# The Winners & Losers from Trumps New Tariffs

An episode of [Patrick Boyle On Finance](https://invisiblenetwork.ai/podcast/1547740313), 2 Mar 2026, 30 min.

Audio: https://traffic.megaphone.fm/APO8219221380.mp3

In this episode, we explore the legal and economic fallout of the Supreme Court's landmark decision to strike down the "Liberation Day" tariffs, a move that has left the administration scrambling for a "Plan B". We dive into the "David vs. Goliath" story of VOS Selections, the tiny wine importer that successfully challenged the President's use of emergency powers, and examine why the new 10% flat-rate replacement may actually provide a competitive boost to China and Brazil while penalizing America's closest allies. From the bizarre world of "National Security Cabinets" to the $175 billion refund headache currently being exploited by "vulture" investors, we break down how tweeting out tariffs met its match in the U.S. Constitution. Patrick's Books: Statistics For The Trading Floor: https://amzn.to/3eerLA0 Derivatives For The Trading Floor: https://amzn.to/3cjsyPF Corporate Finance: https://amzn.to/3fn3rvC Ways To Support The Channel: Patreon: https://www.patreon.com/PatrickBoyleOnFinance Buy Me a Coffee: https://www.buymeacoffee.com/patrickboyle

## Transcript

[0:00] On February 20th, the US Supreme Court delivered a major legal
[0:04] set back to the cornerstone of Donald Trump's economic strategy
[0:08] by striking down about 2/3 of the tariffs that the
[0:11] administration had imposed. Specifically, the court ruled
[0:15] that the Liberation Day duties imposed under the International
[0:19] Economic Powers Act, or IEBA, were illegal.
[0:23] This was not a huge surprise to anyone who had been paying
[0:26] attention before reaching the highest court in the land.
[0:30] These duties had been ruled unlawful by the Court of
[0:33] International Trade and by a federal appeals court.
[0:36] The legal issue isn't that the president can never impose a
[0:40] tariff, it's that the power to tax belongs to Congress under
[0:44] Article One of the Constitution, and they've only delegated that
[0:48] power to the executive through very specific, limited laws.
[0:53] The Supreme Court essentially ruled that the ACT, which
[0:56] doesn't even contain the word tariff, was never intended to be
[1:00] a blank check for trade policy. Because investors had spent
[1:04] months watching this slow motion car crash in the lower courts,
[1:08] there was no major market spike when the verdict finally landed.
[1:12] In fact, the outcome was so predictable that even the family
[1:16] of one of the men helping run the policy was seemingly
[1:19] profiting from it. While Commerce Secretary Howard
[1:22] Lutnick was championing the tariffs in public, his sons, who
[1:26] now run his firm Counter Fitzgerald, were reportedly
[1:29] buying up the rights to hundreds of millions of dollars in
[1:33] potential tariff refunds at a deep discount.
[1:36] Lutnick has denied being involved in these trades, but
[1:40] Wired magazine reported seeing a letter from the firm explaining
[1:44] how they were willing to pay 20 to $0.30 on the dollar to buy up
[1:48] tariff refund claims. The reaction from the White
[1:52] House to the Supreme Court judgment was equally
[1:55] predictable. President Trump held a press
[1:57] conference where he described the justices as fools, lap dogs,
[2:01] and unpatriotic. He even claimed that the court
[2:05] had been swayed by foreign interests, which is a wild
[2:08] allegation to make against the highest court in the land.
[2:12] He even singled out some of his own appointees, calling Justices
[2:16] Amy Coney Barrett and Neil Gorsuch an embarrassment to
[2:20] their families for having the audacity to read the
[2:24] Constitution literally. Investors correctly assumed that
[2:28] the Tariff Man would do exactly what he ended up doing once the
[2:31] verdict was announced, start rebuilding his wall using
[2:35] different, albeit fiddlier, legislation.
[2:38] The problem for the administration, though, is that
[2:41] the economic miracle that they've been promising is
[2:44] starting to look a bit shaky. Despite a year of aggressive
[2:48] protectionism, the US trade deficit actually hit a fresh
[2:52] record high of $1.2 trillion last year.
