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Supreme Court's Tariff Ruling: What It Means for Energy · Columbia Energy Exchange

• 0:00
  Richard Nephew:
• 0:01
  Ultimately the president's ability to still use sanctions tools to target and to weaponize energy resources haven't changed a bit. It's just that the mechanism now is much more straightforward and again, in my opinion, a much more targeted way of doing business in any event because then you're imposing costs on the one that you think needs to have costs as opposed to an entire country.
• 0:02
  Jason Bordoff:
• 0:03
  President Trump has aggressively used tariffs as an economic tool, but the US Supreme Court decision on Friday that struck down his sweeping tariffs, now brings new uncertainty. The court in a six to three decision ruled that the president had exceeded his authority when he imposed tariffs on nearly every US trading partner last year. While the ruling eliminated his primary tool for imposing tariffs, President Trump moved to work around the court by imposing levies using other trade powers. On Saturday, Trump said that he would raise the new global tariff rate to 15% — using a provision in a law never before invoked by a president — that allows him to impose an across the board tariff, but only for 150 days unless Congress agrees to extend it. Trump also said he would use the act to investigate other countries’ unfair trade practices, possibly resulting in yet additional tariffs.
• 0:04
  So what does this ruling mean for the president's tariff policy and more broadly, his ability to wheel tariffs for geopolitical pressure? How will this impact US trading partners and existing trade deals? And what about the impact on the energy sector, from oil and gas to clean energy?
• 0:05
  This is Columbia Energy Exchange, a podcast from the Center on Global Energy Policy at Columbia University. I'm Jason Bordoff. Today on the show: Trevor Sutton and Richard Nephew. They are both researchers here at the Center on Global Energy Policy. Trevor focuses on the intersection of trade, climate and industrial policy. He leads the Center's program on trade and the clean energy transition. Trevor previously served as research director at the Remaking Global Trade for a Sustainable Future project. Richard formerly served as the US Deputy special envoy for Iran under the Biden administration, where he played a key role in negotiations over the Iran nuclear deal.
• 0:06
  Trevor and Richard joined me to unpack the court's decision. I hope you enjoy the conversation. Trevor Sutton, Richard Nephew, welcome back to Columbia Energy Exchange. Great to talk to you guys on this snowy day here in the Northeast about the big news on Friday.
• 0:07
  I guess everyone listening knows a major Supreme Court ruling, I think. But tell me what you think, Trevor, I'll start with you. Widely seen as a major setback for a huge piece of President Trump's agenda, which was widespread seemingly unrestrained authority to impose tariffs on other countries. So can you just remind everyone listening, it's been a couple of days, so I think most people saw the news. What did the Supreme Court decide on Friday?
• 0:08
  Trevor Sutton (02:55):
• 0:09
  Sure. So this is possibly the most highly anticipated decision of the Supreme Court's term, the October, 2025 term. It may be the most consequential Supreme Court decision of both of Trump's presidencies, although there are some serious competitors there, admittedly. But David French of the New York Times said it might be the most important criminal report decision of the century, which again may be hyperbolic, but I do think gives you a sense of the scale of the defeat for the administration. So having heard that you might be surprised to learn that the subject of the ruling was tariffs, right? I mean, prior to Trump's first term, tariffs were a relatively sleepy subject.
• 0:10
  (03:39):
• 0:11
  Trade policy had largely been settled in the 1990s and 2000s, but since he was first elected in 2017, Trump has been, I think it's fair to say overhauling the foundations of US trade policy, US trade diplomacy, and with it the functioning of the global trade system and even how some of our partners are thinking about trade. And of course, tariffs have been the centerpiece of this effort. Trump has said that tariff is one of his favorite words, maybe his favorite word. And he has been using tariffs in ways no recent president has used other than President Biden between the first and second Trump administrations in the first Trump administration, he used tariffs in ways that would've been familiar. At least previous presidents using provisions of laws that were passed related to trade, had trade in the name of the law using more or less the usual process.
• 0:12
  (04:38):
• 0:13
  In his second term, though, he took a much bolder approach to tariffs. He used a statute, a statute that many of us who worked in national security issues were familiar with: the International Emergency Economic Powers Act. He used that statute, which previously had been used to apply financial sanctions to apply tariffs. No president in 50 years since the act was passed, had ever used it to create tariffs. Trump did not claim it allowed him to use tariffs in one narrow set of circumstances or even a small set of circumstances, but pretty much without restraint tariffs on any country, on any product for any amount of time, at any rate that the president deemed necessary. And this is the most important part to me: With almost no rationalization, unlike other tariffs in which there is an administrative process, hundreds if not thousands of pages of records generated.
• 0:14
  (05:43):
• 0:15
  This required the president to issue a declaration of emergency and then that would allow him to impose tariffs. So this case was a little bit of a sleeper initially, I think because there was so much going on in the first Trump administration, I mean the first year of the second Trump administration, but after the court of international trade and then the federal circuit both ruled against the administration, all of a sudden it was viewed as high stakes because while Trump continued to use some of those other trade laws, I just mentioned really the centerpiece of his trade policy, and indeed one of the anchors of his foreign policy was the freewheeling and often coercive use of tariffs under IEEPA. And he was so, I suppose, aggressive or assertive in using these tariffs that they've become a hundred multi-billion dollar source of revenue to the US Treasury as well.
