Commerce Secretary Lutnick recently had this to say:
Donald Trump’s commerce secretary Howard Lutnick Thursday said that people should just let the president run the global economy because he knows what he has been doing.
One thing he presumably knows is that his recent announcement destroyed $2.5 trillion in stock market wealth in the US, not to mention additional damage to non-traded firms and foreign firms. That’s one of the largest one-day destructions of wealth ever achieved by a single individual, perhaps the largest.
And here’s the very first article of the US Constitution:
Article. I.
Section. 1.
All legislative Powers herein granted shall be vested in a Congress of the United States, which shall consist of a Senate and House of Representatives.
Notice that it says All legislative Powers, not “Most”. I’m still looking for the part of the Constitution where it says the president should “run the global economy”.
There was a time when Congress did actually determine US trade policy. The Institute for Policy Innovation recently produced a list of 15 treaties passed by Congress that President Trump violated in the past 24 hours. I won’t list them all, but here are the first two and then the last two, to give you a flavor:
On May 23, 1985, Congress passed a US-Israel free trade agreement.Donald Trump just broke it.
On September 19, 1988, Congress passed a US-Canada free trade agreement.Donald Trump just broke it. . . .
On October 12, 2011, Congress passed a US-Colombia free trade agreement.Donald Trump just broke it.
And on January 16, 2020, Congress passed Donald Trump’s USMCA, a free trade agreement with Mexico and Canada. Donald Trump just broke his own four year-old trade agreement.
I can recall a time when Congress had the power of the purse. Decisions on taxes and government spending were made by Congress, and the job of the executive branch was to enforce those laws. Today, congressional spending authorizations are treated as mere suggestions, which the president is free to accept or reject. The President can enact the largest tax increase in history.
Throughout history, intellectuals have repeatedly dreamed of the benevolent dictator, a leader that would cut through the messy job of reaching consensus and would rule in a bold and decisive fashion. On a few occasions it even worked out, as we saw in Lee Kuan Yew’s Singapore. But for every Lee, there are a dozen Maduros, Castros or Putins. The wisdom of the crowd is not always correct, but on average it is less wrong than the wisdom of a single individual.
The tariffs recently adopted by the Trump administration never would have been enacted by Congress. We’ll see how they work out. Bloomberg reports that the tariff announcement hurt the US stock market much more than foreign markets:
US equity index futures tumbled more than 4% after Trump announced a sweeping series of tariffs following the market close on Wednesday, and a gauge of the dollar slumped. But the impact elsewhere was less extreme. The Stoxx Europe 600 was down 1.9%, while the euro was up 2.2% against the dollar, hitting its highest level since October. A broad gauge of Asian stocks fell as much as 1.7%.
I wonder how that difference would be explained by mercantilists, especially those who have claimed that tariffs are an effective way of preventing America from being “taken advantage of by foreigners”. Is this what they expected? Did they expect the dollar to depreciate on the news?
It’s worth noting that some of these trade treaties were clearly more than economic policy initiatives. It is no coincidence that Israel was the first country to achieve a free trade agreement with the US—we have close ties with Israel related to security issues in the Middle East. Trump’s repeal of this treaty is more than just economic policy, it’s also foreign policy.
The IPI also had this to say:
When did it become okay for a president to break treaties lawfully passed by Congress?
President Trump is relying on the 1977 International Emergency Economic Emergency Powers Act (IEEEP), which empowers the president to act in cases of “unusual and extraordinary threat.” Can anyone argue with a straight face and a sound mind that the United States faces an unusual or extraordinary threat from literally every country on Earth?
A 10% tariff was placed on Heard Island, which has a population of zero humans and a few penguins. It does have a nice mountain however, a bit reminiscent of our Mt. Rainier:
