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Hello and welcome to World Business Report from the BBC World Service.
I'm David Harper and today there is one story leading above all others.
In other words, they charge us, we charge them, we charge them less.
So how can anybody be upset?
Well, they were upset and some people are now upset enough to take up a legal case against the president over his imposition of tariffs.
That case came to a head on Wednesday night in the United States when a federal court ruled these tariffs to be unlawful.
Put simply, three judges said that the president had overstepped his authority in using emergency powers to bring in the charges.
So what does that mean for the business owners around the world who've been left wondering what the level of taxes on their goods will be?
Well, the president has bought in the tariffs, paused them, increased them and reduced them in the last few months.
Our New York Business Editor is Jon Mervyn who joins us live now.
Jon, let's look at exactly what has happened here.
Interestingly, it isn't one big corporation or organisation that's brought the action.
It's some states and a group of small companies.
That's right, David.
Twelve states led by Oregon and five small companies whose case was organised or led by the non -partisan legal organisation called the Liberty Justice Centre, brought two different cases to the Court of International Trade in New York.
They filed their lawsuits earlier this year, shortly after President Trump announced his liberation day tariffs, the reciprocal tariffs that were announced with such fanfare on April 2nd.
They brought two lawsuits to the court of international trade that, as you said, ruled on Wednesday evening that President Trump had indeed overstepped the bounds of presidential authority in setting those liberation day tariffs which, as you may recall, amounted to a 10 % blanket tariff on every country in the world and then a whole bunch of higher tariffs depending on whether or not the Trump administration had deemed individual countries to have be running too big a trade surplus with the United States.
It's important to say as well that it isn't a complete block on all tariffs and it's also not going to take instant effect?
No, that's absolutely right.
The point of this ruling was not about can a President impose tariffs, full stop, nor was it asking for any ruling on whether or not tariffs are legitimate tool.
It was very precisely asking the court to decide whether or not the President had invoked, the President had the right under the law that he invoked when announcing those tariffs to set tariffs.
And so the President has used various laws to set different tariffs and so tariffs on the different sectors of the economy, so steel and aluminium are the ones that have gained the most attention, are untouched by this ruling.
And the tariffs that are untouched by this ruling amount to a large portion of America's international trade.
This ruling is very specifically about the tariffs that were announced from the White House garden on April the 2nd, which in some ways were the most attention -grabbing because they were universal.
they applied across the to all countries in the world practically including some bizarre geographical entities that no one very few people had even heard of but also because they so much were part of Trump's President Trump's political rhetoric about what tariffs should be used for.
And presumably the news of this judgment hasn't gone down well in the White House have we heard anything from them?
Yes, we have. We're obviously waiting, as everybody spends so much of their time these days waiting, for President Trump himself to respond, which presumably he will be heard from later today.
But in the meantime, various press spokespeople and assistants to the President have made what you might think of as the expected remarks about the President was elected by the people and that the judges are overstepping their authority in throwing out a centrepiece, or presuming to throw out the centrepiece of a President's economic policy.
There has even been mentioned by Stephen Miller, the Special Advisor to the President, of a judicial coup, which is, like I say, fairly in line with the Administration's rhetoric when it encounters judicial rulings that it doesn't like.
John, thank you very much for joining us.
John Mervyn, our New York Business Editor, speaking to us live.
Let's speak to Emma Wallnau, Head of Platform Investments at Hargreaves Landsdown.
Hargreaves at Landsdown, who has been watching the market reaction for us.
And Emma, we've seen the response to this after it was announced across the globe from Tokyo right round to New York as markets open up and people just try to work out the details of what this means for them.
Absolutely, I think what's really interesting as the fact that when the S &P 500 to the major U .S. index opened this morning, which was Europe's afternoon, it opened sort of 40 points up, but actually much of those gains have already been given back.
So, the market is actually quite confused about whether this will hold or not.
And adding to that, what I think is really interesting is two of the major U .S. investment banks.
So, Morgan Stanley and Goldman Sachs have both come out and said, actually they don't believe that this will hold.
There will probably be some form of additional tariff going forward. And I think we're very much seeing that in the markets.
Actually, most of what's propping up the S &P 500, which has opened up around 1 % and has now fallen back down to just 0 .26 % up, is the fact that Nvidia has done so well, so actually very much a stock -specific story rather than a tariff -specific story in the stock market at the moment.
Yes. A good point made there is that whilst we are looking at this in great detail, other stories are going on elsewhere.
Just looking sort of broadly across the world, are there particular sectors that seem to be affected by this more than any other?
Yeah, it's a really mixed bag.
Obviously, we've seen some positive reaction from autos and some of those that were specifically targeted by the terrorists.
But really, it's not as positive as uplift as you might expect, and I think that's very much either sector -specific and an aggregate level that markets are not sure actually when this court ruling will be held.