• 0:16
  (06:38):
• 0:17
  So that was also part of why the stakes were so high. I don't think there's been a time since the 19th century in which tariffs had a truly meaningful influence on the federal budget. And so the stakes were high, and a number of people, myself included, thought that maybe the Supreme Court would try to thread the needle because they have been pretty deferential to the president on a lot of issues, particularly where his executive authority is concerned. They might find a way to strike down these tariffs, but not the idea that the president could use tariffs under IEEPA. In fact, it was about as crushing defeat as the president could have feared. They said simply that the statute does not allow the president to authorize tariffs and that the president had effectively irrigated to himself the Congress's power to regulate trade and set tariffs. So there was really no opening for the president to spin this in a way that he had come out on top. So some pretty big reverbations and what are the biggest questions is: What happens to all the money that companies have already paid to comply with a tariff that is unconstitutional? They did not decide that they remanded that to lower courts. And so it's a drama that is not over yet.
• 0:18
  Jason Bordoff (07:53):
• 0:19
  Very comprehensive overview. Trevor teeing up a lot of the avenues I want to go deeper on. So thank you for that. And Richard, just remind people what IEEPA is because as Trevor said, in a sense, nothing new about tariffs. Biden had a bunch of tariffs in place, kept some of Trump's tariffs. This is not about tariff authority. This is a particular statute. And remind people which one we're talking about.
• 0:20
  Richard Nephew (08:17):
• 0:21
  Yeah, so basically IEEPA was passed actually as a way of reigning in the authorities that had been previously even to the president, to declare a national emergency and then to do things that normally a president couldn't do. It is interesting when you think about it in that context because actually has now been used by successive administrations ever since it was passed in 1977 to do a wide range of activities, mostly involving the position of sanctions against those that are targeted with national emergency declarations. And that's really the crux of what IEEPA does. It gives the president the ability to declare that there is a national emergency with respect to a thing, a place an issue, and then to impose sanctions to deal with that threat. So we've seen this in a bunch of different places. We've seen the president declare that Iran represents a national emergency and that its activities, whether they're terrorism or attempts to acquire nuclear weapons are a crisis that the president needs to respond to using sanctions. And then pursuant to IEEPA authorities and some additional elements of legislation, the president has said, so now Secretary of the Treasury, you may freeze assets now, secretary of State, you may deny visas. Those sorts of things.
• 0:22
  Jason Bordoff (09:33):
• 0:23
  And those things, just to be clear, there's no question that that is permissible legally under IEEPA. This is just about IEEPA doesn't cover tariffs as the tool to use.
• 0:24
  Richard Nephew (09:43):
• 0:25
  Exactly. And that's where I was going to go with that. I mean IEEPA gives the president a wide range of authority to enact sanctions policies, but importantly, crucially, centrally, as Trevor said, you don't find the word tariff in there, right? You find the ability to regulate the flow of money. You find the ability to regulate the flow of people. There are other specific elements of IEEPA that you can use to impose sanctions but not tariffs. And I think where the Supreme Court weighed in heavily on this, and part of the reason why I think our hedging, because I agree with Trevor, my digital thought is they were going to find a way to thread the needle, give the president something. I think they just looked at the text and said, we don't see the word tariff here. And it's really, really hard to try and wedge in the word tariff, especially when tariff is being described by the Supreme Court as a tax.
• 0:26
  (10:32):
• 0:27
  And I think that's a really central piece of this, is that they were essentially saying it's not only just regulating economic activity. IEEPA does allow that to a certain extent, but it's allowing it to collect revenue. It's allowing it to be a tax raise. And that's just not something the Supreme Court was willing to concede, given that IEA does not say the word tariff in there, and given the fact that it was in fact passed as a way of restricting the president's ability to invoke national emergencies and do all sorts of things with them.
• 0:28
  Jason Bordoff (11:03):
• 0:29
  Trevor, you mentioned there was no rationalization. There's no case that needs to be made or investigation that needs to be undertaken like some other tariff statutes. And we've seen the reciprocal tariffs, this broad announcement on so-called Liberation Day and about imposition of tariffs to deal with trade deficits. We've seen tariffs threatened in other cases because there are other concerns like India buying Russian oil. Just remind people what problem Trump was trying to solve, to the extent you think there was one, with the use of tariffs under IEEPA.
• 0:30
  Trevor Sutton (11:42):
• 0:31
  What problem wasn't he trying to solve? I mean, I think that's what it came down to. So after 10 years of Trump trade policy, it's easy to forget what tariffs are for, right? Obviously tariffs have a very long history. Tariffs are a significant source of revenue for the early US republic, but particularly in the wake of the second World War, there is a sense that trade needed to be regularized. The use of tariffs needs to be channeled and subject to certain restrictions and transparent largely to avoid reproducing the tariff wars of the 1930s and to promote what were then seen and still are by many people seen as the virtues of an open global economic order. So one can set one tariffs, whatever level one wants the standard tariffs that apply to all your trading partners. And since 1995, those tariffs are effectively what you agree to with all the other members of the WTO.
