Solicitor General John Sauer reached for an unlikely ally early in November: Richard Nixon. During the Supreme Court hearings on Learning Resources, Inc. v. Trump, the Solicitor General, defending President Trump’s broad invocation of tariffs, pointed to Nixon’s use of an across-the-board 10% tariff to compel foreign partners to negotiate. Underscoring the aggressiveness of Nixon's move, it was post-hoc legally justified under the Trading with the Enemy Act of 1917 (TWEA). Reframing tariffs as a measure to “regulate importation” rather than revenue generation, the Solicitor General argued that a previous U.S. Customs court decision, Yoshida International (1975), affirmed the president's broad powers to manage trade, including the use of tariffs to explicitly “regulate importation.” Justice Brett Kavanaugh noted that this was a “good example,” since, under the International Emergency Economic Powers Act of 1977 (IEEPA) invoked by Sauer, no president had used tariffs to regulate imports. The hearings suggest that the Supreme Court’s decision will center on whether it accepts that IEEPA, a law that modified TWEA to limit the scope of the president’s emergency peacetime powers, adopted Yoshida’s definition of “regulate importation.” The other issue, known as the “major questions doctrine,” centers on whether Congress can delegate its constitutional tariff power to the President without more explicit statutory language. Determining if the president’s asserted justification, that the U.S. faces economic “catastrophe” without tariffs due to trade deficits, is moot - the court accepts that the president has significant leeway to determine what constitutes an emergency. IEEPA’s text offers little clarity, stating the president is granted powers to confront “unusual and extraordinary threat[s]… to the national security, foreign policy, or economy of the United States.” Moreover, previous cases affirm this executive prerogative, even if unwise. Before writing the Yoshida decision, the United States Court of Customs and Patent Appeals reviewed President Franklin D. Roosevelt’s use of TWEA to embargo gold exports and revalue the dollar in Norman v. B. & O. R. Co. (1935). They concluded the question then was “of power, not of policy.” Citing this precedent, the Yoshida court’s decision stated that “Though such a broad grant may be considered unwise… should it come into the hands of an unscrupulous, rampant President, willing to declare an emergency when none exists, the wisdom of a congressional delegation is not for us to decide.” While the Court will avoid determining whether an actual emergency exists, a voting public interested in safeguarding its constitution and civic protections should assess whether this broad use of tariffs, in fact, combats an emergency. At face value, the Nixon parallel appears nearly identical to the Trump administration’s claims: a 10% tariff was imposed on all trading partners to combat growing trade deficits and force them to the negotiating table. But upon closer inspection, these surface-level parallels dissipate. At the end of the day, Nixon’s tariffs were actually about currency, not trade balances. During the Second World War, the Allies devised a new monetary system known as the Bretton-Woods System. Seeking to avoid a repeat of the monetary mistakes that contributed to the Great Depression, the system consolidated the world’s monetary gold in the United States. The U.S. dollar replaced gold as the de facto reserve currency, pegged at $35 per gold ounce, while the rest of the world adopted floating currencies whose exchange rates fluctuated within a band against the dollar. This system was predicated on an assumption that made sense in the immediate aftermath of the war – the dominance of American manufacturing. The United States ran a net trade surplus, meaning it exported more than it imported. To compensate, its trade partners paid it in gold. However, this assumption began to fade as the U.S.’s trade partners rehabilitated their economies from the ravages of war. In the 1950s, Japan’s economic miracle was driven by its proximity to Korea, where it supplied NATO forces during the Korean War. In 1957, six European states created the European Economic Community, a customs union that eliminated internal trade barriers and created uniform tariffs for non-member parties. As time passed, the U.S. share of global manufacturing slipped, and by 1971, the strength of the dollar, combined with a diminishing share of global output, led the United States to run trade deficits. With the U.S. dollar fixed against gold, this created a conundrum. Trade partners could artificially keep their currencies weak against the dollar to advantage their exports in US markets. This then threatened the United States' ability to hold its gold reserves – given the dollar’s convertibility, trade partners could turn around and purchase gold with the dollars they received from their trade surpluses. This would effectively drain the United States' monetary supply, strengthen the dollar, create deflation, further exacerbate the trade deficit, and spark a recession. Given this situation, Nixon’s briefly tenured Treasury Secretary John Connally (a Southern Democrat) pronounced, “My philosophy is that the foreigners are out to screw us. Our job is to screw them first.” Calling the problem a matter of “benign neglect” on the part of the US, Connally sought to close the gold window, thereby ending foreign banks' ability to convert US dollars into gold. When a Treasury report determined the dollar was overvalued by 10% to 15%, encouraging fears of a broader foreign exchange crisis, Nixon held a meeting where his advisors determined that under GATT rules, a 10% “import surcharge” could be implemented to force trade partners to the negotiating table to compel them to strengthen their currencies. On August 15th, Nixon announced, “as a temporary measure, I am… imposing an additional tax of 10 percent on goods imported into the United States… When the unfair treatment is ended, the import tax will end as well.” In December, trade partners negotiated the Smithsonian agreement to readjust exchange rates. The Smithsonian agreement proved a partial solution. By early 1973, the world largely accepted the collapse of the Bretton Woods system and the convertibility of the US dollar into gold that went with it. In 1976, the Jamaica Agreement effectively shifted the world to a regime of managed, floating exchange rates for all currencies, with the dollar retaining its role as a global reserve currency based upon the strength of the American economy and its integration into the world economy. That resolution gets to the crux of the question over the present invocation of trade balances as justification for tariffs. The Nixon administration was intent on defending the dollar’s gold convertibility and offered no rhetorical lipstick that its tariffs were anything other than an “import tax.” Nixon made clear that he intended that the “emergency” tariffs should be temporary, not a potential permanent replacement for the entire tax ecosystem. Moreover, while one may protest that perpetual trade deficits may allow foreign entities to purchase American companies, equity, and debt, there is no threat to America’s ability to control its monetary policy, and this aspect of the trade deficit can be resolved by the government addressing chronic fiscal deficits. In light of this, it's challenging to consider the modern trade deficit a “crisis” worthy of the executive branch intruding on Congress’s power of the purse. The Court, of course, may decide differently, allowing the Presidency to permanently wrest from Congress its constitutional power of the purse. But for history and citizens alike, the Nixon administration’s use of emergency tariffs to force international negotiations is the exception that proves the rule.