Yes. And it initially looks like it might bring some stability, but when you look at it, there seem to be far too many question marks over it.
Emma, thank you very much for just updating us on what we have seen.
We have now heard what's happened, we've heard how people have reacted.
Let's hear from some of the people who are directly involved in this.
And among those who brought the case was a consortium of small businesses and also a number of states as we heard, including Oregon, whose Attorney General is Dan Rayfield.
A big thing that What really compelled me and our office to bring this lawsuit is the impact that it has to everyone.
Tariffs are something that are not just out there in the ether.
They are something that we all pay.
They get passed down to us as consumers.
They get passed down to small businesses, which impact us.
And that really compelled me to really move forward. And economists have shown that $3 ,800 is the increase that average households are going pay here in Oregon every year.
And as we said, five small businesses also came together to bring this lawsuit against President Trump's tariffs.
Terry Precision Cycling was one of them.
They sent us this statement, which is voiced by one of our producers.
The recent decision by the U .S. Court of International Trade is a turning point.
The now -vacated tariffs disrupted our supply chains, added costs and forced us into months of defensive planning.
This ruling allows us to get back to what we do best, supporting women in cycling, investing in innovation and planning for the future with confidence.
It gives businesses like ours the space to operate without being penalised for sourcing smartly or manufacturing ethically.
Ilya Somin is the Co -Council who brought the lawsuit against the tariffs along with the Liberty Justice Centre, he's also Professor of Law at George Mason University and the Kenneth B Simon Chair in Constitutional Studies at the Cato Institute.
thank you very much for joining us here on World Business Report.
Let me ask you – presumably you're fairly pleased that the ruling has gone the way it has?
We're very happy at the ruling.
The court recognise that the President made a massive and illegal power grab and we also hope that the ruling will be sustained on appeal.
For small businesses, relatively small businesses like these, to take this step it's not an inconsequential thing to do.
Why did they feel so strongly that they had to take action?
I think, as you have seen on your own program just now, these tariffs are an enormous harm to small businesses throughout the United States, including our clients.
They're angry, they're unhappy, and they wanna be free of this massive burden.
I wish I had a dime for every time a business owner told me that these tariffs were an existential threat to them.
But I mean, it's not normal for a business to take action as drastic as this.
What was it that sort of spurred them onto, you know, that they were the ones that had to take this on.
So I would say it's not normal for the president of the United States to make such an enormous power grab and to start the biggest trade war since the Great Depression.
I think our clients felt strongly that this was a terrible injustice that was done to them and they welcomed the opportunity to challenge it.
We've heard already that there will be an appeal to this.
Presumably this could now take some time.
It could, though I'm hopeful that the appellate court will hear the case on a relatively accelerated basis as was done by the trial court.
We can't know for certain what will happen, but I'm guardedly optimistic on the three -judge panel that unanimously ruled in our favor where judges appointed by both Democratic and Republican presidents, including one appointed by President Trump, so we are optimistic that have a strong case that can be understood and accepted by judges across the political and judicial spectrum and hopefully the appellate court will see that as well.
President Trump has a history of standing up quite strongly to to legal action.
This could potentially go all the way to the Supreme Court and if that were the case might it have a slightly more hostile reception?
So we will have to see if it gets to the Supreme Court we don't know if it will.
However, as I noted before, both conservative and liberal judges ruled in our favor on the trial court.
And many of our arguments rely on doctrines that have been championed by conservative members of the Supreme Court, such as the major questions doctrine, which says that when the executive claims the power to decide some major political or economic issue, they have to have a clear statement from Congress that that power has been delegated to them.
And also one of the bases for the court's ruling last night was the idea that there are limits to how much power Congress can delegate to the president.
And if there are any limits at all, certainly an unconstrained power to impose any tariffs of any level on any country in the world would breach those limits.
The court last night said precisely that.
We are hopeful that if the case gets to the Supreme Court, which is a big if, they will see things the same way.
And presumably just very quickly, from what you're saying, this assumes that you and your clients are prepared to take this as far as necessary.
We are indeed prepared to do that.
Ilya Somin, one of the Co -counsels who brought the lawsuit against Trump's tariffs.
Thank you very much for joining us here on World Business Report.
This is World Business Report from the BBC World Service.
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Now of course if you feel to stand to benefit from the Trump administration's escalation of tariffs, this court ruling will come as something of a setback.
Let's hear from Thomas Phillipson, an economist at the University of Chicago, who was also the acting chairman of the White House Council of Economic Advisors between 2019 and 2020 during the first Trump administration.
Thank you very much for joining us here.
It'll be great to hear your thoughts on this.
This judgment, at the very least, is going to delay President Trump's strategy.
What do you think the impact of that is likely to be?
Yeah, I think he's clearly going to follow the law.
The question is if he will reclassify the tariff authority from the ones struck down by the panel, essentially.