• 0:32
  (12:45):
• 0:33
  And then there are ways that you can either increase those tariffs or lower them on all or a subset of trading partners both under gold trade rules. In US law, you can lower them by negotiating a free trade agreement with one or more countries, which, for example, NAFTA and the US MCA is one. We have what we had and now we do, again, lower tariffs for most Canadian and Mexican goods. Then for example, goods from, I don't know, China, and you can also raise tariffs. But raising tariffs, sometimes there's a collapse of two different concepts. One is that the tariff that you apply to goods normally that's how 20 years ago someone would've thought of the word tariff. That's the one you agreed to in the WTO and your FTA. And that's when customs at the border looks and says, okay, this is this type of good, and that's tariff line. Then there are other cases in which you can apply a tariff because something has gone wrong or you have a concern.
• 0:34
  (13:48):
• 0:35
  You are concerned that there is too much steel made in the world. Steel prices are too low. It means that your steel industry is struggling, and that in turn threatens your ability to supply your defense base. Where there ever an outbreak of hostilities, or let's say that you just feel a trading partner is doing something unfair under a trade agreement or in your trading relationship like stealing IP theft and using that to make a competitor product to the one that's being made in your country, and that is making your own country's producers of that product meet with that IP uncompetitive at home or abroad, then you can impose a tariff on another country or another product to fix that problem. But as I've just laid out, there are specific reasons that you would impose a tariff. There are specific legal authorities under which you would justify that tariff. There's a record that is produced, and it's not inflexible, but it is somewhat kept.
• 0:36
  Jason Bordoff (14:52):
• 0:37
  But you would accept that when the US first joined and created the WTO, the country agreed to maximum tariffs that are quite low relative to other countries in the world. There may be an argument for thinking about a different tariff policy just to again, accept the playing field for people listening about when I say what problem one was trying to solve.
• 0:38
  Trevor Sutton (15:13):
• 0:39
  Yeah, no, excellent. No, no, yes, that's completely right. And this is something this administration has itself said many times in its public statements at the WTO and elsewhere. And to explain this, you have to take a little trip back in time. And I have to imagine the fair number of your listeners, but maybe not all of them can remember the sort of giddiness of 1995 and the optimism around globalization and its sense of inevitability. Inevitably, we would all be moving towards lower tariffs. Tony Blair famously said, there's no sense arguing about globalization. It's like arguing about whether fall follows summer. And so the US was instrumental in creating the WTO, and when it joined the WTO, it agreed to have sort of a maximum set of tariffs. And it does so on a good by good basis that we're among the very lowest in the world.
• 0:40
  (16:02):
• 0:41
  I think that the number that Trump administration uses is the average one. It's three point something percent, and some developing countries have much, much higher tariffs. I dunno exactly how much, but India, it's in 20 to 30% I think is its average applied tariff, meaning the one that actually uses is the maximum is probably even higher. And so the idea was that as they matured and as they industrialized and as they saw the virtues of globalization and economic integration, these developing countries would lower their tariffs, and all of a sudden everyone would be around the same sort of low tariff baseline. That's not what happened. And so by the time we get to the second Trump administration, there's a sense that globalization has been a bad deal for American workers. It's led to industrialization. There are all these trade imbalances that reflect any competitive behavior on the part of our trading partners, particularly ones that aren't conventional free market economies like China. And it's just a whole host of other problems, basically to put it in Trump speak, the fact that we're getting taken for a ride, it's a bad deal. And so the core logic of IEEPA, the big splashy rollout, the liberation day tariffs were intended to deal with those distorted in the Trump administration's mind trade imbalances.
• 0:42
  (17:25):
• 0:43
  And so that was the start. But then IEEPA even expanded to be used as an almost all purpose general tool of coercion, right? So you mentioned the Russian oil example, India buying Russian oil. Normally you apply tariffs in connection with trade that actually involves your country, but that was trade between India and Russia. It wasn't trade that involved the United States. So that functioned more like a kind of punitive sanction than a tariff, as people traditionally understood it. Likewise, there were sanctions on Brazil, and that was in part because the administration did not like the fact that the Lula administration was prosecuting the former president Bolsonaro. So again, there wasn't one problem that Trump administration was trying to solve, but it was dealing with the fact that it felt that the trade system had gone dangerously, I guess off course or rather that we didn't anticipate that globalization would lead us to a place in which so many US interests would be threatened and that so many US citizens and workers would be disadvantaged, that now they just need to have a kind of all-purpose tool of raising trade barriers against our trade partners, that the tariff authorities under US laws, they were used previously, just don't allow.
• 0:44
  (18:46):
• 0:45
  They basically were like, you know what? We're in an emergency situation, and so we just need to be able to raise tariffs and our trading partners however we want, dam the rules, dam the WTO. That's where they, and that is a big difference between Trump 1 and Trump 2.
• 0:46
  Jason Bordoff (19:05):
• 0:47
  Too, which is why in addition to someone deeply versed in trade policy and trade law, and even a lawyer here on the podcast, namely we have the person who wrote the book literally on sanctions and tools of economic state craft. Because as you said, there may be a plausible argument people can debate whether tariffs are good fiscal policy or not, whether they should be rethought given developments since the embrace of globalization in the 1990s. But Richard, as you said, and Trevor as you just said, this administration has expanded the use to using tariffs as a tool of economic statecraft, I think as a way to try to exert leverage, extract concessions, get other countries to pursue the policies that the US wants, not buying Russian oil. So is that right, Richard? Is that how we're using tariffs now? Ways you had seen other instruments, namely sanctions used in the past?
