Trade War Chaos Explodes on the Fake Emergency Detour
It looks like this year's trade detour is about to prove worse than the emergency it promised to save us from.
For six months straight, manufacturing has been receding, according to the Institute for Supply Management. What I find most revealing in today’s ISM report about this period of manufacturing recession are the comments that tell a tale on tariffs that confirms the cost of chaos, itself. That chaos just got a huge jolt over the Labor Day weekend when a US federal court voted 7-4 to declare most of the Trump Tariffs illegal on the basis that his emergency is a “fake emergency.”
To me, the faked emergency was obvious from the start because we’ve had the trade situation that we started all of this new trade war mess off in for decades. Trump may not have liked our trade relations; many people may not have thought we had fair trade; but it certainly wasn’t an emergency since even Trump didn’t solve it during his entire first four years and we were doing better before all of this than we are now.
How much of an “emergency” could it have been if it wasn’t worth completely solving back then? Our trade relations have, however, become much more like an emergency as a result of the trade wars. Trump’s emergency claim was obviously nothing but a hyuge power grab to take the tariff power he covets away from congress. I’m surprised the court was not unanimous in declaring the present situation a non-emergency.
Now we have what has, for the moment anyway, been determined by a large majority decision on the court as months of illegal, extraordinarily costly tariff pressure applied by this president throughout the world(!) slammed into reverse with nations and businesses all over the world, but especially in the US, having to correct back the other way. What an economic disaster due to presidential pride and overreach. The fallout will be with us for years … like the global Covid lockdowns in Trump’s first term, and the benefit to the US will, as Trump’s Treasury Secretary just said, be global disgrace for the US.
One of the most telling comments about the chaos created by Trump’s on-and-off-and-on-and-on-again tariffs was a description of the current business environment as "much worse than the Great Recession." Some business leaders would rather have to figure out how to navigate all of that disaster again than try to beat a way through the brush and swamps created by different tariffs everywhere going on and off on a daily basis.
The Institute for Supply Management (ISM) survey on Tuesday also showed some manufacturers complaining that the sweeping import duties were making it difficult to manufacture goods in the United States.
That is the exact opposite of Trump’s stated tariff goal, which was to make businesses want to do business here. Tariffs on average are now the highest they have been in an entire century because Trump sought to raise taxes astronomically on Americans by claiming that foreigners would pay for all of it and getting American’s to buy into that.
Now his tariffs have not only been turned back off as an unconstitutional power grab, but the court has indicated the US government will have to pay all of that back, which gave Treasuries a jolt today and sent stocks back down. Imagine what increasing government funding enough to pay for the current enormous deficits under Big Beautiful Bill plus to make up for the lost ongoing revenue Trump was counting on in Big Beautiful Bill from tariffs PLUS to immediately pay back the tax revenue already wrongly collected from Americans will do to Treasury auctions. It won’t be pretty!
For now, however, the court has said the government can continue until the appeal process works through its inevitable higher levels, but that will only make the return even harder down the road if the Supreme Court doesn’t decide quickly, unless it decides in favor of Trump. Trump may also take an alternative route, as I pointed out in the weekend Deeper Dive and try to strong-arm his slim congressional majority into passing his tariffs the proper way.
In the meantime, this really leaves businesses with no idea as to how to operate or what will happen with their expenses or whether to pass along the cost of tariffs to consumers or try to hold out a little longer on the hope that this will all fade away like a bad dream, thanks to the Labor Day court decision. Naturally, when businesses have no idea how to plan, they slow down. Recession.
Today’s ISM report also contained a surprise.. If you really believed that the Trump Tariff wars were bringing business back to the USA, the ISM had a different take:
That was reinforced by government data showing spending on the construction of factories dropped in July and was down 6.7% from a year ago. A U.S. appeals court ruled last Friday that most of Trump's tariffs were illegal, adding more uncertainty for businesses.
If that decline in factory construction is true, that’s a big failure (so far anyway) of Trump’s prime objective from all of this madness. Even though we’ve heard some stories of companies like Apple promising to build new factories here, we’ve not seen much follow-through; and we have no way of knowing if that kind of promise under extreme tariff duress is just a dodge to avoid the tariffs since Trump has promised to hold the tariffs off if companies make such promises. You put a gun in someone’s mouth, and say, “Talk,” they’re going to say something.
Apple and others may figure they can play it out long enough to wait out the present administration, calculating it would be cheaper to look like they’re trying to build a factory here than to pay the enormous tariffs on most of their sales in the next few years. According to ISM, on net, the amount of factory construction has plummeted.
The failure to deliver on the promise of bringing business back to America out of the ashes of all of this chaos only makes all the comments about the chaos that were registered in the report prior to this weekend’s Trump Tariff turnover all the more poignant:
"I continue to see the broad economy generally and the manufacturing sector in particular as in a holding pattern until tariff-related uncertainty recedes," said Stephen Stanley, chief U.S. economist at Santander U.S. Capital Markets….
