- by New Deal democrat
Let me start this post by picking up where I left off yesterday.
In yesterday’s post I suggested that an absolute YoY decline in intermodal rail freight might well show up in this morning’s report from the AAR. And as the below chart shows, that’s exactly what happened, with intermodal traffic being down YoY for the first time this year at -1.8%:
This is after a very small 0.3% YoY increase last week.
But of course the other big thing that has happened since yesterday morning is that the US Court of International Trade, as special US District Court specializing in these issues, declared that (as far as I have been able to determine) *ALL* of the tariffs T—-p has imposed since he took office were Unconsitutional and invalid, and ordered that they be permanently stopped.
So what happens next? I expect both the legal and the financial/economic communities will be gaming out how this is likely to unfold further in the coming months.
One thing that has already happened as of last night is that the Administration filed an appeal with the Federal Circuit Court of Appeals.
In order of confidence, here is how I expect developments to happen from here:
- the Administration will ask that the Court of Trade’s decision be stayed during appeal
- this will wind up with the Supreme Court, perhaps within a matter of weeks.
- the Supreme Court will expedite the appeal and decision process, because of the huge impact on the economy from a decision either way. They will want to provide certainty.
I am somewhat less certain of the following:
- the Administration’s request for a stay will be granted, because continuing the status quo of tariffs is less destabilizing than their sudden disappearance.
- the appeals court and Supreme Court will uphold the opinion of the Court of Trade on the basis of the “major questions doctrine” and possibly for other reasons. In other words, if Biden couldn’t waive student loan payments in the face of a statute that said that he could “waive or alter” such payments, without more explicit Congressional authorization, then the wholesale upending of the US tariff regime in the face of explicit Constitutional text saying that tariffs are a Congressional responsibility, certainly qualifies as such a “major question” as well.
- regardless of what the courts do, the Administration will drag the process out with as many interim appeals as possible.
- the Administration will try to evade the Court of Trade’s ruling, and indeed any adverse ruling by the Supreme Court by invoking other laws allowing for the imposition of tariffs.
Now let’s turn to what companies will do. I am almost 100% sure that the kind of gaming out I engaged in above is being done by many businesses today as well.
In view of the above, if I were a company that imported some or all of what I sell, would I go ahead now and reinstate new foreign orders? Or would I hold back, waiting for the smoke to clear?
I think the second course of action is far more likely. If I order now, or during the pendency of any appeals, I am subject to being whipsawed by any stay that might be entered by the Appellate or Supreme Court, as well as by any adverse ruling upholding the tariffs by either court, and further by the likely continuing efforts of the Administration to evade the ruling. And even if the Supreme Court ultimately agrees with the Court of Claims, T—-p is notorious for stiffing counterparties, so I would expect to go through months if not years of dilatorious litigation just to get my improperly paid tariffs back. Thus the safer course is to wait until I have certainty.
We live in interesting times. In any event, my suspicion is that the downstream effects of Tariff-palooza! will continue.
