Former House Speaker Paul Ryan (R-Wis.) is predicting further disruptions to President Trump’s wide-ranging tariff regime, with consequences for financial markets.
He said Wednesday that Trump’s emergency tariff authority, which is the legal basis for Trump’s country-specific “reciprocal” tariffs that are set to go into effect Thursday, is likely to be struck down by the Supreme Court.
An appeals court is reviewing that authority, which Trump invoked through the 1977 International Emergency Economic Powers Act (IEEPA), becoming the first president in history to use the law for tariffs.
“It’s more than likely that the Supreme Court knocks out IEEPA, the law that’s being used for these tariffs, which doesn’t have the word ‘tariff’ in it. Then the president is going to have to go to other laws to justify tariffs — 232, 201, 301. There’s a bunch of laws, and those are harder laws to operate with,” he told CNBC.
Financial markets, which took a dive earlier in the year as a result of the tariffs and then bounced back to record highs, are assuming that the general shape of the new tariff regime is in place, but that assumption could be wrong, Ryan warned.
“[The market thinks that tariffs] are going to settle into some easy, predictable place, and I just don’t think that’s going to happen,” he said.
The former Speaker also warned about policy factors that have nothing to do with trade making it into the tariffs, saying some of them were based simply on Trump’s “whims.”
“They threw a tariff on Brazil at 50 percent, and we have a trade surplus with Brazil. There’s no, sort of, rationale for this other than the president wanting to raise tariffs based up on his whims, his opinions,” Ryan said.
Federal judges on the Washington-based Federal Circuit Court of Appeals raised their eyebrows at the president’s use of IEEPA last week.
“It’s just hard for me to see that Congress intended to give the president in IEEPA the wholesale authority to throw out the tariff schedule that Congress has adopted after years of careful work and revise every one of these tariff rates,” Judge Timothy Dyk said.
The economic effects of Trump’s policies are starting to show up in the economic data.
Prices have risen as companies have likely started to pass along cost increases from tariffs. The personal consumption expenditures price index rose to a 2.6 percent annual increase in July, and the consumer price index advanced to a 2.7 percent increase.
The labor market has also started to slow down, adding just 106,000 jobs to the economy since May. A modest 73,000 jobs were added in July, the Labor Department reported on Friday.
While businesses have been expressing concerns about uncertainty coming from the tariffs, it’s not clear yet whether that’s what has prompted the slowdown in hiring. It could also be from a lower supply of available workers — a potential result of Trump’s immigration crackdown.
If it’s the business climate that’s weighing on the jobs market, economists say that will show up in future employment readings as a rise in the unemployment rate and lower wage growth. Those are indications of “slack.”
If it’s fewer available workers due to restricted immigration, the effects on the unemployment rate and wages would be the opposite. In that case, “the reduction in the supply of workers decreases the slack in the labor market because it lowers the level of maximum (or potential) employment,” former Federal Reserve economist Claudia Sahm wrote in a Tuesday commentary.