Analysis of an amicus curiae brief filed with the U.S. Supreme Court by prominent professional economists, including several Nobel Prize winners and former government officials. There are two consolidated cases before the U.S. Supreme Court: No. 24-1287: Learning Resources, Inc., et al. v. Donald J. Trump, President of the United States, et al. and No. 25-250: Donald J. Trump, President of the United States, et al. v. V.O.S. Selections, Inc., et al.
Analysis by Claude AI.
This is an amicus curiae brief (Latin for “friend of the court”) filed with the U.S. Supreme Court by prominent professional economists, including several Nobel Prize winners and former government officials. An amicus brief is filed by non-parties who have expertise or interest in a case and want to provide the court with additional information or perspectives.
The Legal Context
President Trump imposed sweeping tariffs (taxes on imports) using the International Emergency Economic Powers Act (IEEPA), a law that gives the President extraordinary powers during national emergencies. He declared two separate emergencies:
- A fentanyl crisis (tariffs on Mexico, Canada, and China)
- An economic crisis caused by U.S. trade deficits (the “reciprocal tariffs” on virtually all imports)
Importers sued, arguing the President exceeded his legal authority. These cases are now before the Supreme Court.
Core Legal Requirements Under IEEPA
For the President to use IEEPA, three conditions must be met:
- There must be an “unusual and extraordinary threat” to national security, foreign policy, or the economy
- The threat must actually exist
- The President’s actions must “deal with” that threat
The economists argue the tariffs fail all three tests.
The Economists’ Main Arguments
Argument 1: Trade Deficits Are Not “Unusual and Extraordinary”
What is a trade deficit? When a country imports more goods and services than it exports, it runs a trade deficit. The U.S. has imported more than it exported for most of the past 50 years.
The economists’ key insight: A trade deficit is economically identical to a foreign investment surplus. When foreigners invest more money in America than Americans invest abroad, we necessarily run a trade deficit. It’s two sides of the same coin.
Their evidence:
– About two-thirds of countries run trade deficits in any given year
– The U.S. has run persistent deficits for 50 years
– The U.S. also ran deficits from 1800-1870
– Countries like France and India have run persistent deficits for decades
On bilateral deficits: The brief explains that bilateral trade deficits (with specific countries) are even more normal. Nobel laureate Robert Solow’s example: “I have a chronic deficit with my barber, who doesn’t buy a darned thing from me.” There’s no reason every country should have balanced trade with every other country.
Argument 2: Trade Deficits Are Not a “Threat”
The economists argue trade deficits are economically harmless and actually reflect U.S. economic strength:
Why the U.S. runs trade deficits:
– America is an attractive place to invest (strong economy, rule of law, innovation)
– Foreign investors want to buy U.S. assets
– To buy those assets, they must give us goods, services, or currency
– This creates the trade deficit
The budget deficit connection: The U.S. government spends more than it collects in taxes (budget deficit). This is partially offset by Americans saving, but not fully. The gap between what America spends and earns must be filled by foreign investment, which equals our trade deficit.
Key point: Foreign tariff rates don’t correlate with trade deficits. A large-scale study of 189 countries from 1988-2022 found “no statistically significant effect of tariffs on trade balances.”
On specific claims in the executive order:
- “Trade deficits hollowed out manufacturing” – False. Even if the entire trade deficit were replaced with domestic manufacturing, U.S. manufacturing would only be 14% of GDP, still far below its 1950s peak of 28%. Manufacturing declined due to productivity improvements, not trade deficits. Germany runs trade surpluses and also saw manufacturing decline as a share of GDP.
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“Trade deficits undermined critical supply chains” – Confused. Trade itself (importing goods) might create vulnerabilities, but that’s unrelated to whether you import more than you export. A country with a trade surplus could still face supply chain risks.
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“Lack of reciprocity in bilateral trade” – Contradicted by data. The tariffs are actually higher on countries that have lower tariffs on U.S. goods, making the term “reciprocal” a misnomer.
Argument 3: Tariffs Don’t “Deal With” Trade Deficits
The fundamental economic principle: “Trade policies do not affect the trade balance.” This is from standard economics textbooks.
