Regarding the recent split decision by the Federal Circuit striking down tariffs, I have no firm opinion about it as of yet. But I do have a hypothetical in mind to help clarify the issues.
Suppose SCOTUS sides with the Federal Circuit, and overturns some or all the recent tariffs. End of story? Not necessarily.
Suppose Trump then orders all of the tariffs to remain in effect, except that the money doesn’t get handed to the federal government. Instead, Trump requires each importer to verifiably burn, melt, or delete the money that is required by the tariffs.
According to this hypothetical (call it the destruction-hypothetical), the tariffs would seem a lot more like “regulation” and a lot less like “taxation.” They would produce no revenue, would fund nothing, and yet would still impact international trade to address what Trump considers an emergency (e.g. the extreme trade imbalances of recent decades). Some might say that this hypothetical of mine is ridiculous, but that doesn’t mean it’s not thought-provoking. And there are variations….
Instead of the importers destroying the money, they could be required to put it into safekeeping (call it the escrow-hypothetical). Then it would be up to Congress whether to grab (tax) the money, refund it, or destroy it within a certain time.
Perhaps a court should not go wandering off into hypotheticals like this, in a written opinion. But it’s surprising to me that experts on tariffs have not raised these issues in public. I do not despair, though, because oral arguments at SCOTUS are notorious for addressing hypotheticals like this, though somewhat less so since Justice Breyer retired.
It would still be necessary to consider the Takings Clause. But I doubt that putting money into escrow would necessarily qualify as a taking. It would be up to Congress whether to tax it or refund it, and in either of those cases it would be no taking (or in case of a refund the compensation would be the refund).
Finally, I’ll toss out a delay-hypothetical: the importer is told that the tariff will be due in exactly two years unless he wants to pay it earlier. That would give Congress plenty of time to act if it wants to pass a law preventing collection of the tariff. All three of the hypotheticals I’ve mentioned still allow the president a lot of flexibility, but they also defer more to congressional power and individual rights.
Incidentally, I thank Professor Ilya Somin for kindly discussing this subject, though all hypotheticals and opinions discussed here are mine alone.
Posted at 6:19 AM