[2:56] If you look at the list of the top 10 exporters to the US since
[3:00] the election, you'll notice that it is barely changed.
[3:04] It turns out that slapping attacks on an iPhone doesn't
[3:07] magically make a factory appear in the Midwest overnight.
[3:11] Moving big factories takes years, if not decades.
[3:15] Most businesses aren't willing to spend $30 billion on a new
[3:19] plant when the rules of the road are being changed by Tweed once
[3:23] a week. Instead of a manufacturing boom,
[3:26] the constantly fluctuating tariffs have mostly created a
[3:30] boom in business uncertainty. Firms have been hesitant to hire
[3:34] or invest because they know the economic rationale for a new
[3:37] project might vanish long before completion.
[3:40] We've seen tariffs on things like bananas and coffee, which
[3:44] were later removed because no matter how high you set the tax,
[3:48] you still can't grow these things in Ohio.
[3:51] You might think that a multibillion dollar trade policy
[3:54] like this would be taken down by a huge firm like Apple or
[3:58] Walmart, but the David who actually slayed the Tower of
[4:01] Goliath was a tiny, largely unknown wine importer called VOS
[4:06] Selections. They, along with a few other
[4:09] small firms, took this case all the way to the Supreme Court
[4:13] because they didn't agree that the president had the right to
[4:16] tax their French Chardonnay just because he declared a national
[4:20] emergency urgency. And as we'll see, their victory
[4:23] wasn't just a win for wine lovers.
[4:26] It was a fundamental reassertion of how the US government is
[4:29] supposed to function. How did a tiny wine importer
[4:33] convince 6 Supreme Court justices to dismantle a
[4:36] cornerstone of the Trump administration's trade policy?
[4:40] Well, they simply pointed out that the president was using the
[4:43] wrong tool for the job. The administration's legal case
[4:47] for a lot of the tariffs rested on the International Emergency
[4:51] Agency Economic Powers Act. They argued that because the
[4:54] president had declared a national emergency over trade
[4:57] deficits and fentanyl, which are questionable national
[5:01] emergencies to begin with, he was allowed to regulate imports
[5:05] however he saw fit, which in his mind meant applying tariffs.
[5:09] The problem, as VOS Selections pointed out, is that the word
[5:13] tariff doesn't even appear in that law.
[5:16] It was designed in the 1970s to allow a president to freeze the
[5:20] bank accounts of Rogue states or stop people from shipping high
[5:23] tech weaponry to terrorists. It was never meant to be a
[5:27] general taxing authority that bypasses the people who actually
[5:31] write tax laws. Congress.
[5:34] This brought the court's conservative majority face to
[5:37] face with a legal principle that they've spent years championing
[5:41] the major questions doctrine. It's based on an idea famously
[5:45] described by the late Justice Scalia, who said that Congress
[5:49] does not hide elephants in mouse holes.
[5:52] The idea is that if Congress had actually intended to give the
[5:56] president the power to unilaterally tax the American
[5:59] people to the tune of hundreds of billions of dollars, they
[6:02] wouldn't have hidden that power out of sight in an unrelated law
[6:06] about national emergencies. As Chief Justice Roberts noted
[6:10] in his opinion, the Constitution gave the power to tax to
[6:14] Congress alone. You can't just find a mouse hole
[6:17] in a 50 year old statute and shove A10 ton tariff elephant
[6:22] into it. One of the most compelling
[6:24] arguments made in the case was that if a president was allowed
[6:28] to use emergency powers this way, he could essentially impose
[6:32] tariffs on the American people whenever he wants, at whatever
[6:35] level he wants, and for as long as he wants, just by declaring
[6:39] an unreviewable emergency. During oral arguments, A
[6:43] hypothetical was raised that should would give pause to even
[6:47] the most ardent tariff supporter.
[6:49] What's to stop a future Democratic administration from
[6:52] declaring a climate emergency and slapping massive taxes on
[6:56] every gas powered vehicle or diesel truck that crosses the
[7:00] border? If the court had allowed these
[7:02] tariffs to stand, it would have been a radical rewrite of the US
[7:06] Constitution. This is the same logic that the
[7:09] Court used to strike down President Obama's Clean Power
[7:13] Plan and President Biden's attempt at student law
[7:16] forgiveness. In those cases, the conservative
[7:19] majority argued that you can't use vague old laws to push
[7:24] through massive policies that Congress never voted for.
