Free Market Party Taxed You $1,500: The Tariff Reckoning, May 19

RachelWelcome to Red Flag. I'm Rachel, and today we are running the receipts on tariffs. All of them, Jordan? Every single one. Okay, so get this. September 2024, Trump tells a crowd, it's not going to be a cost to you, it's going to be a cost to another country. And then Tax Foundation puts out a number, $1,000 per household in 2025. Right. And the pre-IEEPA ruling projection for 2026? $1,300. So not another country? Another country.

JordynWe've got a lot of ground to cover today. The Tax Foundation called these tariffs the largest U.S. tax increase as a percent of GDP since 1993. 1993!

RachelI know! And then the courts got involved. Supreme Court 6-3 February 20th strikes down IEEPA tariffs.

JordynWow.

RachelThat is a big deal.

JordynAnd hours later, a brand new 10% tariff under Section 122.

RachelTwo: wait for it-which the Court of International Trade then struck down in May.

JordynDeadpan and yet collections continue, because a federal circuit stay is keeping them alive. Yes, playfully; so the courts say no-the money keeps flowing out of your pocket!

RachelWe're also getting into Mike Pence, his group's memo on tariff lobbying, a four hundred and ninety six percent spike in lobbying revenues.

JordynYeah!

RachelAnd the argument that tariff complexity is basically a gift to the well connected.

JordynSarcastically, draining the swamp one exemption at a time.

RachelAnd we close with Friendly Fire, where we say the quiet part out loud.

JordynWarmly, the free market critique was right. We'll get there. First, though, time to open the receipts.

RachelLet's go. It's not going to be a cost to you, it's going to be a cost to another country. September 2024, Donald Trump on the campaign trail.

JordynAnd then Tax Foundation ran the receipts.

RachelYeah, a thousand dollars per household in 2025 alone.

JordynSo another country.

RachelAnother country called your checking account.

JordynThe Tax Foundation nonpartisan and called it the largest U.S. tax increase as a percent of GDP since 1993.

Rachel1993. That is not a typo.

JordynAnd before the Supreme Court knocked down the IEEPA tariffs, they had the 2026 projection at $1,300 per household.

RachelPer household, not per corporation, not per Chinese exporter, per family sitting at a kitchen table.

JordynAnd look, I want to be fair. The IEEPA ruling changed the math. Tax Foundation now puts the 2026 hit closer to 700 after that ruling.

RachelStill real money, still paid by Americans.

JordynStill not another country.

RachelHere's what kills me. The promise wasn't vague. It was specific. It was repeated.

JordynRight.

RachelI'm not raising your taxes. I'm raising China's. Direct quote. And the data says Americans absorbed something like 94 to 96 percent of the cost. Foreign exporters, 4 to 6 percent.

JordynSo who actually got taxed here? And does that change what you think the policy was really for?

RachelAnd here's where the numbers get uncomfortable, where the talking points meet the receipts. Tax Foundation modeling shows the 2026 household hit at $1,500 before the IEEPA ruling, largest U.S. tax increase as a share of GDP since 1993. That's not spin. That's data.

Speaker 3And that 1993 comparison? That was Clinton's. Whose deficit bill?" Conservatives screamed bloody murder for a decade over that one.

RachelRight. Now it's dressed up in an American flag and called trade policy.

Speaker 3Patriotic taxation, groundbreaking.

RachelSo here's the thing that gets me, Jordyn, and this is where the communication breaks down: Tax Foundation modeling shows the top one percent takes a smaller hit proportionally; the bottom and middle quintiles absorb more.

Speaker 3Which is the definition of a regressive tax: you spend more of your income on goods, you pay more-a family buying groceries and appliances gets squeezed harder than someone whose wealth

Rachelis Ah!

Speaker 3in equities.

Racheland the whole foreign countries are paying framing just doesn't survive contact with how tariffs actually work.

Speaker 3Never did U.S. importers pay the duty at the border-they pass it to retailers. Retailers pass it to you. The Chinese manufacturer is not writing a check to Treasury.