• 0:48
  Richard Nephew (20:06):
• 0:49
  Yeah, no, exactly. And it's interesting when we think back to Trump 1, there was a test case and some of us who really spina type thinking about this, watched it pretty carefully, and we saw it kind of happen and then it went away and not much made of it, and it kind of moved on. And that was the case of the imposition of tariffs against Turkey with regard to an American pastor who had been arrested, Pastor Brunson in Turkey, the president invoked a very high tariff, I want to say on aluminum and steel, I want to say it was like 50% or something like that. It was pretty extraordinary. And as a result of that, within a couple of days, maybe even hours, Pastor Brunson was released and sent back to the United States. And so that was really the first test case of using tariff as a traditional sanction tool.
• 0:50
  (20:52):
• 0:51
  In the past, we would've threatened an asset freeze in the past, we would've threatened to target a bank or something similar. In this case, the president decided to use a tariff threat. And that was the test that then was applied throughout the first year of the Trump administration, where we saw the United States threaten the imposition of tariffs with respect to, as you said, Russian oil, but also now with Cuba and its ability to purchase oil Iran in response to the protest activity and what the Iranian authorities did in response to that. Venezuela. And so what really struck me over the last year is that the president, I think thought of sanctions as being a waste of money, that it imposes a cost but doesn't get us anything. And it's remarkable. His press conference after the Supreme Court's decision kind of highlighted this when he said, I can't make any money off of imposing all these other sanctions.
• 0:52
  (21:45):
• 0:53
  This one I could, so I don't understand why I wouldn't do this one where the United States could make some money. I never really thought about it that way. But certainly if you think about it from his perspective, that would be a way of both achieving something from a foreign policy standpoint as well as doing something from an economic standpoint. But it is, I mean, it's definitely exceptional. I have strong opinions about whether or not it's wise and whether or not it's targeted and whether or not it achieves the kinds of missions that it's supposed to achieve. Maybe we could talk about that, especially in the case of India and Russian oil, but is it a way of using economic tools for statecraft policy purposes? And that's certainly the way the administration looked at it for the first year.
• 0:54
  Jason Bordoff (22:25):
• 0:55
  Which I think, again, I want to focus — people will have lots of opportunities to get legal takes on what the Supreme Court did — but focusing on the energy impacts. And I think you're teeing up several of those. And then there's also these other tariffs on clean energy.
• 0:56
  Lemme just ask you, Richard, you said a moment ago, IEEPA gives the president broad authority to regulate international economic affairs and commerce to pursue all the objectives, national security that you just talked about. It just doesn't say the word tariffs. So is this a major setback for the purpose of achieving those foreign policy goals, or is it a major setback for the tool of trade, which as you said, raises revenue? And so there may be a fiscal impact, but if you want to prevent people from selling oil to Cuba, if you want to prevent people from buying oil from Russia like India, do we just switch to a different tool that the president has more than enough authority under IEEPA without Congress to pursue?
• 0:57
  Richard Nephew (23:18):
• 0:58
  Yeah, absolutely. And look, that's essentially what the Supreme Court said. They said, listen, we're not saying that IEEPA didn't delegate authorities to the president. It did. It didn't say that the president can't use those authorities for his foreign policy objectives. It did in a way, actually, if the Supreme Court had decided to say in some cases you can use these authorities, in some cases you couldn't use these authorities, that actually would be much more of an infringement on the president's ability to use IEEPA. So say for instance, the Supreme Court had said, listen, broad range, trade-based problems, we don't consider those to be a national emergency. Cuba, we do. Well, then the Supreme Court would be studying itself as the arbiter of what a reasonable foreign policy is. And I think actually they did the right thing in not doing that. They said, no, look, we ascribed to the president, the foreign policy prerogatives that the president both has and the tools he's been given by Congress, he can do that. We're just saying which tools are not allowed by the law. And I think this is why if you look about, look at Cuba or you look at Russia, what this essentially means is no, Mr. President, you can't use tariffs. However, if you would like to impose sanctions on every single bank in Cuba, that is completely within your authority under IEEPA, whether or it's a good idea or not, set that aside,
• 0:59
  Jason Bordoff (24:33):
• 1:00
  That would be true to threaten Europe over Greenland.
• 1:01
  Richard Nephew (24:36):
• 1:02
  Absolutely. Absolutely. Okay. Absolutely. And that functionally is what the United States has done for the last 20 years with respect to Iran, right? Most of the sanctions imposed against Iran have been done pursuant to IEEPA with a president issuing an executive order and imposing sanctions as a result of that on the institutions that are to be sanctioned. There's no reason in the world legally not saying about whether it's a good idea, no reason or legally why the president wouldn't still be able to do that with regard to Russian oil, Cuba, purchasing oil, et cetera, et cetera,
• 1:03
  Jason Bordoff (25:06):
• 1:04
  And the way that this decision immediately affects energy through the lens of economic statecraft is what is, I mentioned India and Russian oil. I saw a headline, I sent it to you the other day, which said, Russian oil tanker is headed toward Cuba, and that is going to test the administration sanctions. And my question for you was what sanctions? I thought they were using tariff threats to put that in place. What are the energy implications you see in terms of the use of tariffs through that economic statecraft lens?
