Commerce Secretary Howard Lutnick had some rather bold statements recently, suggesting that we should allow President Donald Trump to steer the global economy, as he seems to possess an uncanny knack for it.
According to Lutnick, âLet the president run the global economy because he knows what heâs doing.â
One could argue that what he knows has resulted in the obliteration of $2.5 trillion in stock market value in just one announcementâa staggering feat in the annals of wealth destruction, possibly unmatched by any individual before.
For a moment, letâs revisit 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 how it states All legislative Powers, not âMost.â Iâm still searching for the clause that empowers the president to ârun the global economy.â
Once upon a time, it was Congress that dictated U.S. trade policy. The Institute for Policy Innovation recently compiled a list of 15 treaties that Congress ratified, all of which President Trump has apparently disregarded in the last 24 hours. Here are a couple of examples to illustrate:
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On May 23, 1985, Congress ratified a free trade agreement with Israel. Trump just broke it.
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On September 19, 1988, Congress established a free trade agreement with Canada. Trump just broke it.
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On October 12, 2011, Congress passed a free trade agreement with Colombia. Trump just broke it.
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And on January 16, 2020, Congress approved Trumpâs own USMCA, a free trade agreement with Mexico and Canada. Surprisingly, he just broke his own agreement from four years ago.
There was indeed a time when Congress wielded the power of the purse. Decisions on taxation and government expenditure were firmly in congressional hands, with the executive branch tasked solely with enforcement. Nowadays, congressional spending authorizations read more like casual suggestions that the president is free to accept or reject at will. It seems the President can now impose the largest tax increase in history without so much as a nod from Congress.
Throughout history, intellectuals have yearned for the concept of the benevolent dictatorâone who could sidestep the tedious process of consensus-building and lead with decisive authority. There have been instances, like Lee Kuan Yew in Singapore, where this has resulted in positive outcomes. However, for each Lee, there are countless examples of Maduros, Castros, or Putins. While the crowdâs wisdom is often flawed, it tends to be less wrong than the judgment of any single leader.
The tariffs recently introduced by the Trump administration would likely never have passed through Congress. We shall see how this plays out. As reported by Bloomberg, the aftermath of the tariff announcement significantly impacted the U.S. stock market more adversely than foreign markets:
US equity index futures tumbled over 4% following Trumpâs sweeping tariff announcement after the market closed on Wednesday, while the dollar experienced a decline. In contrast, foreign markets felt the impact less severely, with the Stoxx Europe 600 dipping only 1.9%, and the euro appreciating by 2.2% against the dollar, reaching its highest mark since October. A broad index of Asian stocks fell by as much as 1.7%.
One might wonder how mercantilists would interpret this discrepancy, especially those who have argued that tariffs effectively shield America from being âtaken advantage of by foreigners.â Is this the outcome they anticipated? Did they foresee the dollarâs depreciation following the news?
Furthermore, itâs important to recognize that several of these trade treaties served purposes beyond mere economic policy. Take, for instance, the fact that Israel was the first nation to secure a free trade agreement with the U.S., a reflection of our strong ties related to security issues in the Middle East. Trumpâs revocation of this treaty transcends economic policyâitâs interwoven with foreign policy.
The IPI also raised a critical question:
When did it become acceptable for a president to disregard treaties that have been lawfully enacted by Congress?
President Trump is invoking the 1977 International Emergency Economic Powers Act (IEEEP), which grants the president authority to act during instances of âunusual and extraordinary threat.â Can anyone genuinely assert with a straight face that the United States is facing an unusual or extraordinary threat from every country on Earth?
Consider this: a 10% tariff was placed on Heard Island, which boasts a population of zero humans and a few penguins. Though it does feature a rather nice mountain, it hardly compares to our Mt. Rainier.