Why? Because the trade balance equals national savings minus domestic investment. Tariffs don’t change how much Americans save or invest, so they don’t change the trade deficit.
What tariffs actually do: They reduce total trade in both directions – both imports and exports. But the balance between them remains roughly the same.
Real-world evidence:
– Despite massive tariff increases in 2025 (15.6 percentage point increase in effective tariff rate), the goods trade deficit from January-July 2025 was $840 billion, up 23% from $682 billion the previous year
– During Trump’s first term, tariffs on China reduced the bilateral deficit with China but increased deficits with other countries, leaving the total unchanged
The investment paradox: The government claimed the tariffs secured $1 trillion in investments from Japan and South Korea. The economists point out this will increase the U.S. trade deficit by $1 trillion, because foreign investment and trade deficits are the same thing.
Argument 4: The Major Questions Doctrine Applies
What is this doctrine? The Supreme Court has ruled that when an agency claims power to make “decisions of vast economic and political significance,” it must point to “clear congressional authorization.”
The economists’ evidence of vast impact:
Revenue impact:
– Wharton School estimates: $2.6 trillion over 10 years (accounting for behavioral responses)
– Government’s own estimate: $2.3-3.3 trillion
– Compare to cases where Supreme Court applied the doctrine: $50 billion (Alabama Ass’n of Realtors) and $469-519 billion (student loan forgiveness)
– The tariffs’ impact is 5-6 times larger than the “staggering” student loan case
Consumer impact:
– Poorest 10% of households: $1,032/year average cost
– Middle-income households: $1,500/year
– Richest 10%: $4,136/year
Economic restructuring: The government itself said the tariffs will “structurally shift” the entire U.S. economy, forcing massive changes in consumer purchases, business inputs, capital allocation, and employment across all industries.
The legal problem: IEEPA doesn’t explicitly mention tariffs; it only says the President may “regulate… importation.” The Federal Circuit held this language doesn’t grant “unlimited authority to impose tariffs.”
Logical Strengths of the Brief
- Impressive credentials: Signatories include three Nobel Prize winners, multiple former Fed chairs, Council of Economic Advisers chairs, and Treasury officials from both parties
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Accessible explanations: Complex economic concepts are explained clearly with concrete examples
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Multiple lines of evidence: Historical data, international comparisons, theoretical models, and empirical studies all point to the same conclusions
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Internal contradictions in policy: Shows that if the tariffs achieve their stated goal (more foreign investment), they must increase trade deficits
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Direct engagement with opposing arguments: Addresses specific claims in Executive Order 14,257 point-by-point
Potential Weaknesses and Counter-Arguments
1. Conflating Economic and Legal Standards
The weakness: The brief assumes that because trade deficits are economically harmless, they cannot be legal “threats” under IEEPA.
Potential counter-argument: National security threats are political/strategic judgments, not economic ones. Even if economists agree deficits aren’t economically harmful, the President might legitimately view them as threatening national security through:
– Dependence on foreign manufacturing
– Vulnerability to economic coercion
– Strategic disadvantages in defense industries
The courts typically give the executive substantial deference on national security determinations.
2. Dismissive Treatment of “Tipping Point” Theory
The weakness: The brief states: “Amici… know of no ‘tipping point theory’ of trade deficits” and calls the government’s position “simply a less transparent way of demanding deference.”
Potential counter-argument: The government could argue:
– While individual annual deficits are normal, cumulative deficits over 50 years create unprecedented foreign ownership of U.S. assets
– There may be a threshold beyond which this becomes strategically dangerous
– The lack of established economic theory doesn’t preclude executive judgment about national security
– Economic consensus in 1929 didn’t predict the Great Depression
3. Narrow Focus on Aggregate Trade Deficit
The weakness: The brief emphasizes that aggregate trade deficits don’t respond to tariffs, but gives less attention to industry-specific and strategic concerns.
Potential counter-argument: The government could argue:
– The real concern isn’t the size of the aggregate deficit but composition of trade (e.g., dependence on adversaries for critical goods)
– Industry-specific deficits in strategic sectors (semiconductors, pharmaceuticals, rare earths) pose genuine security risks
– The brief acknowledges tariffs can affect bilateral and sectoral deficits
– The President has legitimate authority to address these specific vulnerabilities even if aggregate deficit remains unchanged
4. Inconsistent Treatment of Foreign Investment
The weakness: The brief treats foreign investment as beneficial when explaining why deficits are good, but doesn’t address scenarios where foreign investment might be harmful.
