Update 871: Tariffs’ Court Battles

June 23, 2025 | DOGE, GDP, Inflation, PCE, SCOTUS, Tariffs, The Fed, Update | By

Update 871 – Tariffs’ Court Battles;
Musk Mission Ends in Fiscal Failure

Trump’s trade agenda hit a major but tentative roadblock this week as two courts halted many of his tariffs, ruling his use of emergency powers “unlawful.” As the appeals process unfolds, the administration is able to maintain its tariff rates, but its long-term survival is in question and may be decided by the Supreme Court. As all that has played out, Musk made his retreat from the public eye official by formally stepping down from DOGE, leaving a meager fiscal legacy. 

Also this week, new data was also released showing that inflation ticked down last month ahead of a likely tariff-driven increase in the coming months and confirming that U.S. GDP contracted over the first quarter of the year amidst the Trump administration’s chaotic tariff announcements. 

Good weekends all…

Best,

Dana

Headline

Trade and Tariff Developments

U.S. Trade Court Blocks Trump’s Tariffs

On Wednesday, the Court of International Trade – an Article 3 federal court based in Manhattan, which hears disputes involving international trade and customs laws – blocked many of Trump’s signature “Liberation Day” tariffs and fentanyl-related duties on Mexico, Canada, and China. The court’s three-judge panel, consisting of appointees from Presidents Reagan, Obama, and Trump, agreed unanimously to freeze tariffs imposed to date by the Trump administration acting on authority it claims is conferred by the International Emergency Economic Powers Act of 1977 (IEEPA). 

Throughout the 20th century, Congress has conceded some of its economic authority to the executive branch, largely due to the role Congress played in the disastrous 1930 Smoot-Hawley tariff hikes that likely worsened the Great Depression. With IEEPA, Congress granted the President sweeping powers to regulate international commerce in times of national emergency declared by the executive. IEEPA authorizes the President to “regulate” various economic transactions, but does not explicitly state that across-the-board tariffs can be levied with this power. Never has such authority been attempted by a President. 

But the court ruled in its decision that Congress’s constitutional authority to regulate commerce is not overridden by any emergency power delegated to the President by Congress, that his powers are not an “unbounded authority.” The panel ultimately found: “The President’s assertion of tariff-making authority in the instant case, unbounded as it is by any limitation in duration or scope, exceeds any tariff authority delegated to the President under IEEPA.”  

As a remedy, the court also called on the administration to issue reversals of the tariffs within ten days. Notably, the court issued a summary judgment, indicating the panel found no material factual disputes, perhaps signaling the vehemence with which this panel stands behind its decision. 

The Trump administration jumped to appeal the ruling to the U.S. Court of Appeals for the Federal Circuit in Washington, arguing the Court of International Trade lacks jurisdiction to determine executive powers in this area. Just a day after the International Trade Court released this decision, the Federal Appeals Court granted a stay, temporarily reinstating Trump’s tariffs. This appeal is likely to be heard by the Supreme Court in the coming weeks. 

White House Press Secretary Karoline Leavitt signaled yesterday that the administration is focused both on appealing this ruling and considering alternative legal authorities to reimplement the tariffs. While the appeals process plays out, the administration has a few options. It can utilize the following powers: 

  • Section 301: A safer, legally tested avenue that requires an investigation into the actions of trading partners.
  • Section 232: An authority under which sectoral tariffs already exist that cite threats to national security.
  • Section 122: An untested pathway that allows for the quickest implementation of tariffs, as it does not require a review period; however, duties applied under this power are valid for 150 days, after which Congressional action is needed.


On Thursday, a U.S. District Court Judge in D.C. also found that IEEPA failed to authorize the President to impose such broad tariffs and blocked the Administration from collecting tariffs from two family-owned businesses, who were the plaintiffs in the case. The judge ordered a 14-day stay on the ruling to account for the appeals process. 

Markets briefly jumped as the news of Trump’s tariff setback was released, but then largely shrugged off the reinstatement of his tariffs. Pending resolution of the appeals, uncertainty continues to loom over the entire global trading system. As Trump’s signature tariff policy hangs in the balance, investors and America’s trade partners, some amid trade negotiations with the administration, are left with little clarity on how to proceed. Trump also erupted on social media Friday, alleging China has violated the trade framework agreed in Geneva earlier this month. Trump’s dangerous tariff endeavors continue to wreak havoc and confusion – and may soon be decided by the Supreme Court.  

EU, Apple Tariff Threats & “TACO”

Late last week, Trump threatened a 50 percent tariff on the European Union, claiming negotiators were being “difficult to negotiate with.” Then, in yet another reversal of a tariff threat, a call with EU Commission President Ursula von der Leyen on Sunday resulted in a delay in higher tariffs until July 9. Trump’s repeated on-again, off-again tariffs led a Financial Times reporter to coin the term “TACO” – Trump Always Chickens Out – when describing how markets fall when Trump threatens a new tariff and then recovers with relief as he backs down amid his concerns over the markets.  

Last week, Trump also posted to social media a tariff threat of 25 percent on iPhones made outside of the U.S. Although Apple is taking major steps to move its supply chains out of China to other countries in the region – namely India and Vietnam – and has announced large investments in the U.S., the President clearly wants these supply chains solely in the United States. Estimates show these tariffs could raise the price of iPhones to as high as $3,500. 