• 1:05
  Richard Nephew (25:40):
• 1:06
  From an economic statecraft perspective, probably not much. And that's in part because the tariff threat just simply hasn't been useful, right? So the tariff threat that was imposed against India for purchases of Russian oil, based on all the data we saw, it didn't really affect Indian purchases of Russian oil on net. It did affect what institutions were doing that, but where we actually saw a reduction in Indian purchases of Russian oil came from sanctions imposed under IEEPA's traditional interpretation by going after targeted entities on Lukoil and Rosneft back in November. That's where we saw a shift. Now, again, not a complete shift, and we've talked about that before about the impact of those sanctions, but it didn't come from the tariff threat. And again, this goes back to what tariffs actually mean from an economic statecraft perspective. They mean you're telling an entire country, we're going to make it more expensive for Americans to buy things from you.
• 1:07
  (26:29):
• 1:08
  That's what we're saying. We're not necessarily imposing costs on the entity that's doing those purchases, but what targeted designations under IEEPA do is say you Indian oil purchaser are no longer going to be able to operate the US financial system, nor frankly, most of the rest of the world's financial system that is a targeted, discreet and much more effective way of doing things. So to take your Cuba Russian tanker example, if the administration wants to try and prevent that tanker from docking, it can target financial institutions in Russia. It can target the ship itself, it can target ports in Russia. I mean there's any number of things it could target or frankly it could target on the Cuban side, banks and ports and purchasers. The real problem then becomes whether or not you're going to have an impact on those because they may already be sanctioned and they may not do business to the US financial system, but that frankly is a different problem. That is not the problem of people looking and saying, well, I'm not too bothered about a 5% tariff because I don't do much business with the United States anyway, so my costs haven't changed.
• 1:09
  Jason Bordoff (27:29):
• 1:10
  So Trevor, the questions I was just asking Richard, were sort of premised on the assumption that tariffs are no longer a tool in the toolkit, so what else could be used under IEEPA? But President Trump responded to this by saying he's going to put in place across the board 15% tariffs, remind people why he is able to do that if he is, and then there's a host of other authorities that the president has to impose tariffs, correct?
• 1:11
  Trevor Sutton (27:54):
• 1:12
  Sure. The president has no short supply of authorities under which he can impose tariffs. So the 15%, originally 10 and then 15% tariffs that he announced were being imposed under a trade authority that I believe has never been used before. So this tariff, I mean it will certainly have impact, but I honestly would characterize it as a kind of effort to preserve dignity or continue to look like he's in charge in the sense that these tariffs don't discriminate between different countries. You have to apply them to all countries regardless of what they,
• 1:13
  Jason Bordoff (28:35):
• 1:14
  But am I right? Sorry to interrupt. Not all products because I believe energy products are exempt from these tariffs the way they were originally.
• 1:15
  Trevor Sutton (28:44):
• 1:16
  I believe so mean again though, whether there are limits on the exercise of this authority are unclear the first time it's ever been exercised, but that's certainly how the tariffs have been implemented by this administration. But they also have a time cap. It's I think 150 days or 180 days, so it does not last forever. So this is not –
• 1:17
  Jason Bordoff (29:08):
• 1:18
  July 23 is when I'm told based by July,
• 1:19
  Trevor Sutton (29:11):
• 1:20
  Yes. This is not the catchall solution at that time. We'll be past the midterms, right?
• 1:21
  Jason Bordoff (29:16):
• 1:22
  No, not yet.
• 1:23
  Trevor Sutton (29:16):
• 1:24
  So this is not the catchall solution that the president is looking for. What I think you're much more likely to see is more aggressive use of section 301 tariffs and section 232 tariffs. 301 tariffs relate to some country somehow not respecting US rights in a trade agreement or otherwise unjustifiably infringing on US commerce. And 232 are about national security and there may be some other untested authority. There's one that's I think section 338 that I don't think has ever been used and designed in the 1920s before we had the modern trade system. And so its application is again, I think unclear and whether there will be an attempt by the courts to put any boundaries around its use will remain to be seen if it's used at all. But 232s and 301s have been the bread and butter of Trump 1 and also the Biden administration, and they are pretty versatile tariffs.
• 1:25
  (30:21):
• 1:26
  They can cover a lot of different grounds, but it's fundamentally a different kind of exercise of authority. It's subject to the Administrative Procedure Act. In the case of 301, there's opportunity for public comment. They're investigations, they're public records that are published and the whole process takes at least a year, and there are a lot of moving parts and it takes a lot of bureaucratic resources to get it done. That is different than IEEPA in which the president can wake up one morning and say, I want to pass a tariff. Here's an emergency. The emergency declaration could be a page or too long. And then from that I can then pass a tariff on every country in the world or one country and every good or no goods. And so it's fundamentally just a much more, I think, cumbersome sort of set of authorities from the president's perspective based on what he was used to under IEEPA.
• 1:27
  Jason Bordoff (31:18):
• 1:28
  So remind people how this affects energy. I think particularly clean energy, solar panels, EVs, these are all subject to some degree of tariffs using either section 232 or 301, correct?