Some makers of transportation equipment said conditions were worse than the 2007-09 recession, adding "there is absolutely no activity" and "this is 100 percent attributable to current tariff policy and the uncertainty it has created." Some viewed the conditions as consistent with "stagflation…."
Some electrical equipment, appliances and components producers complained that "'made in the USA' has become even more difficult due to tariffs on many components…." Others reported that because of the lack of "stability in trade and economics, capital expenditures spending and hiring are frozen…."
Manufacturers of computer and electronic products said "tariffs continue to wreak havoc on planning and scheduling activities," adding that "plans to bring production back into (the) U.S. are impacted by higher material costs, making it more difficult to justify the return."
Food, beverage and tobacco products manufacturers warned that everything made of organic sugar was "about to get significantly more expensive" because of a 50% tariff on imports from Brazil and the U.S. Department of Agriculture's elimination of the specialty sugar quota….
ISM Manufacturing Business Survey Committee Chair Susan Spence said that for every positive comment about new orders there were "2.5 comments expressing concern about near-term demand, primarily driven by tariff costs and uncertainty."
While tariffs have been slow to pass through as higher prices, again the reason noted in the report is the very reason I said they would be slow, at first, to pass through:
Businesses are still selling merchandise accumulated before the import duties kicked in…. But inventories were drawn down in the second quarter and companies have warned tariffs are raising their costs, which economists expect will eventually be passed on to consumers.
As I noted in the weekend Deeper Dive, this kind of major overthrow of massive amounts government work is what you get with a president who wants to rule like a king in order to avoid congress’s more deliberative process, slow and deliberate being a safety feature the founding fathers always saw as important. Their goal was not to speed up political decisions, but to make sure they were not rash.
Rash decisions get thrown out left and right by courts and cause all kinds of chaos because they are rushed through and not well thought out just like we’ve seen with DOGE rehires after the firings turned out to be detrimental to the things government needed to get done. That’s in the news again today, with Team Trump saying they are going to hire back a good number of their IRS fires so that the job can continue to get done. They might have wanted to figure out what could really be cut before turning the decision over to high-schoolers with names like “Big Balls.” They need people who think with something else.
Imagine the needless (if the recent court decision stands) chaos this has created for all of our trading partners all over the world if they engaged enormous amounts of their government talent and their energy to hammer out tariff deals only to find out that the king never had the authority to be forcing such deals in the first place. Imagine their anger to find that it was all for nothing!
Imagine all the needless actual damage to businesses all over the world that held off or altered plans based on how they thought the map was going to change, possible engage in hirings and firing accordingly … if it all turns out to be for nothing. Talk about the US making itself look like the most temperamental and unreliable trading partner in world history. Fortunes have been spent already in redrawing trade maps for supply chains, cancelling contracts, starting new contracts, in some cases building new facilities. What a fiasco if it turns out the Supreme Court agrees that Trump never had the constitutional authority to do any of this!
We could be reeling in years of economic damage equal to that caused by the ill-conceived Covid lockdowns in Trump’s final year of his first term … and all for nothing!
It is unclear exactly where the case goes from here. The Trump administration could quickly appeal the ruling to the Supreme Court, or it could allow the trade court to revisit the matter and potentially narrow the injunction against his tariffs.
“Our trading partners must be dazed and confused,” Wendy Cutler, a senior vice-president at the Asia Society Policy Institute and veteran US trade negotiator, wrote in a post on LinkedIn. “Many of them entered into framework deals with us and some are still negotiating.”
Trillions of dollars of global trade are embroiled in the case, which was filed by Democratic-led states and a group of small businesses. A final ruling against Trump’s tariffs would upend his trade deals and force the government to contend with demands for hundreds of billions of dollars in refunds on levies already paid….
Friday’s ruling by the US Court of Appeal for the Federal Circuit held that Trump was wrong to issue tariffs under IEEPA, a federal law that the panel concluded was never intended to be used in such a manner. Indeed, the court noted that the law does not mention tariffs “or any of its synonyms”.
“Once again, a court has ruled that the president cannot invent a fake economic emergency to justify billions of dollars in tariffs….”
What a Trumped-up mess! And it may even be, that having been strong-armed into all of this by “strong-man” leadership, our trading partners, which have created their own retaliatory tariffs in the legitimate legislative way may just decide to keep theirs all in place now that they have them in play. Hopefully not, but who knows?
Hours before Friday’s ruling dropped, Trump cabinet officials told the appeal court that striking down the president’s tariffs would seriously harm US foreign policy, with Treasury Secretary Scott Bessent saying it would lead to “dangerous diplomatic embarrassment” and undermine trade talks.