[7:27] Whether you're a fan of the current president's trade policy
[7:30] or not, the court's ruling is a reminder that sticking to the
[7:34] Constitution is a safety feature for everyone.
[7:38] It ensures that the person you don't like, who will inevitably
[7:41] be elected in the future, can't use the same shortcuts to do
[7:45] things, things that you find even more objectionable.
[7:49] While the legal battle was playing out in Washington, the
[7:52] actual economic results of the tariffs were starting to show up
[7:56] in the data, and they were unimpressive.
[7:59] Despite all of the talk of economic independence, the US
[8:03] trade deficit hit a fresh record high of $1.2 trillion last year,
[8:08] even with the average effective tariff rate sitting at its
[8:11] highest level since 1946. A massive driver of this gap was
[8:17] the AI boom. To build the infrastructure for
[8:20] the ongoing AI revolution, US firms had to import a record
[8:25] $3.4 trillion worth of computer parts and equipment.
[8:29] Since most of these high tech components weren't hit by the
[8:33] initial tariffs, no import duty was charged.
[8:37] Had these components been tariffed, the money would have
[8:40] likely flowed out anyway. The government would have simply
[8:43] taxed the Big Tech firms importing them, which might have
[8:46] slowed the construction a bit or reduced the profits of US Big
[8:50] Tech. We also saw a massive
[8:53] stockpiling effect. Fearing that the Tariff Man was
[8:56] about to close the gates, American businesses rushed to
[8:59] import as much as they could in early 2025 to get ahead of any
[9:04] new taxes. the US consumers stepped up their purchases, too,
[9:09] to buy the stuff that they wanted before the prices went
[9:13] up. The administration claimed a
[9:15] small victory when the deficit appeared to dip slightly later
[9:19] in the year, But economists pointed out that this wasn't
[9:22] because the tariffs were working.
[9:24] It was simply the result of firms drawing down the massive
[9:27] inventories they had accumulated in anticipation of the new
[9:31] duties. Now, if you listen to the
[9:33] consensus story on Wall Street, tariffs are supposed to be
[9:37] dollar positive. The logic is that the tariffs
[9:40] lowered the demand for imports, which means fewer dollars are
[9:44] being swapped for foreign currencies like the yen or the
[9:47] euro. With less supply of dollars
[9:49] sloshing around abroad, the value of the greenbacks should
[9:53] go up. But a funny thing happened on
[9:56] the way to the trade war. Since the implementation of
[9:59] these tariffs, the dollar hasn't soared.
[10:02] It's actually weakened significantly, falling by
[10:05] roughly 10% over the last year. This decline makes imported
[10:10] goods even more expensive than the tariffs alone, as it now
[10:14] takes more dollars to buy the same Japanese machine parts or
[10:18] European wine. For US savers, this has been
[10:21] particularly painful. They've effectively seen their
[10:25] global wealth decline by double digits over the last year just
[10:29] by holding the world's reserve currency.
[10:32] This this has LED a number of analysts to wonder if the famous
[10:36] dollar smile theory is finally broken.
[10:39] The idea was famously put forth by the economist Stephen Jen
[10:43] during his time at Morgan Stanley.
[10:45] He argued that the dollar thrives in two extreme
[10:48] scenarios. It rises when the US economy is
[10:51] booming as investors want to move their money to where the
[10:55] action is, and it also rises when the world is in a crisis as
[10:59] everyone rushes to the safety of the US Treasuries.
[11:02] We saw this happen in the global financial crisis.
[11:06] Investors are now worried that if the US is deliberately
[11:10] causing the economic problems, it's safe haven status no longer
[11:15] makes sense. Investors might avoid the dollar
[11:18] in difficult times if they feel that the US government is busy
[11:22] breaking institutions that historically made it a safe
[11:25] haven. The bond market seems to share
[11:29] some of this skepticism. After the Supreme Court ruling
[11:33] came down, Treasury yields barely moved.
[11:36] Normally, removing a massive tax like this would cause a stir,
[11:41] but investors had already priced in the probable outcome.
