The Supreme Court on Wednesday heard oral arguments on a challenge to President Trump's tariff powers, with even conservative justices sounding skeptical of the White House's position.
The big picture: You can't divine a SCOTUS ruling from questions, or even their tone, but the odds have definitely shifted against this type of executive authority.
Zoom in: Most of the ensuing commentary has understandably focused on the $195 billion in collected tariffs that the U.S. government may need to return, and the lack of an existing mechanism for doing so.
- But I'm wondering how it may impact the giant investment agreements that Trump has extracted from foreign nations, usually in exchange for lower tariff rates.
- If Trump no longer has the ability to unilaterally impose tariffs — instead returning that power to Congress — might countries renege on their pledges?
Caveat: I know this is a hypothetical on top of a hypothetical. But it's not a moonshot.
The bull case: The SCOTUS ruling won't have any impact.
- First, it's not in most countries' best interests to poke Trump in the eye, and he cherishes at least the appearance of foreign direct investment. Plus, he likely would maintain at least some tariffing authorities, under Sections 232 and 301.
- Plus, some of the FDI agreements seem so vague that countries may already have been planning to slow-walk disbursements.
The bear case: Sovereign nations don't like being extorted, and will rush through the first available exit.
- Particularly if SCOTUS goes even further than some expect, and puts restrictions on Trump's Section 232 and 301 authorities.
- It's hard to say how many U.S. companies and states are really banking on FDI for things like infrastructure. For those that are, this could require major revisions.
The bottom line: Trump has said this case is "literally LIFE OR DEATH for our country." He's being hyperbolic. But it is life or death for his economic policy, and perhaps for the investments he's negotiated.
A Treasury Department spokesperson didn't return a request for comment.