• 1:29
  Trevor Sutton (31:30):
• 1:30
  Yes. I mean a lot of them, yes. It depends how broadly you define clean and energy. And it is worth emphasizing that in most cases, the IEEPA tariffs actually make carve out exemptions where there were already tariffs under 232, which are national security tariffs. And so for many countries that did quote unquote deals in part under the coercion, I guess, or to alleviate the trade barriers that the Trump administration imposed on them, the IEEPA tariffs were not always the ones that cared about the most. But at the same time, the IEEPA tariffs did cover a significant number of clean energy goods in the way that the previous tariffs did, not rather in the way that oil and gas products were not generally covered by IEEPA, but it is worth emphasizing that even before we got there, there were high tariffs on a lot of clean energy goods, particularly Chinese under these traditional authorities.
• 1:31
  (32:31):
• 1:32
  So we had section 301 tariffs on solar panels or various solar products from China. There are section 232 security tariffs on automobiles, which would cover EVs and on there's now an investigation into sort of polysilicon. There are countervailing duty Canva duallys, which deal with subsidies and what's called dumping, where you sell something abroad lower than the price at home on Chinese solar panels and southeast Asian solar panels. And under the Biden administration, they finalized 301 rules on Chinese electric vehicles and so on. Then there are also, how to put this second order impacts of other tariffs like the tariffs on steel that has an impact on certain components of wind turbines driving up the price there. And so there were already a whole range of tariffs on clean energy goods and then IEEPA would have been piled on top of them.
• 1:33
  Jason Bordoff (33:28):
• 1:34
  And these are unaffected by the Supreme Court's decision. These remain in place,
• 1:35
  Trevor Sutton (33:33):
• 1:36
  Those are unaffected by the Supreme Court's decision except that they may pursue them more aggressively or seek to increase them.
• 1:37
  Jason Bordoff (33:41):
• 1:38
  So are provisions like 232 and 301 just alternatives now the president can use to use tariffs the way he was before, or these are much more narrow, much need to be more targeted, as you said, require an investigation. So we're more cumbersome. You can't just by press conference declare a threat.
• 1:39
  Trevor Sutton (33:58):
• 1:40
  Yeah, I mean it's a little of column, a little of column B, right, because he can get a lot of the way he wants, but it's not nimble. It doesn't lend itself to the same kind of deal making that he likes. And I think it is worth important that IEEPA was hard to separate from deal making. He was changing the IEEPA tariffs all the time, all the time. And I think if people had honestly were more critical of the uncertainty than they were the actual tariffs themselves, at one point the US tariff rate increased and then decreased in a single day significantly. So IEEPA is really the lever that he had to drive these big deals that he was getting with UK, with the EU, with Japan, with a bunch of Southeast Asian countries. And that was because he could impose them and then he could lower them just really swiftly. Whereas these tariffs, he has authority to make exemptions and lower them, but it's just simply not as quick. And then just getting the tariffs up and running takes time. So if he wanted a tariff on a country to have a deal, he would still have to go through this whole process, which I think at a minimum would take six months or more.
• 1:41
  Jason Bordoff (35:10):
• 1:42
  So that deal making process you described, I was wondering about that over the weekend too in terms of what the implications of this are for energy. Again, the purpose of this podcast. And I hadn't seen much discussion of that and all the commentary about it, but to your point, the use of tariff threats under IEEPA extracted agreements, concessions, whatever the right word is from other countries that had I think important implications for energy, countries like Japan and Korea committed to spend tens of billions of dollars on American LNG purchases to invest in critical minerals to invest in new nuclear projects here in the us. A big deal announced with Westinghouse, is all of that gone now because those countries no longer perceived there is a credible tariff threat to which they were responding in the first place. Either of you or both of you can take that.
• 1:43
  Trevor Sutton (36:03):
• 1:44
  I'll just answer real quick. I mean that's a $64,000 question. The short answer is I don't think we know. And I think it also is contingent on a broader set of factors about how strongly that country wants to maintain positive relationships with the Trump administration for a broader set of reasons than just trade. I mean, Japan seems like it is going to go ahead with it. So whereas the EU already asked, oh, is this deal still on? And Japan and the EU view the United States very differently right now, but it also has to do with what else there was before IEEPA actually for a lot of countries in Asia, the preexisting 232 and 301 tariffs had more bite to them or just as important. And the IEEPA tariffs, as I mentioned, often weren't added on top of some of the two 302s.
• 1:45
  (36:59):
• 1:46
  And so I think there is a desire to be in the Trump administration's good side, not withstanding the loss of IEEPA tariffs, and also to see further reductions in the tariffs that they exist. And finally to avoid new tariffs because Trump will go ahead with additional 301s most likely for example, on countries. But there will be, I think a certain amount of discretion or strategy involved in that is it does involve more resources. It does involve more time and effort. So they're going to have to be a bit judicious. And I think countries are looking at that being like, well, maybe these IEEPA tariffs are gone, but we don't want to have 15 301 actions against us in a year's time. So I think again, I think it very much depends. And finally it just depends on the power dynamic between them.
• 1:47
  Jason Bordoff (37:49):
• 1:48
  Is that your take Richard, same as Trevor's?
