The Supremes Tackle Tariffs
Trade Deficits Rock On
On Friday February 22nd, the United States Supreme Court rendered its decision in the international trade tariffs case filed as Learning Resources v. Donald J. Trump. Representing the plaintiffs was the Pacific Legal Foundation, the relevant law was the International Emergency Economic Powers Act (IEEPA) of 1977, and their press release states:
The businesses asked the Supreme Court to determine whether IEEPA authorized the President to impose tariffs and, if so, whether Congress unconstitutionally delegated that legislative authority to the President. The 6–3 decision held that in enacting IEEPA, Congress did not delegate “the distinct and extraordinary power to impose tariffs,” a power that the Constitution vested in Congress.
Before I address the ruling, it is best to put the idea of protective tariffs, President Trump’s rationalization for them, and trade deficits into perspective.
Trade is voluntary exchange for mutual profit. Tariffs are the intrusion of force by the State in private transactions.
Trade deficits are one half of a double entry accounting system and mean little without proper context. The other half is the capital account surplus. Tariffs extract capital from its wealth creation potential.
Cheap imports mean greater consumption and job creation. Or increased savings and investments for future prosperity. Tariffs degrade the price mechanism. Price discovery is the foundation of efficient markets.
Countries that subsidize their home industries are exporting wealth. Tariffs delay the innovation needed for declining industries to stay competitive.
Trade deficits happen when there are income disparities between countries. They are evidence of economic vitality. Tariffs are taxes on importers, value adding businesses, and consumers. They impair economic vitality.
What is the IEEPA? As a Reason Magazine article dated November 9, 2025, reports: “If the President declares a national emergency with respect to any unusual and extraordinary threat, which has its source in whole or substantial part outside the United States, to the national security, foreign policy, or economy of the United States, The President may”:
Regulate, direct and compel, nullify, void, prevent or prohibit, any acquisition, transportation, importation or exportation of any property in which any foreign country or a national thereof has any interest.
Notice, there is nothing about the power to impose tariffs on importers. But what about the national emergency claimed by the Trump administration? There was none and there is none. Far from it. According to the Bureau of Economic Analysis (BEA)
The U.S. goods and services trade deficit for 2025 was $901.5 billion, a marginal 0.2% decrease from $903.5 billion in 2024, despite new tariffs – the third largest in history.
For the full year 2025, the economy grew by 2.2%, a deceleration from 2.8% in 2024.
By the third quarter of 2025, real gross output increased at an annual rate of 3.2 percent.
Wages increased 0.3% in January, unemployment was unchanged at 4.3%.
None of this reveals anything close to an emergency. Those are healthy numbers, but what about leading indicators? The S&P 500 gained 17% in 2025.
But assuming President Trump’s economic advisors, who are certainly better than President Biden’s team of luminaries, are actually clairvoyant, how effective were their massive new tariffs at curtailing this national emergency? According to another Reason Magazine article, this time dated February 19, 2026:
America imported $3.44 trillion of goods during 2025, the Census report shows. That’s a $143 billion increase over 2024, despite the higher taxes applied to many of those imports last year. Meanwhile, exports increased by $123.5 billion to a total of $2.2 trillion.
In summary, trade deficits are largely irrelevant, protective tariffs are largely destructive, there is no economic emergency, and the Supreme Court delivered a ruling that helps restore America’s reputation as the best place for investors in the history of the world.
The Pacific Legal Foundation concluded in their press release: “The Supreme Court’s decision is a win for the separation of powers and the American people,” said Oliver Dunford, a senior attorney with Pacific Legal Foundation.” Or as Reason quoted Justice Neil Gorsuch in the majority opinion:
Americans fought the Revolution in no small part because they believed that only their elected representatives (not the King, not even Parliament) possessed authority to tax them, Gorsuch pointed out. And Americans later codified these beliefs in the Constitution.