Trump’s DOJ Seems Awfully Nervous About the Tariff Lawsuits

The most interesting lawsuit against the Trump administration right now, in my view, is V.O.S. Selections v. Trump. A group of small businesses is challenging the president’s authority to levy tariffs via the International Emergency Economic Powers Act of 1974, or IEEPA. They argue that President Donald Trump’s sweeping restrictions on nearly every imported good go far beyond what Congress had authorized in the law.

The U.S. Court of International Trade sided with the businesses in May and ruled that the tariffs were blatantly unlawful. “Regardless of whether the court views the President’s actions through the nondelegation doctrine, through the major questions doctrine, or simply with separation of powers in mind, any interpretation of IEEPA that delegates unlimited tariff authority is unconstitutional,” the court explained in an unsigned opinion.

The Trump administration swiftly appealed the ruling to the Federal Circuit Court of Appeals, which reviews decisions from the specialized federal trial courts. (The government can continue to collect the tariffs while the lawsuit unfolds.) Now it appears that the Justice Department is openly afraid that it might lose the case and bring down the central pillar of Trump’s economic agenda—such as it is.

One rather clear sign of nerves is that Solicitor General D. John Sauer, the third-highest-ranking official in the Justice Department, sent an unusual letter to the Federal Circuit panel reviewing the case earlier this week. It was styled as a Rule 28(j) letter, which is used by litigants to update the court and the other parties about “pertinent and significant authorities” that they learn about after filing their briefs that could be relevant to the litigation.

This type of letter is most commonly used to formally notify courts about legislative changes or new judicial rulings by an appeals court that might be relevant. It is not meant to be used to simply fire off esprit de l’escalier–type arguments after briefs have been filed and oral arguments have been heard. But that appears to be how the solicitor general used it.

“On July 27, after stating his intention to impose IEEPA tariffs, President Trump announced the largest trade agreement in history with the 27-nation European Union, America’s most significant trading partner,” Sauer wrote, citing contemporary news reports. “President Trump entered historic agreements with Indonesia, the Philippines, and Japan on July 22; and with the United Kingdom on May 8.”

If the panel rules against the administration on the tariffs’ legality, Sauer argued, then it should stay its ruling pending the Supreme Court’s review. “Suddenly revoking” that power would have “catastrophic consequences” for national security and the economy, he claimed.

“The President believes that our country would not be able to pay back the trillions of dollars that other countries have already committed to pay, which could lead to financial ruin,” Sauer wrote. “Other tariff authorities that the President could potentially use are short-term, not nearly as powerful, and would render America captive to the abuses that it has endured from far more aggressive countries.”

This argument, though reflective of the administration’s views on trade, is misleading. When the United States levies a tariff on imported goods, other countries do not “pay” them. The person or company that imports the goods pays the tariff. The costs incurred by paying these tariffs can then be offset by raising prices for U.S. consumers, who indirectly bear the brunt of tariffs. The exporting countries don’t directly pay a cent.

Sauer’s claim that other countries “committed” to pay “trillions of dollars” in tariffs and that paying it back to them would lead to “financial ruin” is also nonsensical. Even setting aside the “other countries” part, the U.S. has not collected “trillions” of dollars in tariff revenue. The Treasury said that it collected $28 billion in customs and excise taxes in the month of July. The U.S. collected between $7 billion and $8 billion before Trump took office, so the actual revenue from Trump’s tariffs is likely smaller.

It is possible that Sauer is referring to what the White House described as hundreds of billions of dollars in new investment into the United States from the other countries with which it struck deals. In July, for example, the U.S. announced a trade deal where the EU would “purchase $750 billion in U.S. energy and make new investments of $600 billion in the United States, all by 2028.” Those numbers come a little closer to the “trillions” that Sauer described.

These investments are still not relevant to the court’s decision-making process in this case because they aren’t revenue derived from the tariffs in question. Courts are not obligated to indulge in the creative accounting that the administration is using to justify its own policies to the public. The EU’s own fact sheet on the deal also says that the $750 billion is for “replacing Russian gas and oil on the EU market,” meaning that it likely would have happened anyway. And that $600 billion investment? “EU companies have expressed interest in investing” that money in the United States over the next few years, which is about as speculative as it gets. The EU itself said that the “political agreement” it reached with Trump is “is not legally binding”—a downside of not using the “other tariff authorities” that Sauer derided.