But I think, you know, he has used it as a tool of getting people to negotiate, essentially.
And that has been very, very successful.
We had decades of talks between these trading nations, and nothing happened.
And then after April 2, when he launched the tariffs, there was 130 countries, roughly, who wanted to negotiate.
So clearly it has been a success to getting people on the negotiating table.
Even last week, EU, with 27 countries, which is very hard to negotiate with, turned around on a whim in two days from Friday to Sunday to wanting to negotiate after the 50 % threat of a tariff.
So that tool has been certainly successful for the goal of getting people to negotiate, and ideally from a US perspective to engage in more free trade for US companies.
The whole issue here is from the US perspective is that we treat companies here a lot better than our companies are treated abroad.
So this was a tool for getting more free trade for US companies abroad.
So you're saying that that was basically, there was never an intention, and there isn't an intention, to have high levels of tariffs for the long term?
This is entirely about getting people to the table and negotiating a better deal, and the tariffs will go.
Yeah, that's the way I interpret it, because once they go and start negotiating, he lowers them.
I mean the whole point here is to have the fire under their feet to get them to the table, which was very, very successful, obviously.
Does this legal action not take the wind out of the sails a little bit though?
Because if you're engaged in negotiations, this weakens your case somewhat, doesn't it?
Yeah I mean in the US, the congress have the power of the purse, meaning they have they have the power to leverage taxes and spending, and obviously tariffs are taxes, so there has been a long debate on whether the executive branch i .e. the White House has the authority.
I'm not a lawyer to weigh in usefully on that debate, essentially.
But given that they have struck this down, my suspicion is that there will be obviously an appeal, and we'll see how that goes.
But also, there will be reclassification of a tariff authority away from the law that was used essentially to grant access to the current tariff levels.
But that is more of a legal question, which there's other experts that know a lot more about than me.
and I'm sure it will be greatly picked over in the coming days in weeks.
Thomas Philipsen from the University of Chicago and formerly of the White House, thank you very much for being with us here on World Business Report.
Well as we have been hearing, there has been reaction from all over the world to this news, as well as questions over where it will leave individual businesses and traders, it's open questions about, as we've just been saying, how negotiations over international trade deals with the US will progress, now that the whole process is in doubt.
Dmitri Grossbinski is a former trade negotiator and the author of politicians lie about trade.
He spoke to me from UBS's Asian investment conference in Hong Kong earlier and I asked him what the mood was like at the conference when people heard this news.
Haha. Tense relief.
These are people incredibly affected by the vagaries of world trade.
A lot of them are investing in supply chains that run out of Asia or through Asia and a of them are investing in international trade.
And the IEPAR which Trump was relying on to impose tariffs very, very quickly with no warning and unilaterally was introducing a huge amount of chaos into international trade, which this ruling, especially if it's upheld by the higher courts, will curtail someone.
That relief presumes that people have got some faith that this legal challenge will have some success and that Trump won't just find another route for this?
I think the initial relief is firstly that the ruling happened at all.
Everyone understands that this has already been appealed to the Federal Circuit and there is of course the Supreme Court after that, but the ruling was unanimous and it was pretty unequivocal on the merits and I think people are welcoming that with all due caution about higher circuit courts of appeal.
On the second half of your question, in terms of kind of how they anticipate this changing things given the Trump strategy, this closes by far the easiest tool the Trump administration had to alter tariffs without Congress.
Tariffs are a power that is in the U .S. Constitution reserved for Congress, and the only reason he was able to do what he has been doing is that there are a number of acts throughout the years that give the executive some ability to act without Congress.
This was by far the biggest open door, and the Court of International Trade has just closed it.
That's going to make a difference.
It'll be a lot harder for him to raise tariffs in the future without AIPA.
So just to look at the wider situation, there are negotiations ongoing now, perhaps most notably with the EU regarding trade agreements.
What will happen to those negotiations at the moment?
Will everything stop dead pending this appeal?
I think it's hard to say.
The Trump administration has some other tools it can use to potentially threaten tariffs on Europe, most notably the 232 and what's called Section 338, which allow him to raise tariffs on specific countries somewhat.
He may attempt to push forward, and he may attempt to push forward by saying, listen, And we're going to defeat this on the appeal.
And it'll be up to the Europeans how much they engage.
However, this was ultimately a negotiation in which President Trump was threatening other countries with a big stick.
That stick just got considerably more ephemeral.
So I think the Europeans will be even less likely to make concessions now.
And they didn't seem that came before.
International trade expert, former trade negotiator Dimitri Grozbynski speaking to me a little earlier.
Well we should make a bit of time to just find out how individual businesses are reacting to this news so to end the program I'm joined with Cara Dyer the owner of Storytime Toys, a toy shop based in Boston and Antonin Finkelenburg, the Director General of the Federation for German Wholesale and Foreign Trade.