RachelShocking development. I know; wild stuff. So you've got a regressive tax, sold as economic nationalism, collected from the people it was supposedly protecting, and the legal basis: two courts already had some pretty clear thoughts on that. So IEEPA goes down six to three February twentieth, Chief Justice Roberts writes the opinion: Article One, Congress sets tariffs, always has.

JordynAnd the White House's response? Hours later, new ten percent tariffs under Section 122 of the Trade Act of 1974. Same day.

RachelSame day. I mean, you have to respect the hustle, even if the law doesn't.

JordynThe court said IEEPA doesn't mention tariffs not once. The word tariff just isn't in the statute.

RachelSo the constitutional argument here is pretty simple, Jordan: the founders put the taxing power in Article One; that belongs to Congress. A president can't grab it through a vague word like regulate.

JordynExactly; and then Section 122 goes down May 7th, Court of International Trade two to one. The problem, the statute covers balance of payments crises like Nixon-era currency instability.

Rachela trade deficit is not the same thing. Right. So the court is basically saying Congress wrote this law in 1974 for a specific kind of financial emergency. You can't just... point at a trade gap and call it close enough.

JordynClose enough for government work, apparently.

RachelBut here's the kicker. According to Gibson Dunn, the Federal Circuit issued an administrative stay on May 12th. So those tariffs are still being collected right now, even though a court called them unlawful. You're paying an illegal tax

JordynYeah.

Rachelwhile the appeal proceeds. Whack-a-mole. One law dies, a new one pops up, and consumers keep footing the bill while lawyers argue.

JordynTwo courts, two different laws, same answer. And coming up, did any of this actually work? Did jobs come back? Did the trade deficit close?

RachelSo the court said no twice. Now let's ask, did the tariffs even work on their own terms? That's the real gut punch, right? The whole pitch was manufacturing jobs roaring back, trade deficit shrinking. Receipt, check. According to Pence's own group, Advancing American Freedom, $288 billion in tariffs coincided with a loss of roughly 72,000 American manufacturing jobs. jobs in 2025.

JordynWait, Pence's group? Yeah, yeah, not MSNBC, Mike Pence's conservative nonprofit. And Cato put it at nearly 70,000. So we've got conservative institutions landing the same place here. And then the trade deficit. Tax Foundation's tariff tracker found the tariffs have not meaningfully altered the trade balance. The deficit fell by just $2.1 billion in 2025, and that was driven by services, not goods. So the one metric the whole policy was sold on basically didn't move. Now, to be fair, the administration does point to 20-plus trade deals and trillions in announced investments.

RachelAnnounced. That word is doing a lot of work.

JordynAnnouncements aren't factory floors, they're press releases. So 72,000 jobs gone, trade deficit intact. Courts invalidating the legal basis, and somebody still made out really well. Who? Oh, that is where this gets interesting. Turns out K Street had a very good year.

RachelSo here's where the swamp angle actually lands. Pence's AAF dropped a memo in January called Protectionism Serves the Swamp. The title alone, Rachel.

JordynI mean...

RachelTariff lobbying revenues jumped 496% in Q4 2025 versus Q4 2024. That's the AAF's own number, attributed to Bloomberg Government data.

JordynNearly 500% in one quarter?

RachelOne quarter! And the line they put in the report is too good. Good; K Street loves tariffs, Main Street hates them.

JordynAlmost like complexity is a feature, not a bug, the more exemptions there are the more you need a lobbyist to get one.

RachelExactly; small manufacturers can't afford K Street, big connected firms carve out exclusions, and you know who said that's not exactly draining the swamp?

JordynMarc Short, Pence's own chair?

RachelFormer VP's group calling out the current president. That's not a think tank memo. That's a receipt.

JordynOkay, but here's my honest question. Is some of this just inevitable? Any industrial policy creates winners. Does complexity always equal corruption?

RachelI mean, probably some of it is structural, but a 496% spike in one quarter? That's not structural. That's a gold rush.

JordynYeah, yeah, fair. And the guys cashing in are literally the same firms that were supposed to be shown the door.

