Ambrose Evans-Pritchard
Those of us who have long admired America as a kindred spirit and upholder of the happiest flowering of global prosperity ever known can only watch with horror as the country hurtles towards a full-blown constitutional crisis.
The Supreme Court ruling on Donald Trump’s tariffs – or rather his reaction to it – compounds the unfolding national tragedy.
Yes, the court has stepped back from the brink after pushing “unitary executive theory” to the limits of credibility and rubber-stamping the abuses of a corrupt and arbitrary presidency.
By striking down Trump’s illegal use of the International Emergency Economic Powers Act (IEEPA) to impose sweeping taxes, without a vote by Congress, the court has at last begun to restore the system of checks and balances that has sustained the great republic through 250 years.
But this welcome return to civic spirit resolves nothing because Trump refuses to accept the verdict. His behaviour pushes this simmering constitutional showdown into the open and takes it to a more dangerous level.
The case goes deeper than the technical question of tariffs and the IEEPA law. It addresses the infinitely larger issue of whether the US is still a republic or whether it will be allowed to degenerate further into the sort of “elective despotism” so feared by Thomas Jefferson and George Mason.
“Article I, Section 8, of the Constitution specifies that ‘the Congress shall have power to lay and collect taxes, duties, imposts and excises’,” wrote Chief Justice John Roberts in his IEEPA ruling.
“Recognising the taxing power’s unique importance, and having just fought a revolution motivated in large part by ‘taxation without representation’, the framers gave Congress ‘alone access to the pockets of the people’.
“They did not vest any part of the taxing power in the executive branch. ‘The whole power of taxation rests with Congress’ … The president enjoys no inherent authority to impose tariffs during peacetime,” he wrote.
It is a thundering opinion, one that instantly turns this case into the most consequential assertion of Supreme Court authority since the Dred Scott case of 1857 on the eve of the American Civil War.
Trump’s tariffs are an attempt to steal the power of the purse and to create an independent source of revenue. It is what Charles I did with the fiscal feudalism of ship money in 1634, a breach of Magna Carta and the mobilising cause of the English Revolution.
It is what George III did – under bad advice – with the Stamp, Sugar, Townshend and Tea Acts, which subverted the colonial legislatures, setting in motion the American Revolution. Trump is playing with nitroglycerine.
For a brief few hours after reading the ruling, I was exuberant. Deflation was swift. Trump launched his torrent of abuse against the justices (“fools and lapdogs”, pawns of “foreign interests”), followed by his angry vow to pick even deeper into the pockets of the people.
It is, of course, vexing that Britain and close US allies should end up facing higher tariffs under the new 15 per cent world rate – assuming that soon happens – while China gains a relative advantage.
But the larger story is that the president has entirely slipped his constitutional leash, accepts no constraint of any kind and will drain US democracy of its substance unless stopped by greater political force – leaving aside the other little matter that he is deploying carrier strike groups around the world with escalating hubris and as if they are his own personal toys.
Switching to another form of tariffs to circumvent the IEEPA ruling changes nothing in principle. Optimists argue that the new Section 122 tariffs are more limited and last just 150 days unless authorised by Congress. But Trump will surely swat aside such legal niceties.
He has already begun a persecution campaign against dissident Republicans willing to join Democrats in retrieving the delegated trade powers of Congress, and he has shown in other areas that he will rig the deadline by restarting the clock every 150 days.
The White House statement announcing the new tariffs is one of the oddest documents I have ever seen. It proclaims in bold ink that the US not only has a structural trade deficit of $US1.2 trillion but also that the “annual balance on primary income” has turned negative for the first time since 1964.
It says the US net international investment position has collapsed to minus 90 per cent of GDP, meaning America is in hock to the world for a net $US27.6 trillion.
Drawing further attention to this is akin to screaming “fire!” in a crowded theatre. These figures are indeed alarming, doubly so since Trump is eroding the reputational underpinnings of both the dollar and US debt.
The imbalances have many causes, but the plainest is that the US is living beyond its means with soaring middle-class welfare and a personal savings rate near historic lows at 3.4 per cent of GDP, viz the UK (9.5 per cent) or France (19 per cent). Trump has made matters yet worse with unfunded tax cuts.
Fitch Ratings expects the fiscal deficit to hit 7.3 per cent of GDP this year. The International Monetary Fund has etched in 8 per cent as far as the eye can see, even at full employment, and even allowing for tariff revenues.
The giant question hanging over America is whether the Supreme Court will remain courageously high-minded as fresh cases arise or whether it will bow to intimidation and let Trump pick the pockets of the people by new means.
George Saravelos, from Deutsche Bank, got into trouble last month for daring to state the truth. “The US has one key weakness: it relies on others to pay its bills via large external deficits. Europe, on the hand, is America’s largest lender,” he said.
There is more than idle chatter going on in Brussels and Paris over ways to weaponise an estimated $US12.6 trillion of US assets held by European funds and investors, perhaps through an “export tax” on capital that would force up real borrowing costs in the US.
I don’t see how such a policy could be enforced on private markets, but an exodus of capital might happen naturally, and in my view will happen, as Trump pushes America closer to political civil war. A country that is $US27.6 trillion under water might be well advised to avoid the breakdown of its institutional system.
What is clear is that Europe’s mood has hardened since the Greenland outrage. On Monday, the EU suspended the trade deal shoved down its throat at Turnberry last year. Europeans are unlikely to roll over so meekly a second time. Trump’s military leverage over Ukraine has greatly diminished in the meantime.
The giant question hanging over America is whether the Supreme Court will remain courageously high-minded as fresh cases arise or whether it will bow to intimidation and let Trump pick the pockets of the people by new means. The justices have no artillery. They cannot stand up to the White House without the backing of Congress.
The Republicans on Capitol Hill now face their test of character. Are they really so tribal, so drunk with ideology and so far gone that they will collude in the degradation of American democracy for the sake of this rogue presidency?
The rest of us in the free world, be we conservatives, liberals or socialists, can only pray that they will rise to the historic occasion.
Telegraph, London
The Business Briefing newsletter delivers major stories, exclusive coverage and expert opinion. Sign up to get it every weekday morning.
