On May 3, 1930, an “open letter” written by over 1,000 American economists was delivered to US President Herbert Hoover, Senator Reed Smoot, and Congressman Willis Hawley in opposition to The Tariff Act of 1930. Hoover ignored the advice and signed what became known as the Smoot-Hawley Tariff Act into Law six weeks later on June 17, 1930. Retaliatory tariffs quickly reverberated around the world, leading to a 65% collapse in global trade from 1929-32 that played an important role in exacerbating the Great Depression.
On October 24, 2025, an “amicus brief” was filed before the Supreme Court of the United States (SCOTUS) by 44 economists in support of legal action that has been taken against the so-called “reciprocal tariff regime” of US President Donald Trump announced on “Liberation Day”, April 2. While a much smaller group than the protest of 1930, the amici curiae (signers of the brief) include three Nobel Prize winners in economics, former Federal Reserve Chairs and US Treasury Secretaries, former Chairs of the Council of Economic Advisers, and a number of distinguished experts in public policy and academia that “have dedicated their lives to understanding international trade and the economy.” Their brief was filed with the stated purpose of “ensuring that the fundamentals of trade economics are correctly represented in this legislation.”
Will SCOTUS do “a Hoover” and reject the bipartisan advice of experts in considering the constitutionality of Trump’s tariffs that have been imposed under the International Emergency Economic Powers Act of 1977 (IEEPA)? As I wrote back in May and June in the aftermath of the initial ruling of the of the US Court of International Trade that struck down the Trump tariffs, there is a compelling economic case against the argument that US trade deficits are either unusual or an emergency. I stressed that the United States, which has been chronically short of domestic saving, has run merchandise trade deficits consistently for fifty years since the mid-1970s. Unsurprisingly, great minds think alike, and the amicus brief underscored the same conclusion.
In oral arguments heard two days ago before the Supreme Court, the economic logic of the Amicus Brief appeared to resonate with liberal and most conservative justices, alike. Of course, there is the obvious and important caveat that there is more to the law than economics. I am especially mindful of that distinction. Despite my current position at Yale Law School, I have no expertise on constitutional matters of “delegation and the major question doctrines” that bear on the separation of powers and potential executive overreach of President Trump to subvert the taxing and revenue authority of the Congress. Nevertheless, Chief Justice John Robert’s simple assertions that “Tariffs are taxes” and that the word “tariffs” appears nowhere in the IEEPA statute was music to my ears, as was the observation by Justice Amy Coney Barret that that the IEEPA phrase of “regulate importation” does not grant tariff-imposing authority to the president.
A couple of things struck me about the Trump Administration’s response argued (with almost unintelligible high-speed elocution) by Solicitor General John Sauer: One, he basically fabricated the case for an emergency trigger to the cumulative trade deficit — arguing that the US was nearing a dangerous threshold, a breaking point on the future progression of trade gaps. As the amicus brief argues forcefully (p. 14), there is “no ‘tipping point’ theory of trade deficits …” that supports this contention.
Second, there is a case for an emergency, but it could be one of Trump’s own making. According to the Congressional Budget Office, estimated impacts of the just enacted One Big Beautiful Act, baseline budget projections point to cumulative increases in the Federal deficit of $2.4 trillion over the next ten years (from 2025 to 2034). That will undoubtedly push an already-depressed net national saving rate from just 0.1% of national income in 2024 into negative territory in the years ahead. With the US lacking in domestic saving and wanting to invest and grow, that points to growing reliance on increased surplus saving from abroad; this, in turn, will result in a further widening of America’s current account and goods trade deficits, both of which stood at around -4% of GDP in 2024.
Trump, of course, claims that surging tariff revenues will offset any potential widening of the Federal budget deficit. That seems highly unlikely, especially if SCOTUS invalidates the Liberation Day tariff collections. Under those possible circumstances, tariffs collected illegally will need to be refunded, imparting a further drag on budget deficits that CBO estimates suggest will amount to approximately $200 billion in FY 2025 and another $300 billion in 2026. With the US dollar already under downward pressure, that’s when the foreign funding of America’s gaping trade deficit may well turn into a full-blown financial emergency — an emergency that is very much an outgrowth of the policy blunders of Trumponomics.
US Treasury Secretary Scott Bessent, along with Commerce Secretary Howard Lutnick, were dispatched by the White House to attend the oral hearing in front of the Supreme
Court. They were proxies for President Trump who toyed with the idea of an intimidation appearance before the Court. Bessent, a former hedge-fund manager well known for his disdain of mainstream economics models, has been a strong advocate of the MAGA case for tariffs. We can only hope that, unlike Herbert Hoover and Secretary Bessent, the Supreme Court of the United States is far more willing to listen to the credible voices of experts.