Less Dumb Investing

I wonder if Brett Shumate is just disgusted at everything he does?

The most interesting lawsuit against the Trump administration right now, in my view, is V.O.S. Selections v. Trump. At its core, it’s a group of small businesses saying what a lot of people have been thinking: the president doesn’t have unlimited authority to slap tariffs on whatever he wants.

The legal hook is the International Emergency Economic Powers Act of 1974 (IEEPA). That law lets the president regulate certain types of commerce during a national emergency. But it wasn’t designed to give a blank check for tariffs on nearly every imported product, which is how Trump has been using it. The plaintiffs argue that Trump’s “Liberation Day” tariffs go way beyond what Congress authorized.

In May, the U.S. Court of International Trade agreed. That court flat-out ruled Trump’s tariffs unlawful and even said that interpreting IEEPA as granting unlimited tariff authority would be unconstitutional. That’s a rare and powerful statement from a court that usually moves cautiously in trade matters. The administration, of course, appealed. The Federal Circuit is now reviewing the case, and for the time being, the government can keep collecting tariffs while things play out.

What’s new—and odd—is what happened earlier this week. Solicitor General D. John Sauer sent an unusual letter to the Federal Circuit. Normally, these post-argument letters are a routine formality: they flag a new ruling or a law that might bear on the case. Sauer’s letter, though, was something else entirely. It was essentially a second round of arguments, delivered after the briefs and oral arguments had closed.

The thrust of the letter was that Trump’s tariffs have already produced “historic trade deals” with the EU, Indonesia, the Philippines, Japan, and the UK, and that striking them down would cause economic and national security chaos. Sauer claimed that foreign governments had “committed trillions of dollars” to the U.S. as part of these deals and that undoing the tariffs might force the U.S. to “pay it back.” That framing is misleading at best. Other countries don’t “pay” U.S. tariffs—American importers do. And it’s U.S. consumers who ultimately absorb those costs.

Sauer went further, warning of financial ruin, a collapse on par with the Great Depression, and even risks to Social Security and Medicare if the tariffs were invalidated. None of this is grounded in fact. U.S. tariff revenue since Trump ramped them up is measured in the tens of billions, not “trillions.” The “trillions” figure comes from speculative foreign investment commitments tied to Trump’s claimed trade “victories,” many of which are nonbinding, inflated, or would have happened without tariffs.

This isn’t legal reasoning—it’s political messaging in legal clothing. What Sauer is really telling the judges is that if they overturn the tariffs, Trump will blame them for any downturn in the economy. That’s less about the law and more about setting up scapegoats.

The market already hates the tariffs. Back in April, when Trump rolled out the “Liberation Day” tariffs, stocks dropped over 10% in a week. Economists now estimate that recession odds within a year have climbed to about one in three. Corporate earnings forecasts are down. Yet despite all that, the S&P 500 has staged a massive rally since April, up nearly 30% off the lows—proof that markets are just as much about sentiment as fundamentals.

The plaintiffs’ lawyers wasted no time pointing out how inappropriate Sauer’s letter was. They told the judges straight up that it was improper and irrelevant. More importantly, they reminded the court that Trump isn’t powerless without IEEPA. Every president before him has managed to negotiate trade agreements and apply targeted tariffs using lawful tools. This case isn’t about whether Trump has some authority—it’s about whether he can claim all authority.

The takeaway is this: if Sauer were confident in his legal arguments, he wouldn’t be resorting to scare tactics and apocalypse scenarios. The fact that he is shows how nervous the administration is. Trump has made tariffs the centerpiece of his second-term economic agenda, and if the courts strike them down, it won’t just be a legal setback—it will be a political humiliation.

And that’s why this case matters. It isn’t just about tariffs. It’s about whether a president can stretch “emergency powers” into a permanent economic weapon. The answer the Federal Circuit gives will set the tone for years to come.