[11:44] They also correctly predicted that the administration would
[11:48] find a more fussy way to put the tariffs back in place almost
[11:52] instantly. What could start worrying the
[11:55] market is the national debt. Jerome Powell recently noted the
[12:00] budget deficit is on an unsustainable path, and this
[12:04] ruling just opened the door for roughly $175 billion in tariff
[12:09] refunds. While that's a drop in the ocean
[12:12] compared to the 30 trillion Treasury market, it represents a
[12:16] significant revenue loss that was previously acting as a
[12:19] restraint on the growing deficit.
[12:22] This leads us to the administration's immediate
[12:25] response, what many are calling Plan B.
[12:28] As if the Supreme Court thought that they'd ended the trade war
[12:32] last week, they hadn't been spending enough time on Truth
[12:35] Social. Within hours of the Supreme
[12:38] Court ruling, President Trump signed a new proclamation to
[12:42] bypass the court's decision. He pivoted away from the now
[12:46] illegal IEEPA and instead invoked Section 122 of the Trade
[12:50] Act of 1974. This is another obscure, never
[12:55] before used provision that allows, as a president, to
[12:58] impose temporary surcharges of up to 15% to address large and
[13:04] serious balance of payment deficits.
[13:07] Initially, the White House announced a global 10% tariff
[13:10] under this new authority. But by Saturday morning, the
[13:13] president had clearly had time to sit with his anger, and he
[13:17] tweeted out on Truth Social that he was hiking the rate to the
[13:21] maximum allowable 15%, effective immediately.
[13:26] There are a few fussy details with Plan B that might make it
[13:30] less effective for Trump than the original IEPA tariffs were.
[13:34] The biggest issue is the 150 day time limit.
[13:38] Unlike the previous tariffs, Section 122 tariffs expire after
[13:42] 150 days, meaning in late July, which is a bit before the
[13:46] midterm elections. To keep the taxes going beyond
[13:50] five months, the president would have to get a vote of approval
[13:54] from the very Congress he's been trying to bypass up until now.
[13:58] While the Republicans control Congress, many are uncomfortable
[14:02] applying taxes that are unpopular with voters right
[14:05] before an election. Then there's the problem of the
[14:08] 15% hard cap. Section 122 has a legal ceiling
[14:13] of 15%, which means that the administration can no longer use
[14:17] the 25% or 50% punishment tariffs that they previously
[14:22] used to lash out at specific countries like China, Canada, or
[14:25] Brazil. The laws designed for across the
[14:29] board stable tariffs, not the kind of bilateral deal making
[14:33] and targeted tariffs that the administration prefers to keep
[14:37] the rest of his agenda live. The President confirmed that the
[14:41] sector specific tariffs like those on steel and aluminium
[14:44] would remain in full force because they were passed under
[14:48] different laws that the Supreme Court didn't touch.
[14:51] He also issued a fresh proclamation to ensure that the
[14:55] suspension of de minimis treatment, the rule that lets
[14:58] you buy cheap stuff from overseas without taxes, remains
[15:02] in place. The result is, for now, a trade
[15:06] policy that's become a legal patchwork quilt for businesses
[15:10] and consumers. The slow motion car crash hasn't
[15:13] stopped. It's just entered a new phase.
[15:16] They aren't getting a reprieve. They're getting a different,
[15:19] shorter term tax that comes with a whole new set of legal
[15:23] uncertainties. While the administration is
[15:26] confident in this new pivot, legal experts are already
[15:30] pointing out some massive holes in the hall of Plan B.
[15:34] Analysts at the Cato Institute, a conservative think tank, have
[15:38] noticed that Section 122 was never intended to be a tool for
[15:43] general trade policy. It was written in the early
[15:46] 1970s as a direct response to the Nixon shock of 1971, the
[15:51] moment that the US effectively ended the gold standard.
[15:55] At that time, the world was still struggling to figure out
[15:59] if it could return to a system of fixed exchange rates.
[16:02] In that old school era, a country could actually run out
[16:06] of gold or foreign reserves to pay its debts, a true balance of
[16:10] payments crisis. But in the modern world of
[16:13] floating exchange rates, that problem is largely vanished.
