In a shock decision last week, two federal courts struck down the Trump administration’s use of emergency powers under IEEPA for his Liberation Day, fentanyl, and other tariffs. As a legal battle looms over the central plank of the Trump tariff agenda, Deborah Elms explains what happens now and the wide menu of legal options open to the executive branch. Trade and economic coercion has been rising in the last decade, including from China and Russia, yet the scale and force of recent US measures have come as a particularly strong shock, for it had been widely assumed that American hegemony since the mid-20th century had an overall effect of enhancing global growth and reducing political risk. The use of the dollar in the US playbook enabled its power projection for most of the last century, but events in the 21st century could dictate a monetary history quite different from its predecessor, Nicholas Mulder writes. Middle powers are in the spotlight with the US-China geopolitical competition straining the core tenets of the global rules-based order. But what exactly is a middle power? Amitendu Palit asks. Stewart Paterson discusses how the weakening dollar might help the policy goal to return the American economy to external balance and what the Trump administration could do better. Plus, see what we have been reading on the US court ruling against the IEEPA tariffs.
TRADE POLICY
A big and not so beautiful court battle over Trump tariffs
Deborah Elms 3 June 2025
Now that courts have ruled against the Trump administration on IEEPA, its use of Section 232 is even more likely. If IEEPA is not to be used for the imposition of tariffs against trade partners, the White House will resort to alternative methods to achieve its objectives. The courts and Congress tend to be highly deferential to executive claims of national security. Our Head of Trade Policy Deborah Elms explains what happens now and Trump’s wide menu of legal cards to play going forward.
The convergence of risk, coercion, and de-dollarization
Nicholas Mulder 3 June 2025
Trade and economic coercion has been rising in the last decade, from Chinese embargoes to Russia’s severance of energy flows. Yet the scale and force of recent US measures have come as a particularly strong shock, for it had been widely assumed that American hegemony since the mid-20th century had an overall effect of enhancing global growth and reducing political risk. History shows this view isn’t quite accurate, Cornell University’s Nicholas Mulder writes in a paper for the Hinrich Foundation. The use of the dollar in the US playbook enabled its power projection for most of the last century, but events in the 21st century could write a monetary history quite different from its predecessor, Mulder writes.
Middle powers are in the spotlight with the US-China geopolitical competition straining the core tenets of the global rules-based order. But those identified as middle powers are not a homogeneous bunch, raising doubts over the feasibility of their collective action, writes Amitendu Palit, Senior Research Fellow at Singapore’s Institute of South Asian Studies.
Podcast: Is the falling dollar the best outcome of the Trump effect?
Stewart Paterson
AFPC-USA
3 June 2025
There is much to dislike in the way the Trump tariffs were derived, not least the focus on trade in goods to the exclusion of services and on bilateral trade positions. But a real effective depreciation of the US dollar is required if the policy goal is to return the American economy to external balance, given the dollar’s overvaluation and persistent US deficit spending. Senior Research Fellow Stewart Paterson explores the dollar’s recent decline in a podcast with the Association of Foreign Press Correspondents-USA.
The US Court of International Trade ruled that Trump’s IEEPA tariffs are illegal and ordered their removal, though the order is now stayed pending appeal. Nippon Steel may proceed with its US Steel investment, under 50% steel import tariff protection. As key US partners like the EU consolidate their positions, companies face profit losses. Meanwhile, a fragile US-China truce appears to be falling apart, with Washington criticizing Beijing’s slow rollback of export restraints and imposing new curbs on Chinese tech firms. Check out what we’ve been reading.
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