The US administration’s defence of its wide-ranging use of tariffs has had a rocky start, as Supreme Court judges have expressed scepticism on their legality. Trade experts have also raised concern that recent trade agreements are offering the US exceptional leverage over trade partners, particularly in south east Asia.
Elsewhere, potential taxation measures in the UK government's upcoming Autumn Budget have been trickling into the public domain, with electric vehicle (EV) drivers potentially facing a new levy.
Tide turning against tariffs?
Opening arguments were made in the US Supreme Court hearing on the legality of US President Donald Trump’s tariffs yesterday (5 November), with strong cases made for curbing some of the power he’s wielded as executive to impose vast trade measures.
Despite the court currently being skewed 6-3 towards conservative judges, voices from both sides of the political spectrum expressed doubt about the legal mechanisms Trump has used.
Politico reported Chief Justice John Roberts questioned whether the 1977 International Emergency Economic Powers Act (IEEPA) granted the president powers to impose tariffs, a purpose for which it has never previously been used.
As was also raised by legal experts in advance of the case, he noted that tariffs have “always been the core power of Congress”.
“So, to have the president’s foreign affairs power trump that basic power for Congress seems to me to kind of neutralise between the two powers, the executive power and the legislative power.”
Trump appointees joined liberal judges in challenging the US administration’s core rebuttal that the tariffs are “regulatory”, rather than “revenue-raising” in intent.
The role of IEEPA in granting Trump the power to impose tariffs has also been question in light of the Act being passed in order to curtail presidential powers in peacetime, rather than expand them.
‘Unconstitutional’
Tariffs have made their way to the Supreme Court through two successfully argued Federal cases, one brought by several Democratic states and one by two private firms harmed by the policy.
Representing those cases, the Liberty Justice Center’s Sara Albrecht said after yesterday's first round of oral arguments was made yesterday:
“These unilateral tariffs, imposed without Congressional authorisation, are unlawful. IEEPA does not permit a president to issue the kind of sweeping, arbitrary tariffs at issue in this case.
“They are also unconstitutional. Tariffs are taxes, and the Constitution grants only Congress, not the President, the power to tax Americans.”
‘Poison pill’ US trade deals
Compounding the challenges to US trade policy, trade experts have questioned the nature of recent US trade deals signed between the US and south east Asian nations that also share close trade ties with China.
The FT reports that experts have alleged deals with Malaysia and Cambodia contain ‘poison pill’ clauses enabling the US to terminate the agreements if these partners sign rival agreements that they deem “pose a material threat” to the US.
Simon Evenett, professor of geopolitics and strategy at IMD business school, wrote this week:
“Ultimately, poison pill provisions transform trade agreements from purely commercial instruments into tools for managing partner countries’ broader foreign economic policy orientation.”
While the renegotiated US-Mexico-Canada trade agreement set a precedent for this type of clause, Evenett argues it contains stronger legal definitions for what could trigger US termination.
Budget preview
As the 26 November date for the UK government's next budget draws nearer, more details of what we can expect are emerging.
Today, reports have suggested that chancellor Rachel Reeves will keep corporate tax on banks at 28% in what colleagues have said is a bid to keep the sector competitive and support growth.
In a blow to the government’s environmental ambitions, she’s also set to introduce a new pay-per-mile tax on EV drivers, according to the Guardian. The new 3p per mile charge is designed to offset falling revenue from petrol and diesel cars.
The government has said that, because there’s currently no equivalent to fuel duty for EVs, the move offers “a fairer system for all drivers”.
CEO of EV lobby group Electric Vehicles UK Tanya Sinclair, said that “pay-per-mile road pricing has resurfaced many times, and with reason.
"Today’s vehicle parc looks nothing like it did when emissions-based VED was introduced. There’s no doubt the system needs fundamental reform.
“The real question is how. Government must take the time to consult properly, design carefully and communicate transparently, a process that will take years, not months."
The policies are reported in the context of a growing fiscal gap that the Reeves will need to plug ahead of the next Parliament, with estimates of the government shortfall between revenues and spending reaching as much as £30bn in the past month.
Elsewhere in the headlines
· The Bank of England is poised to hold interest rates at 4% today, the BBC reports
· The firm behind some of the world's best-known alcoholic beverages, Diageo, is heading for lower than anticipated sales and profits this year, as tariffs hurt international sales
· The secretary of state for Northern Ireland yesterday visited businesses benefiting from dual-market access under the Windsor Framework, as part of International Trade Week
Yesterday in trade
· The EU reduced its emissions target for members after pressure from Italy and Romania
· China suspended some agricultural counter-tariffs against the US, following the announcement of a framework agreement last week
· EU leaders refused to attend an international summit in Colombia this week, in response to Trump’s hostility towards Colombian leader Gustavo Petro
You can read more on those stories here.
