Apex Court cautious, Trump angry
Experts feel that the US Supreme Court’s decision to delay its order on the constitutionality of tariffs for the second time in a week signals its caution, and behind-the-scenes tussle. This is reflected in two related issues. The first is that Polymarket, a blockchain-based prediction platform, states that nearly three-fourths of the traders are betting on a negative court ruling, which will deem the tariffs as illegal. The second is the US President Donald Trump’s recent missive on his social media platform, which says that “if the Supreme Court rules against the United States of America on this National Security bonanza (tariffs), WE’RE SCREWED.”
Given these two contradictory positions, and the fact that the apex court is filled with judges appointed by Trump’s Republicans, there seems to be a tussle within the institution on the issue. While the thinking is that a true order should deem the tariffs as unconstitutional, there are external, possibly political, pressures not to do so in the interests of the nation, president, and ruling party. In essence, the Supreme Court stays divided from within as to how to deal with the tariff issue. Media reports reflect this paradox as some stated that the first delay indicated a pro-Trump order, and the second one indicates that it may be against the president.
Trump’s anger stems from the realisation that if the duties are dubbed illegal, or that the president does not have the executive powers to impose, it will “trigger an economic and administrative crisis.” The US may need to refund the hundreds of billions of dollars that it has collected to different nations, a “process nearly impossible to execute.” In a long post, Trump explains, “It would be a complete mess, and almost impossible for our Country to pay.” The president feels that the total may be in trillions of dollars if the nations demand investments-related refunds, apart from the tariff ones.
“That (refunds of hundreds of billions of dollars) does not include the amount of ‘payback’ that Countries and Companies would require for the investments they are making on building Plants, Factories, and Equipment for the purpose of being able to avoid the payment of Tariffs,” explains the president. The fact remains that in most cases, lower tariffs negotiated bilaterally with nations and regions stipulate minimum foreign direct investments over a specific period. Many foreign firms have already invested to build new plants, or expand the existing ones. Based on the Supreme Court order, they may demand this money back if the tariffs are ruled as illegal.
According to Trump, the task is impossible. “Whoever says that it (refunds) can be quickly and easily done would be making a false, inaccurate, or totally misunderstood answer to this very large and complex question. It (refund calculation) may not be possible but, if it were, it would be Dollars that would be so large that it would take many years to figure out what number we are talking about and even, who, when, and where, to pay,” said the president. The point is that the refunds issue will be fought in several courts of law.
However, the traders linked with Polymarket believe that the Supreme Court may take an ani-Trump stance, largely because the president imposed the tariffs in the garb of national economic emergency, which does not, and did not, exist. The duties on imports were an illegal extension of the executive powers, which were aimed to be used rarely, if ever. In the past, few presidents relied on the emergency powers, and for specific cases and events. In addition, the judiciary, as is the case with loud voices within the Republican party, may wish to curb and curtail Trump’s executive overreach.
Of course, there are political ramifications. If the Supreme Court rules against Trump, the latter may be energised to use other means to continue with the tariffs. Media reports, and legal experts indicate that he has several aces up his sleeves, although they will not result in immediate impositions. This may lead to more legal cases within the US against the new measures, but buy valuable time for the president, at least until the midterm elections are held later this year. An angry Trump may take more aggressive decisions on other fronts, like the Venezuelan abduction of a president, and his wife.
For example, he may attack Greenland to divert attention, and take on Colombia. This will create political and diplomatic crises, which will lead to internal issues. In a bid to woo the loyalists, and other voters, a tariff-trapped president may flex his muscles in other areas to show his strength. He will gain confidence from the recent economic data which shows that the GDP growth is high, and trade and current account deficits are coming down. Although inflation and prices inch up, Trump has already pinpointed the villain of the piece in the form of the chairman of the Federal Reserve.
According to a media report, “(American) Economic activity picked up at a ‘slight to modest pace’ in most parts of the US since mid-November, the Federal Reserve said…. This marks an improvement over the last three report cycles where a majority of districts reported little change. Employment levels were mostly unchanged in eight of the Fed’s 12 regional districts. Wages grew at a ‘moderate’ pace, with ‘multiple contacts reporting that wage growth had returned to ‘normal’ levels.” So, in a sense, the “economy is picking up, employment remains unchanged,” and the trade deficit is down.
Some experts feel that a negative order against Trump may weaken the latter politically, and have implications for the midterm elections. Right now, he enjoys a thin majority in both the Senate and Congress, which allows him to push through several laws. In any case, the president uses executive powers to push through his thoughts, emotions, and decisions to woo loyalists and supporters. But if the president loses both the houses, and most of the seats are up for grabs this November, he will become a lame-duck leader. His presidency may be there in theory, but not in practical terms.
Apart from Americans, other nations, both allies and enemies, await the Supreme Court judgment on tariffs and president. Global stock markets, bond markets, and bullion prices are expected to reach dramatically, and radically, whatever may be the order. If it favours the president, investors’ sentiments will turn negative, as it will embolden the president. If it is against him, the markets will celebrate, and reverberate with bullish emotions.