Potential counter-argument:
– Not all foreign investment is equal: portfolio investment is different from strategic acquisitions
– Large-scale foreign ownership could create leverage over U.S. policy
– The economics profession’s consensus that “deficits don’t matter” might be challenged by geopolitical considerations
– China’s Belt and Road Initiative shows how investment can create strategic dependencies
5. Limited Engagement with Precedent on Executive Deference
The weakness: The brief doesn’t fully address how much deference courts traditionally give the President on national security and foreign policy matters.
Potential counter-argument:
– Courts have historically been very reluctant to second-guess Presidential determinations about national security threats
– Youngstown Sheet & Tube v. Sawyer recognized Presidential authority in emergencies
– Even if economists disagree, the President’s assessment might be entitled to deference if reasonable, not provably correct
– The separation of powers might preclude courts from substituting economic expertise for Presidential judgment
6. Major Questions Doctrine Application
The weakness: While the revenue numbers are impressive, the government could distinguish this from student loan cases.
Potential counter-argument:
– Tariffs have been a Presidential tool since the founding era, unlike the novel programs in Alabama Ass’n and Biden v. Nebraska
– Historical practice matters: presidents have imposed tariffs for 200+ years
– IEEPA was enacted knowing presidents traditionally used tariffs
– The “regulate… importation” language encompasses tariffs more naturally than agencies’ strained interpretations in prior major questions cases
– Revenue size alone doesn’t trigger the doctrine if the authority is traditional
7. Selective Use of Data
The weakness: The brief notes the 2025 trade deficit increased despite tariffs but doesn’t address potential lag effects or acknowledge that tariffs were only imposed starting in February/April 2025.
Potential counter-argument:
– Seven months isn’t enough time to evaluate policy effects
– Behavioral adjustments take time (firms need to find new suppliers, build domestic capacity)
– Short-term data doesn’t disprove long-term effects
– The first Trump administration’s China tariffs did reduce the bilateral deficit with China, showing tariffs can work for specific objectives
8. Alternative Theories of Harm Not Addressed
The weakness: The brief focuses on economic growth and consumer welfare but doesn’t fully engage with distributional and social concerns.
Potential counter-argument:
– Even if aggregate GDP is unaffected, trade deficits might:
– Concentrate economic pain on manufacturing communities
– Reduce middle-class job opportunities
– Increase inequality
– Undermine social cohesion
– These might constitute “threats” to national security through domestic instability
– Court might defer to elected officials on value judgments about distribution vs. efficiency
The Broader Legal Picture
This case will likely turn on several key questions:
- How much deference do courts owe the President on “threat” determinations under IEEPA?
- The economists argue for minimal deference (facts must support the claim)
- The government will argue for substantial deference (reasonable judgment standard)
- Does “unusual and extraordinary” have objective meaning or is it Presidential judgment?
- The economists treat it as objective (provable by data)
- The government will argue it’s inherently judgmental
- Does IEEPA’s “regulate… importation” language clearly authorize tariffs?
- Major questions doctrine suggests ambiguity should be resolved against vast authority
- But historical practice might support broader reading
- Can courts evaluate whether measures “deal with” threats using expert testimony?
- The economists argue courts should credit economic consensus
- The government will argue this invades executive prerogative
Bottom Line
This is a powerful brief that marshals impressive credentials and clear economic reasoning to argue that trade deficits are neither unusual nor threatening, and that tariffs don’t address them anyway. The economic analysis is sound and well-supported.
However, the brief may be vulnerable to the counter-argument that:
– Legal “threats” aren’t limited to economic threats
– National security involves strategic judgments beyond economic efficiency
– Courts traditionally defer to Presidents on such matters
– Even if the aggregate trade balance isn’t concerning, specific dependencies might be
The Supreme Court will need to balance economic expertise against executive authority in national security matters—a tension at the heart of many contemporary administrative law disputes.