• 1:49
  Richard Nephew (37:51):
• 1:50
  Yeah, I think so. No, I agree. And I would add two additional glosses to that. I would say one, I think some of the deals that were made in response to tariffs two may never have actually been executed anyway. So the actual practical impact might be slight if all it was was a press release intended to get the president off their back. So I think it's worth just putting that out there that we probably weren't going to see the level of investment coming from Saudi Arabia that was being billed anyway just because the amount of money that was being pledged was so astronomically high. It was probably infeasible in any event, but there's no reason to back off of a commitment that wasn't a real commitment anyway, so you might not see much of a practical impact because people would say, well, I had no intention of really carrying through with this, and it's going to all depend on what people think they need out of this administration, how they want to work with it.
• 1:51
  (38:39):
• 1:52
  And then the second big point is, as we were just talking about, IEEPA still gives the president a lot of coercive economic power and it's just different now. So if the president wants to get something different out of Japan or different out of China, there are different tools. And to take up the example on solar panels for instance, again, I'm not saying this is a good idea, I'm just saying the president could say, I find that Chinese solar panels are such a threat that I'm going to direct the Secretary of the Treasury to freeze the assets of this entity if they're attempting to transfer the United States. Again, not saying it's a good idea, but I do think this is where the decision made by the Supreme Court affected one element. It does not affect the totality of the president's economic arsenal and that actually merits additional scrutiny and consideration.
• 1:53
  (39:25):
• 1:54
  It's all worth pointing out here. The reason why 232 and these other processes are slow and cumbersome is because Congress has historically not loved the idea of a president being able to flip a light switch on and off with regard to tariffs and trade policy. They have wanted a say as the elector representatives of the United States. In many ways, my opinion is this is trying to reset that balance and to put it back onto Congress as I think it was Justice Gorsuch saying in the opinion as well, there's a legislative requirement here and the legislature needs to respond.
• 1:55
  Jason Bordoff (39:57):
• 1:56
  Yeah, I think Justice Gorsuch was pretty clear in saying Congress, we need you to step up and you have a role to play in all of this as well. I think that was pretty clear in the opinion he wrote.
• 1:57
  Trevor Sutton (40:12):
• 1:58
  Can I just come in there, Jason, because there is an interesting energy analog and it just gives you a sense of perhaps how the politics of Congress have shifted in the last four years when the Biden administration negotiated a one-off critical minerals agreement with Japan so that Japanese firms could benefit from some of the critical mineral subsidy tax credits under the Inflation Reduction Act. There was a lot of pushback from Congress. They were not able to successfully negotiate something similar with Indonesia and I believe the EU because Congress said, Hey, this looks like market access. This looks like you deciding which countries get to tap into the US market on better terms than others. We don't like that we are supposed to be involved in that. And it's funny that something is what seems as narrow and technical as that. The Biden administration now and the Trump administration, he's basically saying, you do it whatever he wants and Congress has no say, and in many ways I think they've had less power in disciplining the president or cabining his trade diplomacy than that little episode in the Biden. So
• 1:59
  Jason Bordoff (41:21):
• 2:00
  Just one or two other energy questions and we're almost out of time. I'll let people listen to other podcasts for other questions like whether companies and maybe people are getting all their money back and other questions that have come up, but does this lower the cost of energy projects in any way in the US I'd seen a lot of developers, LNG projects and oil and gas pipeline developers talk about the impact of tariffs on equipment, on the steel and all the material they need for these projects. Do you think it lowers the cost or it's pretty negligible?
• 2:01
  Trevor Sutton (41:57):
• 2:02
  No, I am not an expert on the specific cost structures of oil and gas products, but I do know that the tariffs that were driving those additional costs were 232s primarily, specifically how they applied to various steel aluminum components of equipment used in the oil and gas value chain. I do know that at certain point in the administration decided to extend IEEPA to the non steel aluminum elements of some of those components that had already been subject to the 232s further steel aluminum component. I don't know if those were actually very significant or that was more of a symbolic exercise, but to the extent it's those 232s that were driving those cost increases in those projects, I haven't seen much sign that the president is going to pull back on 'em. He may do so quietly if he is hearing from the industry that this is holding up the pipeline, but in the short term, I haven't seen much reason to believe that this is going to provide significant relief in that respect.
• 2:03
  Jason Bordoff (43:08):
• 2:04
  And the other thing I was wondering about, you both talked about the ability to use these tariffs in some way as economic coercion to encourage activity from others. And in the opinion we saw and in the oral argument we saw, saw people make the argument that if this were allowed, you could imagine the other side saying climate change is a national security emergency and it unlocks all sorts of powers like tariffs on countries that still burn coal in their power plants or something that's gone. But I presume any other authority under IEEPA is still there, but I saw Trevor something you've looked very closely at, which is how the European Union is using carbon border tariffs and how some in the US have proposed to do that. I think Senator Cassidy even tweeted after this opinion came out, well, this authority may no longer be there, but there's another way that we could try to pursue this agenda of protecting domestic industries that are lower carbon intensity, which is a carbon border adjustment, something he has proposed. Is that something that requires Congress? Is the possibility of a carbon border tariff much lower now because the president no longer has this authority, Democrat or a Republican?
• 2:05
  Trevor Sutton (44:23):
• 2:06
  I wouldn't say so. I think that the next administration say it's a democratic administration that wants to return to climate ambition and likes the idea of something similar to the European carbon border adjustment mechanism. I think IEEPA probably would've had a kind of unpleasant association with it, and they would've tried to do it through a different authority. It's my understanding that the Biden administration was actually exploring whether you could have something like this through the existing tariff authorities, for example, by declaring climate change and emergency under section 232, or at least doing an investigation into the national security sort of concerns related to climate on 232. And by that means imposing some sort of carbon border adjustment mechanism. But you could imagine that being challenging, that would almost certainly get taken to the courts, and there's still constraints in how you use 232, so it would be a bit tricky and they never went ahead with it as you saw, so they may try that, but to my mind, the most likely route is through legislation, and there are at least two proposals in Congress that have been around for some time.