Other Developments

Musk Announces Plan to Quit DOGE

On Wednesday, Elon Musk announced on Twitter/X that he was leaving government work behind him, signaling an end to his time at DOGE. He stated, “As my scheduled time as a Special Employee comes to an end, I would like to thank President [Trump] for the opportunity to reduce wasteful spending. The @DOGE mission will only strengthen over time as it becomes a way of life throughout the government.” The announcement was later confirmed on Friday, with Trump praising the work Musk did but indicating Musk will not be out of the administration entirely. Musk’s departure came as he had worn out his welcome in Washington: he entered the administration promising to cut government spending by $2 trillion, but four months later only ever accomplished an infinitesimally small fraction of that, with DOGE’s claim of saving taxpayers $175 billion likely far higher than reality as only roughly 10 percent of those cuts are independently verifiable.

Musk has learned that there is only so much he can do unilaterally without support from Congress, even with Trump’s backing, without getting bogged down in lawsuits and political opposition. Additionally, the “move fast and break things” approach used by Silicon Valley does not work so well when one is breaking things that millions of Americans rely on and are not easily fixed, such as the Social Security Administration. While Trump seems intent on finally getting some of DOGE’s cuts approved by Congress, those cuts come in the form of a $9.4 billion recissions package that does not focus on “waste, fraud, and abuse” so much as frequent targets of GOP scorn, such as NPR, PBS, and USAID. 

In the meantime, it is difficult to calculate the damage DOGE inflicted on the federal government and beyond, with thousands of layoffs in important agencies such as the IRS, HHS, and the SSA, the gutting of important scientific research at the NIH and NSF, and immense harm to millions of people abroad thanks to the gutting of foreign aid programs that ultimately amounted to a small fraction of US government spending. All of these have indirect, though often difficult to quantify, impacts on the economy, as cuts to the social safety net and public health hit lower-income households hardest, cuts to scientific research mean decreases in economic growth resulting from that research, and even cuts to foreign aid mean that American companies could find a frostier reception abroad as they look to invest in overseas markets.

Now pulling back from government, Musk seems intent on making himself less visible in politics as he refocuses his energies on his companies, going so far as to announce that he’s scaling back his political donations in the future, stating that he has “done enough.” This withdrawal will come as a relief to his shareholders, as Musk’s involvement in politics proved toxic for his brands, especially Tesla, whose EVs traditionally catered to the liberal, environmentally-conscious crowd that is less than fond of the Trump administration. It will also come as a relief to Democrats, as Musk’s reduction in political donations means that the GOP will have a smaller warchest in upcoming elections. 

But Musk is not likely to pull out of politics entirely, and DOGE is not done, as most of the personnel Musk put in place remain embedded in a vast range of federal departments and agencies. What Musk’s announcement means is that a billionaire who assumed he could take Washington by storm the same way he took Silicon Valley has been humbled by political reality.  

April Prices Tick Down to 2.1% Ahead of Full Tariff Impact

The Federal Reserve’s preferred measure of inflation, the personal consumption expenditures (PCE) price index, rose 2.1 percent on an annualized basis in April, its lowest level since September and only slightly above the Federal Reserve’s 2 percent target. This is down from the 2.3 percent annualized increase in prices in March and the 2.7 percent annualized increase in February, according to the April PCE report released by the Bureau of Economic Analysis (BEA) on Wednesday. The new data shows that inflation has fallen notably from its 2022 peak, but the Trump administration’s sweeping tariffs threaten to disrupt this progress in the coming months. 

Core PCE – which strips out food and energy prices – rose by 2.5 percent on a year-on-year basis last month, the lowest core inflation level since March 2021. This is down from the 2.6 percent annualized increase in core prices in March and the 3.0 percent annualized increase in February. 

On a monthly basis, headline PCE rose by 0.1 percent last month after remaining flat in March. This was partially driven by a 0.3 percent fall in food prices compared to the previous month. Energy prices rose by 0.5 percent on a monthly basis in April. Core PCE also rose by 0.1 percent on a monthly basis in April, just as it had in March. 

The new data shows that inflation is approaching the Federal Reserve’s longstanding target of two percent just as the Trump administration’s sweeping tariffs begin to take effect, threatening to upend years of progress. With inflation expected to rise in the coming months, the new inflation data is unlikely to move the Fed’s rate-setting committee, the Federal Open Market Committee (FOMC), towards cutting interest rates at its meeting late next month.

U.S. Economy Contracts 0.2% in First Quarter 

The United States economy contracted by 0.2 percent on an annualized basis in the first quarter of this year, a slightly smaller contraction than the previously estimated 0.3 percent contraction. This is according to the second estimate of first quarter GDP released by the Bureau of Economic Analysis (BEA) yesterday morning. 

The second estimate is based on more complete data. The upward revision of 0.1 percentage point from the advance estimate reflects an upward revision to investment that was partly offset by a downward revision to consumer spending.

In the first quarter, the U.S. economy contracted for the first time since the first quarter of 2022. The decrease in GDP comes as consumers and businesses increased imported purchases ahead of anticipated tariffs. The U.S. economy grew by 2.4 percent on an annualized basis in the fourth quarter of last year and by 2.8 percent over the entirety of 2024. 

Based on more complete data, the third and final estimate of first-quarter GDP growth will be released on June 26.

Look Ahead

Wednesday, June 4 

Thursday, June 5

Friday, June 6

  • May jobs report

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