2025). 

“Trump originally justified the tariffs under an emergency law to combat the alleged threat of fentanyl. But he claimed Tuesday the tariffs are needed because “we pay subsidies to Canada and to Mexico of hundreds of billions of dollars” and have “very large deficits with both of them.” …. That sounds like White House protectionist in chief Peter Navarro. He and his boss love tariffs for their own sake.” “Trump’s Roller Coaster Tariffs.” Wall Street Journal (March 6, 2025).

“It’s doubtful Mr. Trump even has the power to impose these tariffs, and we hope his afflatus gets a legal challenge. The Constitution gives power over trade to Congress, which for most of U.S. history wrote tariff law. That changed after the catastrophe of the 1930 Smoot-Hawley tariff, …. and ceded authority to the President to negotiate bilateral trade deals. It ceded more power after World War II …. The President now has the explicit power to restrict imports, but only for specific reasons. The President may impose tariffs on imports that threaten national security (Section 232) or in response to “large and serious” balance-of-payments deficits (Sec. 122), a surge of imports that harms U.S. industry (Sec. 201), and discriminatory trade practices (Sec. 301) …. During his first term, Trump used Section 232 to impose tariffs on steel and aluminum and 301 on goods from China. Mr. Trump’s executive orders imposing 25% across-the-board tariffs on Canada and Mexico and 10% (now 20%) on China instead invoke the 1977 International Emergency Economic Powers Act (IEEPA), which gives the President authority to address an “unusual and extraordinary threat” if he declares a national emergency. Trump deems fentanyl and other drugs such an emergency …. The bigger problem is that IEEPA doesn’t clearly authorize tariffs. The law lets the President investigate, block, prohibit or regulate any “importation or exportation” or financial transaction involving “property in which any foreign country or a national” has an interest or “any property, subject to the jurisdiction of the United States.” Presidents have used the law to freeze assets of foreign governments and nationals, restrict U.S. companies from doing business with them, limit export of technologies and ban imports from adversaries …. Trump’s tariff doesn’t appear reasonably related to the fentanyl emergency …. Presidents of both parties are now declaring everything to be an emergency to achieve their policy goals without having to deal with a frustrating Congress.” “Trump’s Tariffs are No Emergency.” Wall Street Journal (March 7, 2025).

“Trump’s start-and-stop expansion of tariffs on major trading partners has no analog in modern history. Yet the past can still be instructive. Previous trade disputes over everything from semiconductors to lumber to chickens have sometimes dragged out for decades, rattling international markets and boosting consumer prices. …. Reagan-era tariffs on Japanese semiconductors aimed to shield the U.S. technology sector from a daunting competitor. President Nixon ended short-lived across-the-board tariffs in 1971 soon after the export juggernauts of West Germany and Japan agreed to boost the value of their currencies. Contrary to many trade spats of past decades, the Trump White House has offered conflicting rationales for taxing foreign goods now, a sign that the coming trade wars could be open-ended.” “Trade Clashes Outlive Tariffs.” Wall Street Journal (March 10, 2025).

“Legal Tools of Trump’s Trade Strategy — The Trump administration’s choice legal instruments are Section 232, Section 301, and the International Emergency Powers Act (IEEPA). Section 232 allows the US government to impose trade restrictions under the justification of national security. While this provision has existed for decades, Trump’s use of it has been particularly aggressive, employing it to justify tariffs on steel, aluminum, and potentially automobiles  ….  Section 301, originally used to counteract unfair trade practices, had been largely dormant since 1995, until Trump revived it to impose tariffs on China under his first administration. The law grants the US government unilateral authority to investigate and penalize foreign trade policies it deems unfair, without requiring international arbitration or approval from the World Trade Organization (WTO). The IEEPA, perhaps the most flexible tool in Trump’s trade arsenal, grants the president sweeping powers to impose economic measures, under the rubric of “international emergency,” without lengthy investigations by other branches of government. Originally intended for national security crises, it has been increasingly invoked to implement economic restrictions, reinforcing Trump’s preference for executive-driven trade policy. “Trump’s American Trade Policy.” Hinrich (March 11, 2025).

“Democrats (are) forcing a vote to terminate Trump’s national emergency declarations for fentanyl and the southern border. The President used the emergency to impose tariffs on Canada and Mexico under the 1977 International Emergency Economic Powers Act (IEEPA). The National Emergencies Act provides fast-track procedures for Congress to end a presidential emergency.” “Congress and Reclaiming Trade Authority,” Wall Street Journal (March 13, 2025).