Trump the Trade Tyrant

October 3, 2016

It would be a grave mistake for American voters to underestimate the might of the U.S. presidency – or overstate the power of checks and balances to curtail radical policy actions.

Republican nominee Donald J. Trump has made headlines threatening to pull out of the World Trade Organization, renegotiate the North American Free Trade Agreement and impose 35 percent and 45 percent tariffs on imports from Mexico and China, respectively. Would a President Trump have the powers to carry out these threats without congressional consent? Could the courts stop him?

The simple answers are that a president has such powers, and it seems unlikely that, if elected, Trump would be derailed by the judiciary. Congress has delegated to the president extensive powers to restrict trade and limited powers to liberalize trade.

If Trump carried out his threats, business firms and some states would vigorously challenge the new trade restrictions. But his actions would likely survive court challenges and congressional protests, because five statutes on the books give the president sweeping powers over foreign commerce.

Statutes do not die of old age, and the granddaddy law, now nearly a century old, is the Trading with the Enemy Act of 1917. TWEA enables the president to restrict all international trade and financial flows and to freeze or seize any foreign assets during time of war. The powers are as breathtaking as they are broad – they are not limited to actions directed against the military enemy but encompass anyone and everyone the president pleases. (Franklin Roosevelt's use of TWEA to declare a bank holiday, Lyndon Johnson's use to restrict outward direct investment and Richard Nixon's use to impose a 10 percent surcharge illustrate the scope of presidential powers.)

Moreover, since the Second World War, for purposes of TWEA, the United States has been at war almost continuously, through congressional declarations and resolutions. Additionally, the International Emergency Economic Powers Act of 1977 allows the president to restrict trade and finance during a national emergency – and courts simply do not question presidential declarations of national emergency. Presidents customarily use IEEPA to impose economic sanctions for foreign policy purposes, but nothing would prevent Trump from using the statute for his commercial goals.

As for NAFTA, it contains a provision that would enable Trump to withdraw from the agreement after giving six months' written notice to Canada and Mexico. He could then use Section 201 of the NAFTA Implementation Act of 1993 to hit Mexico with 35 percent tariffs claiming insufficient reciprocity, following consultations with Congress – or he could invoke IEEPA after declaring a national emergency, with the same result. President Trump could similarly dispatch other free-trade agreements. Most cataclysmic, he could withdraw from the WTO and revert U.S. most-favored-nation tariffs to their Smoot-Hawley levels, last seen in the Great Depression.

If such actions strike Trump as too draconian, he could draw on three Cold War statutes with more limited boundaries. The first, Section 232(b) of the Trade Expansion Act of 1962, enables the president to impose import restrictions after finding a threat to national security. The second, Section 122 of the Trade Act of 1974, allows the president to impose maximum tariffs of 15 percent, or quantitative restrictions, for 150 days, against all or selected countries to deal with large and serious U.S. balance of payments deficits. A third statute, Section 301 of the Trade Act of 1974, lets the president take retaliatory action, including trade measures, after finding that a foreign country unfairly restricts U.S. commerce.

If Trump translates trade threats into trade restrictions, vigorous domestic opposition is inevitable. Auto companies such as GM and Chrysler, apparel firms such as Gap and Levi's and information technology giants such as Apple and Qualcomm would all seek preliminary injunctions. Past cases, however, illustrate the demanding tests for federal courts to grant preliminary injunctions against presidential actions and suggest that the challengers would face a steep uphill battle.

Trading partners harmed by U.S. measures might well also challenge his moves under the General Agreement on Tariffs and Trade, claiming compensation because their legitimate expectations of trade benefits had been denied. Rather than wait for vindication in the WTO, however, they might simply retaliate against U.S. exports, intellectual property or investment interests.

It is troubling that ancient and modern statutes would empower President Trump to discard the international fabric of the U.S. economy, with very little assent from the Congress or the courts. In light of this possibility, if only hypothetical, Congress should seriously review the existing delegations of its powers under Article 1, Section 8 of the U.S. Constitution, and narrow those statutes through appropriate amendments.