So to you first Cara, your initial reaction when you heard last night that this, that this ruling had happened?
Well I was incredibly happy and relieved but I'm also still very cautious.
I want this to work its way through our court system so we have a little bit more certainty about what the tariffs will be in the future and we feel more comfortable about placing our order, our orders in China, so that we know what the expenses are.
I was gonna say just explain me a little bit how you would be affected by these tariffs?
Yes. Right now, all of our products are made in China.
They're toys and really, China is the only place that can manufacture our toys.
When the tariffs were implemented, we would have to pay a huge lump sum as soon as the products arrived here in the United States.
It's really a tax on our business and then we have to decide whether we're going to absorb the cost of it or pass it on to the customer or a combination of both.
And so that gave a lot of risk to us that we had to decide, you know, how much we were going to order and how much risk we were going to take.
And so it's it's just been a lot of uncertainty for our company.
And just to clarify, President Trump's argument should be that Americans should be buying American toys made in the United States.
And you're that isn't an option at all?
It really isn't an option, the materials that we use to make our toys are not available here in the United States and we just don't have the capacity and I have definitely looked because it would be a lot more convenient if it was if our manufacturing were closer to us but right now China is the place where I think 80 % to 90 % of toys are manufactured.
Antony, let's turn to you for a moment because there have been negotiations ongoing with the EU and the White House.
What was the situation like for a business in Germany prior to this announcement last night?
Good afternoon. The situation for businesses in Germany was unstable, a lot of confusion because again we don't know what tariff applies, what tariff will change overnight or be taken back overnight if we are at 50 % or 10 % if the 90 day limit still holds or not so the confusion was all around and all around and it's felt as an interruption to supply chains and the whole value process.
How, well do you feel this judgment has made any difference to that at all?
Not really because it's only the first leg of probably an out -drawn judicial contest between the administration and the courts.
For us, it's a good sign that the court overview, the judicial overview works because apparently Congress doesn't feel the need to really fight for its rights versus the administration.
However, it does not change anything material yet.
The negotiations with the EU will continue.
And I'm not sure if Trump will not find a different way to raise terrorists again.
As we were asking before I mean, oh, sorry to continue.
Oh, finally, the aluminum the steel terrorists, the car terrorists, the plant pharmaceutical terrorists, they are still on the table.
They're not affected by this.
Well, I was going to ask about the car tariffs in particular because the US is a big buyer of German cars, that...
well, nothing changes at all there.
Well we know that the German car manufacturers who have production sites in the United States are currently negotiating by themselves to expand those production numbers to strike a deal by themselves, but the overall EU versus United States but the issue does not go away.
It hasn't changed a bit.
And just to talk quickly about those EU negotiations, this was already underway after those tariffs were announced by President Trump.
Has this put the EU in a better position?
You know, Trump is not going to be able to go into these negotiations with such a strong footing as he would have been 24 hours ago.
I'm not sure. It is possible that he now tries to pick apart the EU by raising terrorists for individual countries, which would be difficult for the stronger exporters like Germany.
It could also mean that in the end, he's more likely to make a deal because the terrorists are more difficult to sustain on the judicial level.
But it's really hard to tell from the outside.
Currently we're very cautious, and we don't think much has changed at all with this decision.
Cara, let me just ask you a little bit about the Trump administration in general.
How has your feelings and your confidence in the way Trump is dealing with the US economy changed from maybe when the election happened last year to the to the present day?
Well it's just been so chaotic and so impossible to plan as a business and I it as business owner it feels like he hasn't thought through the repercussions of of the tariffs.
Just thinking about our business.
For every toy that we bring in say it cost four dollars for us to bring it in we spend probably fifteen to thirty dollars on services here in the US to get our products into the hands of customers and so all of those businesses that are American businesses are hurting too.
So it just feels like the policy has not been well thought out, and it's you know, anti -American business, really in the modern sense of American business.
And it's just and also the fact that it's been changing so often.
And he's adding the tariffs and taking them off.
It's been so hard to plan that we have not been able to innovate and create new products in the way we would have if this wasn't the case.
And so I think it's hurt us.
And the people that say, well this is all bluster, it's only about creating a negotiating position for President Trump and you shouldn't worry about it.
What would your reaction to that be?
Well it's been very real for us, so like in the last few months, this is when we should have been placing our very large orders for the holiday season and I didn't do it this year.
I've placed small cautious orders and so this has very definitively affected our business in a negative way and I think they'll see a ripple effect too through customers.
Cara and Antonin thank you very much for your thoughts.
I just want to tell you that we've also learned this afternoon that the former Mauritanian Finance Minister C .D.
Wield -Tar has been elected president of the African Development Bank.
We will more on that and what the future might hold in our later program at 2130 GMT. Here today, Rome tomorrow.
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