Sauer went on to frame the overall situation in stark terms. “There is no substitute for the tariffs and deals that President Trump has made,” he told the court. “One year ago, the United States was a dead country, and now, because of the trillions of dollars being paid by countries that have so badly abused us, America is a strong, financially viable, and respected country again. If the United States were forced to pay back the trillions of dollars committed to us, America could go from strength to failure the moment such an incorrect decision took effect.”

This is not a legal argument. What Sauer appears to be suggesting is that the court would be responsible for any negative economic consequences that should befall the country if it rules against the tariffs’ legality. That is doubtful on the merits. Most indicators suggest that the country is heading for a recession thanks to the uncertainty and higher costs from Trump’s tariffs, and the major stock indices fell by more than 10 percent when he announced the “Liberation Day” tariffs in April. If anything, the markets would experience a modest boom if Trump’s tariffs could no longer be collected.

It is also an argument unworthy of a high-ranking Justice Department official, let alone the solicitor general. Striking down the tariffs would not seriously harm the U.S. economy (if it harmed it at all), but it would be highly embarrassing for Trump, who has made them the centerpiece of his second-term economic agenda. Sauer nonetheless continued by warning of an apocalyptic (and highly unlikely) economic meltdown if the tariffs are blocked.

“If the United States were forced to unwind these historic agreements, the President believes that a forced dissolution of the agreements could lead to a 1929-style result,” he claimed. “In such a scenario, people would be forced from their homes, millions of jobs would be eliminated, hard-working Americans would lose their savings, and even Social Security and Medicare could be threatened. In short, the economic consequences would be ruinous, instead of unprecedented success.”

You do not need to be an economist to know that a Great Depression won’t happen if the Federal Circuit strikes down tariffs that did not exist six months ago, or if other countries later back out of “trade agreements” that did not exist six weeks ago. The global economy simply does not work like that. The most cynical interpretation of this letter is that the Trump administration thinks that a recession is imminent and that the Federal Circuit will strike down the tariffs, and it is trying to preemptively blame the former on the latter.

The plaintiffs’ response was short and curt. Perhaps the lawyers who drafted it knew the judges would see Sauer’s pseudo-intimidation tactics for what they are. Michael McConnell, the lead lawyer, noted that its contents were “improper” for a Rule 23(j) letter because the government “already cited the same events at argument.” Indeed, the oral arguments took place on July 31, a few days after the EU “trade agreement” was announced. McConnell disagreed about the need for a stay at all and argued for it to be a narrow one if granted because the plaintiffs “face imminent and ongoing irreparable harm to their businesses from the challenged tariffs.”

“If the Court is inclined to consider the substance of the letter, there is no basis for its declaration that there is ‘no substitute’ for ‘the tariffs and deals that President Trump has made,’” he continued. “Even without IEEPA, the president can obtain ex ante authority to enter into trade agreements, see 19 U.S.C. § 4202(a), or submit agreements for congressional approval, including via fast-track procedures, as prior presidents have done, see 19 U.S.C. § 4501 (implementing the U.S.-Mexico-Canada Agreement).”

In other words, Trump can (and did, during his first term) pursue his trade agenda through the lawful mechanisms that Congress intentionally created to give presidents flexibility when negotiating with other countries. What he cannot do is use IEEPA to arbitrarily enforce massive tariffs on most of the American economy; not even to coerce U.S. trading partners into what appear to be largely performative trade negotiations.

It is characteristic of the Justice Department’s overall decline that Sauer thought this letter would be a reasonable thing to send to federal judges. It also shows how Trump’s thuggish approach to governance—in levying tariffs on close U.S. allies, in extorting law firms and universities, in sending troops into Democratic-led cities, in meddling with media company mergers, and more—is permeating throughout the entire executive branch.

More than anything else, it shows how scared the Justice Department is (and the Trump appointees who staff it are) that Trump might lose this case. Even if one sets aside the propriety of this letter, a solicitor general who was confident in the strength of their argument and the validity of the executive branch’s actions would not stoop so low as to telling federal judges that it will blame them for any negative consequences of their ruling. Like all bullying tactics, this one comes from a place of fear, not strength.