After the Supreme Court struck down many of President Trump’s global tariffs, he pledged to keep most of them in place through other means. To discuss what the ruling and the president’s response mean for the economy, Amna Nawaz spoke with Natasha Sarin, a professor of law and finance at Yale University and president of The Budget Lab at Yale.
Amna Nawaz:
For more on what today’s ruling means for the economy, we’re joined by Natasha Sarin, professor of law and finance at Yale University and president of the Budget Lab at Yale.
Good to see you, Natasha.
So we got this Supreme Court ruling at 10:00 Eastern. By 2:00 p.m., the president had announced a new slate of tariffs. Help us understand, which of the tariffs are now gone and which are in place?
Natasha Sarin, President, Budget Lab at Yale University: So I will say it is a bit of a whirlwind. And the nature of what happened this morning was you basically had the president having effectuated across-the-board tariffs on allies and adversaries like at levels that we haven’t seen in the last century.
The Supreme Court said that about two-thirds of those tariffs, the tariffs that had been issued under this particular authority called IEEPA, were invalidated as a result of their decision. And then, as was widely expected, as a result of a decision like this, the president said he plans to use other authorities like Section 232 or Section 122 of the Trade Act, in order to be able to essentially keep in place tariffs that were at levels that were dismissed by the Supreme Court earlier this morning.
That’s actually a harder thing to do in practice than you might think having listened to the president this afternoon because there are more rules and process requirements associated with the other authorities that he’s trying to deploy, which is why his preferred authority was one that the Supreme Court said simply couldn’t whether the burden of tariffs as broad-based as those that this administration has pushed for.
Amna Nawaz:
And you just heard a little bit about this in the previous conversation. What about those billions in tariff revenue? Could retailers and manufacturers see some kind of a refund? Could consumers as well?
Natasha Sarin:
What’s so interesting is that in oral argument, Justice Amy Coney Barrett said, won’t it be a mess with respect to trying to think about what to do with the fact that about $140 billion of revenue have already come into the fisc as a result of these tariffs that were at play in the Supreme Court case?
Just as Amy Coney Barrett ultimately ruled to invalidate those tariffs, along with the majority, but Justice Kavanaugh said explicitly, this is in fact going to be a mess, recalling her in oral argument. And the decision says literally nothing with respect to what is going to happen with respect to those refunds.
One reason why that really matters to consumers is a large chunk of those $140 billion that have already been paid into the fisc as a result of these tariff levels have actually been passed through in the form of higher prices. We estimate my colleagues and I at Budget Lab that that cost the average American household around $2,000 a year in higher prices.
But if there are any refunds, they’re going to go to the firms, the importers of goods. And so how that ultimately plays out with respect to the consumers seeing these dollars, that’s an open question. How these refunds would even work in practice, big open question that this decision says nothing about.
Amna Nawaz:
Natasha, what about this new 10 percent global tariff that the president also announced? Given how the Supreme Court just ruled, does he have the authority to do that or does he need Congress?
Natasha Sarin:
Part of what I’m worried about with respect to these alternate trade authorities is you’re almost in this tariff legal uncertainty doom loop, where he’s effectuating these 10 percent across-the-board tariffs that were in place this morning before this decision landed through this alternative authority.
I’ll note that this alternative authority only gives him the capacity to keep those tariffs in place for 150 days. What happens after those 150 days, who’s to say? But even for those 150 days, does he have the power under this authority to levy tariffs like this? It’s never been tried before and it’s ultimately something that is likely to reach the Supreme Court in some capacity over the course of the months and years ahead.
And so I think tariff uncertainty is here with us to stay for quite some time. And I suspect this is not the last time that the highest court in the land is going to be weighing in on these questions.
Amna Nawaz:
You look at the economic impact of all of these things.
In a minute or so we have left, with the existing tariffs that are still in place, with this new 10 percent global tariff, what’s the economic impact you’re looking at there?
Natasha Sarin:
So what we know is that tariffs are at their highest level that we’ve seen over the course of the last century. As a result of today’s Supreme Court decision, tariff rates fell from something like an effective tariff rate of 16 percent to around 9 percent.
But they rose way back up as a result of these 10 percent across-the-board tariffs that the president announced this afternoon that basically held in place a large chunk of his existing tariff agenda. And all that is to say these are the most inflationary policies in our lifetimes. Tariffs are a tax on the American consumer, to the tune of several thousand dollars of increased prices every year.
And at a moment when the American people are still grappling with post-pandemic inflation, higher prices for literally everything that they consume than they remember just a few years ago, it is striking that we are pursuing these types of inflationary policies, and really to no economic end that has been clearly articulated from this administration.
Amna Nawaz:
Natasha Sarin, president of the Yale Budget Lab, thank you so much for your time.
Natasha Sarin:
Thanks so much for having me.
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