• 2:07
  (45:36):
• 2:08
  There's one from Senator White House and then there's the Cassidy one that you mentioned, the Foreign Pollution Fee Act. And the Cassidy one has a lot of features that I think would be appealing in theory to the president and congressional Republicans, and it has the additional benefit of, unlike the IEEPA tariffs actually tariffs collected under that bill would contribute to the budget to revenue raisers in a reconciliation process so it would actually allow them to spend elsewhere. The issue is whether anyone in Congress, particularly on the right side of the aisle, is willing to vote for something that could conceivably be or is in the public mind associated with climate.
• 2:09
  Jason Bordoff (46:20):
• 2:10
  And yeah. Richard, let me end with you and just want to ask again, the broader landscape for energy where energy is often a target or a tool for trying to pursue foreign policy and international economic objectives, what you've spent your career on, is this decision very consequential or is it just like now we return to the regular order where the president has a lot of authority to do this and we're just going to go back to doing it the way we used to be doing it?
• 2:11
  Richard Nephew (46:45):
• 2:12
  Yeah, I think it's option two, right? I mean, I think ultimately the president's ability to still use sanctions tools to target and to weaponize energy resources haven't changed a bit is just that the mechanism now is much more straightforward and again, in my opinion, a much more targeted way of doing business in any event because then you're imposing costs on the one that you think needs to have costs as opposed to an entire country. I do think it's worth pointing out just as we're closing here, there has been discussion for many years about IEEPA reform, and one of the reasons why is because of the wide ranging ability of a president to declare a national emergency on anything. And we've seen that happen repeatedly in this administration in ways that people on the other side of the aisle, potentially even the same side of the aisle have got some concerns with.
• 2:13
  (47:26):
• 2:14
  We've seen this in the past as well on the other side too, and I think the fact that a president thought that they could have wide ranging authority to impose a national emergency and wide ranging tariffs is still something I think that merits consideration, especially because the only thing that changed today was tariffs, not the ability to impose [unclear] on the entire world. I go back to the President's press conference, he said, I have the ability to destroy every economy on earth through the use of these other sanctions. I just can't get a fee from it. That bears mention, that bears consideration as to whether or not at this point, the overuse of sanctions is a problem that needs to be addressed and something that I've been writing about and talking about, I think it's something that either this Congress or certainly in any future one needs to consider when they think about how wide ranging authorities like IEEPA are being used by an executive.
• 2:15
  Jason Bordoff (48:17):
• 2:16
  Trevor, have we covered everything on your mind or is there a final observation we didn't get to?
• 2:17
  Trevor Sutton (48:26):
• 2:18
  I would just simply say that I think this points to the fact that right now there are problems that are being generated by US participation in a relatively globalized economy that it's set up 30 years ago. And right now the political center of gravity seems to be that we don't have the tools, at least the tools we would like to manage them effectively. And so where that took us in the second Trump administration is towards a very legally aggressive interpretation of a law that gave the president pretty much uncabined power to deal with those challenges. And now we're back to where we used to be. And so I do think there is a case for Congress to step in and say, well, if you really feel that we don't have the tools to solve these problems the way that you would like to President Trump, and arguably you could say President Biden was grappling with the same problem. We need to come up with a new set of tools, tools that are tailored to the issues that matter right now, whether that's climate change, de-industrialization, concentrated supply chains, however you want to describe it. Clearly we're trying to put a round peg in a square hole right now, and I think that we probably need a square peg.
• 2:19
  Jason Bordoff (49:30):
• 2:20
  It's great to have the chance to learn from both of you and hear your reflections on this in real time. For our listeners, I guess a couple of years ago, we set up a program on energy and trade and the energy transition, and a few years before that Richard won on energy and economic statecraft, and both of those are looking some more prescient than we could have realized and come together nicely with leaders and scholars like both of you to help us make sense of this complicated landscape we're in and the very consequential decision of the Supreme Court on Friday. So fantastic to have both of you on work with you every single day. Thanks for making time to explain this to all of us.
• 2:21
  Richard Nephew (50:06):
• 2:22
  Thanks for having us.
• 2:23
  Jason Bordoff (50:08):
• 2:24
  Thank you again, Trevor and Richard. And thanks to all of you for listening to this week's episode of Columbia Energy Exchange. The show is brought to you by the Center on Global Energy Policy at Columbia University.
• 2:25
  The show is hosted by me, Jason Bordoff, and by Bill Loveless. The show is produced by Caroline Pitman, Mary Catherine O'Connor, and Kyu Lee. Gregory Vilferanc engineered the show.
• 2:26
  For more information about the podcast or the Center on Global Energy policy, please visit us online@energypolicy.columbia.edu or follow us on social media at Columbia U Energy. And please, if you feel inclined, give us a rating on Apple or Spotify or wherever you get your podcasts. It really helps us out. Thanks again for listening. We'll see you next week.
• 2:27
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