Tariffs Are For Emergencies - Bloomberg

Alternative Titles

• The Constitutional Case That Trump's Tariffs Are Simply Illegal
• Why a Conservative Legal Group Just Sued Over Liberation Day
• The Emergency Powers Loophole That Could Unravel Trump's Trade War
• Private Equity's Denominator Effect Returns as Markets Crater

Key Takeaways

• The Constitution explicitly assigns Congress — specifically the House — the power to lay tariffs, since 'duties, imposts and excises' are revenue-raising taxes and 'all Bills for raising Revenue shall originate in the House of Representatives.' This was central to the founding, echoing the colonial cry of 'no taxation without representation,' meaning Trump's unilateral tariff orders are constitutionally suspect at their root.
• Trump invoked the International Emergency Economic Powers Act of 1977 (IEEPA), which lets the president regulate imports to address an 'unusual and extraordinary threat' to national security, foreign policy or economy after declaring a national emergency. In nearly 50 years, no prior president had ever used IEEPA to impose tariffs — Trump did so first in February against Canada, China and Mexico, then broadly on 'Liberation Day.'
• The asserted 'emergency' for the Liberation Day tariffs is the 'large and persistent trade deficit' driven by lack of reciprocity, currency manipulation and foreign VATs. Levine notes this stretches the statute absurdly: decades-old, worldwide trade patterns can't plausibly be 'unusual' or 'extraordinary,' yet the framing puts the US in a perpetual emergency against every country, letting the president bypass Congress indefinitely.
• Two distinct legal attacks are available: (1) IEEPA simply doesn't authorize tariffs and 'international trade exists' isn't an emergency; or (2) if IEEPA does grant such sweeping power, it violates the nondelegation doctrine because Congress cannot hand the executive a blank check on what is constitutionally a legislative function. Current law requires Congress provide an 'intelligible principle,' but a 2019 5-3 Supreme Court decision showed four justices interested in reviving stricter nondelegation limits.
• The New Civil Liberties Alliance, a conservative-funded group, has already sued in federal court in Florida on behalf of stationery retailer Simplified, challenging the February China tariffs (justified by the fentanyl/illegal alien 'emergency'). The complaint argues IEEPA never mentions tariffs, the across-the-board tariff doesn't 'fit' the opioid problem and isn't 'necessary' to it, and Trump's own statements reveal the real motive is reducing trade deficits and raising revenue — not the declared emergency.
• The 'denominator effect' is hammering institutional investors: when public stocks crash 10% but private equity holdings stay marked at stale quarterly values, PE rises as a share of total portfolio, pushing investors above target allocations. Per FT reporting, large institutions — endowments expected to move first — are now exploring sales of PE fund stakes at discounts on secondary markets. Levine notes the absurdity: if buyers will only pay a 10% discount to stated NAV, the holdings effectively aren't overweight at all.
• Levered ETFs on volatile stocks like MicroStrategy suffer 'volatility drag' from daily rebalancing — a 3x long MSTR ETF was down 82% YTD last September while the stock was up 100%. The Defiance MSTR Double Short Hedged ETF exploits this by simultaneously shorting both the 2x long and 2x short MSTR ETFs, harvesting decay from both sides. Byrne Hobart frames it as tail-risk insurance / market-making: profitable when MSTR oscillates, but blown up by sustained one-directional moves where the winning leg compounds higher faster than the losing leg can decay to zero.
• Ken Griffin has spent billions over 13 years on trophy properties at record-high 'full retail' prices across Palm Beach, Miami, Chicago and New York, and appraiser Jonathan Miller calls him a 'whale's whale.' Levine's read: Griffin has converted ultra-high-end real estate from a normal good (where sophisticated buyers seek value) into a status good like fine art, where paying the maximum is itself the signal — emboldening other nine-figure buyers who 'don't feel like they're overpaying.'
• A Cambridge, Mass. high-end brothel charged up to $600/hour and collected IDs, work badges and references from biotech executives, doctors, lawyers and politicians; that client database is now criminal evidence after johns lost their anonymity fight. Levine's deadpan business-model joke: charging $600/hour is the least efficient way to monetize such a meticulously maintained dataset of compromising information on prominent men.

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