Indeed, it would because it would show the world our government is utterly inept, and it would call into question the legitimacy of many other things the president has done under the rubric of “emergency” powers. It would be massive! And the egg on the face would be all yours, Bessent, and the rest of your team’s for doing this to us and not being prudent in understanding the limits on the powers accorded to you and those reserved clearly for others. But we’ll see what Trump’s Supreme Court says, having already said he can do anything he wants on a criminal level and not be held guilty so long as it is done as an official act of the president. With that precedent, who knows where they will go in extrapolating new higher powers and protections for this president?
On Friday night after the court move, Trump posted on social media that if the tariffs went away, “it would be a total disaster for the Country”.
Yes, your disaster because, if your tariffs ever go away, it will be because you faked an emergency and so never had the legitimate power to do any of this. It will be a disaster that we all get to live through. We all get to bear the enormous economic costs already created.
In the meantime, the uncertainty as to whether the president even has the powers he’s claimed will likely make all nations that are still in deliberation with the US put their negotiations on hold. Why spend more energy going down this road if the president is operating completely outside the constitution to where his threats will all be overruled?
What a colossal mess.
I want to thank one paying subscriber who wrote …
“This is one of your best Deeper Dives ever! It really explains a lot of the intricacies of the economy … most of us have no idea about how they work.”
I hope that is what that last Deeper Dive does for everyone—laying out the specifics on how tariffs are playing through as inflation and why the inflation seems slow in some areas, though all areas are really exactly on schedule and how the ways in which some seem slow are the ways in which they will blind-side many as well as the ways in which they will be powerful in their impact.
Of course, if the Supreme Court upholds the present overthrow of these tariffs, that tariff-based inflation will largely melt away, but the damage created to businesses throughout the world with these months of chaos is likely to be as great as we saw under just a few months of global Covid lockdowns
Thank you to all who support the writing of The Daily Doom. Without growing support, I couldn’t justify giving so much time to it!
Please help spread the help that The Daily Doom can give to others in shining a light on the path ahead:
Economania (national & global economic collapse plus market news)
Dow falls 250 points to kick off September on tariff worries, rising bond yields
Trump’s Immigration Policies Reshape Labor Market as 1.2 Million Fewer Immigrants in Workforce
Real-Estate Rubble (housing, commercial & global real-estate bubble trouble)
Bessent: "We May Declare A National Housing Emergency In Fall"
Money Matters (monetary policy, metals, cryptos, currency wars & going cashless)
Gold price hits record high as investors seek safe haven from Trump chaos
John Rubino: Monthly Portfolio Review, August 2025
Rubino: Gold/Silver Miners Are Two-Thirds Through Their Best Quarter Ever
Former CFTC Chair Says Stablecoins Will Replace Failing Fiat Currencies As Dollar Dies
Trump family made upward of $6 billion in a day thanks to its crypto-coin launch
Wars & Rumors of War, Revolts, Hacks & Cyberattacks + AI threats
Trump’s deadline for Russia-Ukraine negotiations looms: ‘Time is running out’
Trump Unveils Another $825M Arms Sale To Ukraine, While Talking Peace
—
Judge rules Trump can't act as national police chief
—
UK Civil War: Wow, That Escalated Quickly
Trump Trade Wars & Turf Wars
Trump’s global tariffs are unlawful, appeals court says
US trade allies ‘confused’ after Trump’s tariffs suffer legal setback
Treasury yields jump on prospect of USA refunding tariff money
Trump Blasts India’s Trade Practices, Calls Zero-Tariff Offer ‘Too Late’ as U.S. Hikes Duties to 50%
Political Pandemonium & Social Senescence (socio-political issues & events)
Khanna, Massie to hold news conference with Epstein victims: 'People are going to be outraged'
Bill Bonner: Pericles on the Potomac
What the Cracker Barrel backlash shows about Maga’s influence on US culture
A Pox Upon Us (the plagues, pandemics & health police of the 2020s)
Trump Brags About Making the Covid-19 Vaccine: ‘One of the Greatest Achievements Ever’
RFK: “Well the vaccine doesn't work, does it?” 23% higher death rate from vax
Off-the-Beat News & Just Plain Offbeat News
Doomer Humor
I could be making a good case for the wrong idea, but...
I read the Appeals Court document and it is written as if *for* the Conservatives on the Supreme Court. It's argument is based on the SC's "Major Questions Doctrine".
Lazy wiki copy for the paragraph below:
"The major questions doctrine is a principle of statutory interpretation in United States administrative law under which, pursuant to recent Supreme Court precedent, courts have held that questions of major political or economic significance may not be delegated by Congress to executive agencies absent sufficiently clear and explicit authorization. It functions as a canon to limit broad assertions of implied powers, effectively reinforcing the role of legislative power."