RachelWhich is going to matter a lot for where some conservatives are starting to break ranks on this whole thing. So here's the fracture that actually matters: on one side you have American Compass, or Oren Cass, the whole post free market nationalist crowd, saying the free trade consensus was wrong the whole time. Tariffs aren't a bug, they're the feature.

JordynAnd I get the argument: Cass has a real thesis: decades of cheap goods policy hollowed out manufacturing communities, and if the market won't fix that, policy has to. That's not crazy.

RachelOh, I know it's not crazy; but, Jordyn, here's where I push back: Reagan ran steel tariffs, Bush ran steel tariffs, those were targeted,

JordynRight.

Racheltime limited, and still didn't save the jobs. A blanket one hundred forty five percent on everything is not industrial policy.

JordynThat's the part I keep landing on: the method matters, even if you believe in strategic industrial tariffs, which I'm willing to grant has a defensible

Speaker 4logic.

JordynAs a defensible history, the IEEPA emergency authority approach was indefensible. That's what the court said, too.

RachelRight; and what happened when the courts struck them down-new tariffs within hours, under a different statute.

JordynWhich then also got struck down.

RachelSo the big ideological question is, principled case for some industrial tariffs, or is all of this just mercantilism with a MAGA bumper sticker?

Jordynsticker. Honestly, American Compass has a coherent framework. What got implemented had none of that coherence. You can't claim Oren Cass's intellectual credibility for a blanket reciprocal tariff built on bad math and declared under emergency powers.

RachelVoters with their feet are weighing in, too. The Hill reported more than a dozen Heritage economists and legal scholars decamped to Pence's AAF in late 2025. five. STAFF FROM HERITAGE'S LEGAL

JordynWow!

RachelAND ECONOMIC CENTERS Nearly doubling AAF's size overnight. And Donald Trump, Jr., called them "Trump-hating RINOs," which honestly tells you everything about where this fight is headed.

JordynSo the ideological split is real, but here's where it runs into cold arithmetic. The Tax Foundation ran the numbers on the One Big Beautiful Bill Act, signed July 4th, 2025, and the headline? Tariffs offset roughly one-third of the long-run economic benefit of those tax cuts. One-third, and they pay for how much of the cost? Less than half. The OBBA pushes deficits up $4.1 trillion dynamically over the next decade.

Speaker 3Wow.

JordynAnd the tariff revenue they counted on before the Supreme Court ruling, that was around $2 trillion over 10 years, after down to $668 billion. So the check bounced. The check absolutely bounced. And courts keep ripping up the revenue source, i.e. EPA gone.

RachelOn, section one twenty two, struck down;

JordynRay!

Racheleach ruling shrinks the offset that was supposed to make this fiscally defensible. And the Administration said tariffs would fund the tax cuts. The Tax Foundation is saying: no, that math never worked, even with tariffs fully intact. Right; and you know what else is in the bill? No tax on tips, no tax on overtime-great campaign promises, zero funding mechanism.

Speaker 3Oh! but don't worry, the tariffs will pay for it-except the tariffs keep getting struck down; so if each new legal challenge removes another chunk of revenue, what does the administration reach for next? Yeah, that's the real question going forward.

Speaker 5Boom!

Speaker 3Sure. So here's the thing nobody's saying out loud: the story isn't over. At all. Right every time a court says no they just load up the next statute. And Section 301 is the next statute. Holland and Knight reported that back in March, USTR opened two separate investigations covering sixty countries; no expiration cap, no one hundred and fifty day clock.

RachelThat's the part that matters. Section 122 expires July twenty fourth, but 301 has no such limit.

Speaker 3Exactly; and Treasury Secretary Bessent basically said the quiet part out loud: that the goal is to rebuild the old IEEPA tariff rates under the new authority. So, courts strike down the emergency tariffs, White House says hold my beer, files investigations into 60 countries under a law that actually survived Trump's first term. Sure. And survived it legally. That's the difference. IEEPA, Section 122, both got knocked down. Section 301 didn't. These new tariffs are going to be harder to challenge. On top of that-and this is where it gets good-Section 232 is still running hot-pharmaceuticals hit with one hundred per cent tariff starting July thirty first; semiconductors, copper, active investigations into aircraft, critical minerals, robotics. So the question for listeners isn't whether tariffs are coming back-they're already here. The question is which statute, which products, which countries, and who's paying? Which, spoiler, still us.