[16:17] As the economist Milton Friedman famously argued, a system of
[16:21] floating exchange rates completely eliminates the
[16:24] balance of payments problem because the currency price
[16:27] fluctuates. To prevent such a crisis because
[16:31] the US dollar now floats freely on the open market, the
[16:34] administration is once again conflating 2 very different
[16:38] things. A trade deficit, which is just
[16:41] us buying more stuff than we sell, and a payments crisis,
[16:45] which is US being unable to pay our bills.
[16:48] To the Cato Institute, using Section 122 to fix a trade
[16:52] deficit is like trying to use a law designed for emergency
[16:56] bankruptcy to justify a spending spree.
[17:00] Well, this might well be challenged in court.
[17:02] Most analysts expect that the cases would take much longer
[17:06] than 150 days to settle. It's also likely that the
[17:10] administration would get more wiggle room from the courts on
[17:14] these economic definitions than they did on purely
[17:17] constitutional ones, as that's what the Supreme Court cares the
[17:21] most about. To fill the gaps left by the 15%
[17:25] cap on Section 122, the White House is now leaning heavily
[17:29] into two other pieces of legislation, Section Three O 1
[17:33] and Section 232. Section Three O 1 is a slow burn
[17:37] tool. It allows for tariffs as a
[17:40] response to unfair trade practices, but it requires
[17:43] lengthy investigations that take months to complete, meaning that
[17:48] they aren't much use for a president who wants to change
[17:51] the tariff rates once a week. Week.
[17:53] Section 3 O one investigations where there have been unfair
[17:56] trade practices do make total sense under any administration
[18:01] at any time. Then there's Section 232, which
[18:06] is where things get really creative.
[18:08] This law allows the president to impose tariffs if he determines
[18:12] that certain imports are a threat to national security.
[18:16] Historically, this was used for things like uranium or
[18:19] specialized steel needed for weapons manufacturing, but the
[18:22] Trump administration has broadened that definition to
[18:25] include softwood lumber and even kitchen cabinets.
[18:30] The Department of Commerce has determined that we can't be
[18:33] guaranteed a secure nation if we're storing our dishes in
[18:36] Canadian made cupboards. It's a bold new doctrine, the
[18:40] national security cabinet, which is a bit confusing because
[18:44] usually when you think about a president's cabinet being a
[18:47] threat to national security, you aren't talking about where
[18:50] they're keeping the coffee mugs. But that's where we are today.
[18:54] The Supreme Court ruling didn't just strike down the tariffs, it
[18:58] also clarified exactly what AIPA is for.
[19:01] The court ruled that while the president can use the ACT to
[19:05] block or freeze transactions, basically using it for licenses
[19:09] and embargoes, he can't use it to raise revenue.
[19:13] This has been a major point of frustration for the president.
[19:17] He tweeted on Truth Social that if he's able to issue trade
[19:21] licenses, he should be able to charge a fee for them.
[19:25] But once again, that's exactly what the court says that he
[19:28] can't do. Under the Constitution, any fee
[19:32] that's actually a tax in disguise has to be approved by
[19:35] Congress. While the president wants to
[19:37] declare an emergency so that he can treat the US border like a
[19:41] private club with a cover charge, the justices reminded
[19:45] him that he's an executive, not a bouncer.
[19:48] He still has the power to ban products entirely, but he's
[19:51] furious that he can't charge a fee while doing it.
[19:55] This leaves the government with a massive $175 billion problem,
[20:00] as that's the estimated amount of illegal IEPA tariffs that
[20:04] have been collected over the last year, as former U.S.
[20:08] Trade Representative Michael Froman recently explained on the
[20:11] FT Economic Show. It's a matter of settled law
[20:15] that if tariffs or taxes have been collected, either by
[20:18] mistake or incorrectly, they have to be refunded.
[20:22] He says that there are open questions about the exact
[20:24] process and there may be some open issues to be worked through
[20:28] in the courts. But the fundamental question
[20:31] about whether refunds are due or not is well established
[20:35] precedent. The way it works when an
[20:37] importer pays a tariff is that the money doesn't go straight to
[20:41] the Treasury. It gets held by US customs for
[20:44] 351 days, so almost a year before it's finally liquidated,
[20:50] which is when the government closes the books on that
[20:53] specific shipment and sends the money to the treasury.