That Doctrine is the darling of the Conservatives on the SC. That is also the argument the Appeals majority used: the IEEPA, which the administration cites as it's basis, nowhere states "tariff" or any synonym of tariff, and has not been used for tariffs. It has been used for sanctions. But never *indefinite* tariffs.
By the logic of that Doctrine, Trump has no standing. Frankly, I think it gives away the SC's own opinion of an "emergency" given it had a chance to take up the case months ago, did not, and let it play out in lower courts.
Now is that absolute? It can be open to hypocrisy, as show by Brett Kavanaugh in FCC vs. Consumers' Research.
https://www.yahoo.com/news/articles/brett-kavanaugh-putting-thumb-scale-100000027.html
Liberals think the SC is totally wanton and just for Trump. But it is following a certain logic. On the face of it, it's not that Trump is absolutely empowered. It's that the Executive is absolutely empowered in the Executive Branch (*in their lane*). I argue that's ahistorical and extremely dangerous as it is. But it's not absolute over the other branches of government or state government.
I would argue this upcoming case would make or break that assessment. If they side with the administration, it's a cop-out of the highest caliber. If it gives the President the ability to execute these based on vagueness that violates their own "Major Question Doctrine" then it would empower the Chief Executive to do anything so long as they declared it an emergency, which undercuts the very basis of Constitutional power and limits to power. They could rubber stamp anything they want with absolute authority, so long as they say "it's an emergency".
If they find against the administration, it's a sign that the SC at least abides by its own logic: the government is three coequal branches imbued with specific powers. The Executive is the leader of the Executive Branch, but is not able to proclaim powers not specifically invested in it by another branch. (Whether any branch can give away power if they do so specifically is another matter). It's a push back on Executive Overreach, and will be a necessary correction back to checks and balances.
The administration may argue consequences (as phony as those are) but the Court has allowed for all his Executive Branch shakeups regardless of major consequences such as thousands of people bring fired. The Court (at least says) it cares about the facts and not the feelings or moral correctness.
If it makes an exception for Trump, it's giving away a game to give him deference and you might as well get your passport out right now. But it may also be finally a pushback, because it's a pushback based on their own logic. Don't forget, these guys and gals are from the Federalist Society. They're supposedly for limited government and States Rights. I don't say that flippantly, except in a case where they hypocritically act against those beliefs.
Based on their own think tank, they should be against Trump on this one. This would also be a benchmark for two other imminent cases: the firing of Cook (after the Fed was the only agency they said was totally independent) and the use of National Guard Troops in a situation of domestic policing and/or to be Federalized and enter a state despite no actual insurrection, emergency, or obstruction of Federal law and no request from the local government. (Even with a request, it would still be illegal).
The SC doesn't like getting into intent as much anymore, but when they keep saying "you better lower the interest rates or else" and fire Cook on an alternate basis, it's hard to turn a blind eye. In the Chicago case, saying "crime" and they're going to send troops to fight domestic crime, it's hard to turn a blind eye if the administration then tries to say "oh, just immigration". And if a state files a lawsuit against you, and keeps saying crime statistics, it's hard to say there's an insurrection. Crime is a bad thing, but it's a domestic issue. Sending in troops to fight domestic crime is like you shooting my grandma in December, me asking why, and you saying "well she gets sick every winter"; it has a logic but it's overreach, the wrong answer and illegal.
Cook is the one area of the Executive realm the SC put off limits from arbitrary decisions. The Chicago issue is a States Rights, Local Rights and Federalism issue alongside a military overreach issue. These three cases would be the trifecta to look out for in terms of how much the SC cares about law, separation of powers and limited government.
If they find against the administration, they are honest in what they're doing. We then have a SC that may be disagreeable but at least has a logic and will maintain the ship of state, and protect individuals and local government against Executive Overreach. If they find for the administration, it's a bunch of lick-spittles finding any excuse and twisting all logic to embolden the Presidency as the ruling position, and Trump specifically, with no checks on power, and the ability to do anything with the excuse of "emergency" and "national defense". It places the Chief Executive as a rubber stamp tyrant able to subsume the will of the people, local government and state government to personal whims and decisions.
I'm a flag waving, "I may not agree with what you say, but defend to the death your right to say it" patriot. I'm not a fair weather techno-bro tyrant on either side. Those people are why we got to what we're dealing with. The saddest part is that if this were any Democrat, your gut would know it'd all be thrown out. Biden had student loan plans thrown out as overreach. Maybe even if this was any Republican. But there's some dark loss of hope in our souls that questions if it will be, just because it's Donald Trump. And that nihilism may be correct. What the Hell happened to us?
On a side note, the three dissenting voices on that case I mentioned earlier were Gorsuch, Alito and Thomas. The most interesting freak of nature is if you got a majority *against* Trump because those three joined with the three Liberals on the court.
how far into the future are the Weimar wheelbarrows you think?