Speaker 6Yeah, and here's the uncomfortable part: the people who are right about that, they weren't always on our side of the aisle.

Speaker 3And here's the uncomfortable part.

Speaker 6Friendly Fire time. Yeah, we owe some credit where it's due.

Speaker 3The core critique: tariffs are paid by American consumers, they were regressive tax, they fall hardest on working class households. That argument lived on the left for decades.

Speaker 6And free market conservatives, ourselves included, largely agreed in private. Quietly. We just didn't say it loud enough.

Speaker 3Because saying it loud felt like handing Democrats a talking point.

Speaker 6Right; and now Schumer and Wyden are

Speaker 3Yeah!

Speaker 6citing Tax Foundation data in Senate letters demanding refunds for one hundred thirty billion dollars in "illegal" taxes. They're using our receipts.

Speaker 3Here's the thing: The argument didn't become right because Schumer picked it up. It was always right. The partisanship changed; the economics didn't.

Speaker 6And the institutions that should have been loudest, Heritage spent years softening its tariff criticism to stay relevant—in twenty seventeen and twenty eighteen they weren't publishing pro-tariff pieces, but by the mid-twenty twenties that had shifted pretty clearly.

Speaker 3We spent two years calling this a left-wing talking point, and it turns out it was just a fact.

Speaker 6Yeah, that's the friendly fire.

Speaker 3The free market case against blanket tariffs was sound. The movement that claimed to champion free markets failed to make it. That's on us.

Speaker 6And that's where we land heading into the final thing: what do we actually do now?

Speaker 3So here's where we land—the free market conservative position on tariffs: correct; the executive power method to impose them:

Speaker 6Mm-hmm.

Speaker 3unconstitutional. The movement that claimed to champion both failed on both counts. Yeah. Noting, and the Section 301 proceedings are the next thing to watch—sixty countries under investigation; accelerated timeline, with Treasury Secretary Bessent on record saying he expects He expects tariff rates to get back to where the IEEPA rates were.

Speaker 6Which means the fight moves from the Supreme Court to the trade record. And that record is being built right now. Public comments, hearings, the whole process.

Speaker 3So if your congressman hasn't heard from you about Article One trade authority, that's the ask. Congress delegated this power. They can reassert it.

Speaker 6And here's the thing that keeps me up a little.

Speaker 3Yeah.

Speaker 6The voters most exposed to this are working class families. The Tax Foundation put the household hit at fifteen hundred dollars this year.

Speaker 3People who were told, specifically told, this policy was built for them.

Speaker 6Yeah.

Speaker 3Look, if you voted for limited government and got the largest consumer tax increase since Clinton, you're allowed to say so, loudly.

Speaker 6Saying so is honestly the most conservative thing you can do. thing you can do right now.

Speaker 3Calling it what it is, that's the whole show, Jordyn.

Speaker 6That's the whole show.

Speaker 3Okay, so that's a wrap on this one, and honestly, Jordyn, the Friendly Fire segment hit different for me today.

Speaker 6Yeah, admitting that the free market critique was right all along and that we didn't say it loudly enough when it counted, that one sat with me.

Speaker 3The bottom line: working class voters were promised relief and ended up absorbing the bill, according to Tax Foundation, that's fifteen hundred dollars per household in twenty twenty six.

Speaker 6And the courts are catching up slowly to strikes down more legal pivots in the pipeline.

Speaker 3So if this episode made you think, share it with one friend who's been biting their tongue. Subscribe wherever you listen and drop us a rating.

Speaker 6More politically homeless voters need to find this show. Help us get there.

Speaker 3That's Red Flag.

Speaker 6Yeah.

Speaker 3Thanks for being here.

Speaker 6See you next week.