[20:57] From that point, businesses have an additional 180 day window in
[21:01] which they can file a formal protest to request their money
[21:05] back if there's been a mistake. Most of the tariff money should
[21:10] still be sitting with customs not yet liquidated as as the
[21:13] IEPA tariffs were introduced on April 4th last year, there might
[21:18] be different processes for claiming back liquidated versus
[21:22] unliquidated tariffs. And it already looks like there
[21:25] might be a fight over who gets the money.
[21:27] Because so many firms knew that this day was coming, thousands
[21:31] of them have already filed protective lawsuits to ensure
[21:35] that they don't miss out on any of the deadlines.
[21:38] An obvious issue is that most of these tariffs were passed on to
[21:42] you, the consumer, in the form of higher prices at the grocery
[21:46] store or at the mall. A lot of importers filled their
[21:49] warehouses before the tariffs kicked in.
[21:52] Some swallowed some or all of the tariffs themselves,
[21:56] reluctant to raise prices, and others passed them straight on
[22:00] to consumers. Research from the New York Fed
[22:03] earlier this month found that between January and August of
[22:07] last year, American took 94% of the tariff hit.
[22:11] During September and October, that ebbed to 92%, settling to
[22:17] 86% in November, meaning that foreign exporters may have
[22:21] slightly reduced their prices, but Americans took almost the
[22:25] entire tax hit. While the businesses who paid
[22:29] the tariffs at the port of entry are the ones with the legal
[22:32] standing to claim them back from the government, it's almost
[22:35] impossible to track which companies swallowed the cost and
[22:39] which one passed them on to consumers.
[22:42] Politicians are, of course, turning this into a campaign
[22:45] issue. Democratic governors like JP
[22:48] Pritzker and Gavin Newsom are declaring that American
[22:51] consumers and farmers are owed billions in compensation, which
[22:56] comes to around $1700 per household, and some are suing
[23:01] the government for these refunds.
[23:04] Other politicians are demanding that small businesses be
[23:07] prioritized legally. Most of these claims are a long
[23:12] shot. The money was paid to customs by
[23:15] importers, not by individuals, and so the Treasury doesn't have
[23:19] a list of which customers bought a tariff toaster or a pair of
[23:22] jeans. Amusingly, while researching
[23:26] this, I came across a website on whether citizens should still be
[23:30] expecting their $2000 Trump tariff check.
[23:33] It was offering advice on how to track your refund.
[23:37] I wouldn't advise on holding your breath waiting for that
[23:40] one. It should come right after that
[23:42] $5000 DOGE dividend check that Elon Musk told you was coming
[23:46] too. The game company Cards Against
[23:49] Humanity announced that they would pass their entire refund
[23:53] back to their customers. While that makes for a great
[23:56] headline, it would be a logistical nightmare.
[24:00] Most of their games are sold for around $20 in big box stores
[24:04] like Target or on Amazon, and so even if buyers got a full
[24:08] refund, the actual overpayment per customer might be less than
[24:12] a dollar. It's still a brilliant way to
[24:14] make people like the brand, but for most people, the check in
[24:18] the mail won't be enough to buy a cup of coffee.
[24:22] There is a huge political incentive for the administration
[24:26] to move fast with refunds. If they could somehow get this
[24:30] money back into the pockets of Americans quickly, it would act
[24:34] as economic stimulus just in time for the midterm elections.
[24:38] Right now, the Tariff Man brand is struggling and the president
[24:42] has found himself in an awkward political position.
[24:45] According to a recent ABC News Ipsos poll, 64% of Americans now
[24:52] disapprove of the president's handling of trade policy.
[24:55] A Council on Foreign Relations poll found that 65% of people
[25:00] across both parties now tied these tariffs directly to the
[25:04] cost of living crisis. For a lot of voters, these
[25:07] weren't protective duties. They were a 15% surcharge on
[25:11] their cost of living. Perhaps the biggest irony of
[25:15] this new tariff structure is that it's actually shifted the
[25:18] competitive landscape in favor of the very countries the
[25:22] president claimed he was trying to punish by moving to a flat
[25:26] rate, which was implemented at 10% this Tuesday instead of the
[25:30] 15% that he had tweeted over the weekend.
[25:34] The administration has significantly reduced the tax
[25:37] barrier for goods imported from China, Brazil and India because
[25:42] many of these countries were previously facing emergency
[25:45] duties as high as 50%. The new 10% tariff represents a
[25:51] much lower hurdle for Americans buying imported goods from these
[25:54] countries. Data from Global Trade Alert
[25:57] reported in the FT shows that the trade weighted average
[26:01] tariff on goods from Brazil has dropped by 13.6 percentage
[26:06] points, while the burden on Chinese goods has fallen by over
[26:10] 7 points. For an American importer, a
[26:13] Chinese he's made knitted sweater or piece of furniture
[26:16] suddenly looks a lot more affordable than it did last
[26:19] week. Meanwhile, America's closest
[26:23] allies are finding out that their special relationship now
[26:27] comes with a higher price tag because the UK, the EU and Japan
[26:31] had previously negotiated lower preferential rates.
[26:35] This new global floor actually increases the tax that American
[26:40] importers must pay to bring in their goods.
[26:43] The UK is the hardest hit here. The average tariff on British
[26:47] goods has actually increased by 2.1 percentage points,
[26:51] effectively erasing the benefits of the trade deals they spent
[26:55] months finalizing. And this is the kicker.
[26:58] None of these deals that we've been hearing about for the last
[27:02] year are actual trade deals because the president never sent
[27:06] them to Congress for approval. They aren't binding treaties.
[27:10] They're just temporary executive arrangements.
[27:13] This is why the EU is now delaying ratification of its
[27:16] side of the deal. India delayed planned trade
[27:19] meetings this week and Taiwan has signalled that it won't ask
[27:24] its parliament to move forward with their agreement until will
[27:27] they get a guarantee that it can't be undermined by the next
[27:31] Saturday morning social media post.
[27:33] Most countries are expected to hold up to their sides of the
[27:37] deals. The EU Trade Commissioner urged
[27:40] EU members this week to approve the deal anyhow, noting that he
[27:45] had received assurances from his US counterparts that they plan
[27:49] to honour the Turnberry Accord. The real strategic problem for
[27:53] the White House is that China hasn't even sat down to
[27:57] negotiate with them yet, and this patience may have been very
[28:00] wise for China. Now that the Supreme Court has
[28:04] struck down the emergency tariffs and the replacement
[28:07] tariffs have a 5 month expiration date, Trump is
[28:10] heading into his upcoming meeting with President Xi with a
[28:14] much weaker hand than he had before.
[28:17] The real test of the Tariff Man legacy will come this November.
[28:22] It's worth remembering that with Republican control of both the
[28:25] House and the Senate, the president likely could have
[28:28] codified his tariffs into law last year when his popularity
[28:32] was at its peak. Congress seemed more than
[28:35] willing to appease his agenda, and the legislative win would
[28:39] have made this entire Supreme Court defeat a non issue.
[28:43] But now the clock has turned against him.
[28:46] Given the 2026 is an election year and the tariffs have become
[28:50] deeply unpopular with a public weary of the cost of living
[28:54] crisis, the window for a clean congressional vote has likely
[28:59] slammed shut. Instead, the administration is
[29:02] left with a strategy of legal improvisation, a patchwork of
[29:06] 150 day surcharges and obscure national security claims.
[29:11] Trump should be able to rebuild his wall 1 brick at a time, 2
[29:16] sections 301 and 232 ahead of the midterms.
[29:20] Whether the American voter views this as a bold defense of the
[29:23] economy or as desperate fiddling with the rules remains to be
[29:28] seen. One thing is certain, the error
[29:31] of the unlimited executive tax has hit a very firm, very
[29:35] constitutional wall. And as the tiny wine importer
[29:39] showed, even the most ambitious administration has to follow the
[29:43] rules of the road. Thanks for tuning into this
[29:46] week's podcast, which is made possible due to support from
[29:50] listeners like you on Patreon. If you'd like to support the
[29:53] podcast, I'll leave a link in the show notes.
[29:56] Have a great week and talk to you again soon.
[29:58] Bye.

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