The 1930 Tariff Law Nobody Dared Use, Aug 4

Rachel: The pitch was simple: tariffs are leverage, a tool to force fair deals, not a trade war. Jordyn: On July twentieth that leverage became Section three thirty eight of the Smoot-Hawley Act nineteen thirty, never invoked, not once, until now. Rachel: Against Canada? Jordyn: Against Canada. Rachel: Same law from the Depression-dusted off. Jordyn: Historic in the worst way. Rachel: I care about what it costs; Jordyn: I care about who handed him the power to do it. Both are on the table today. Okay, welcome to Red Flag; I'm Jordyn. Rachel: And I'm Rachel. We've got a full one. Jordyn: First, why the Administration skipped the slower but better documented tools and reached for a statute nobody's touched since before World War Two; then, we trace the statute hopping—how many laws they've cycled through this year alone just to keep tariffs moving without a vote in Congress; and later, friendly fire: we admit the critics calling this pattern were right. Rachel: Which stings a little. A little; plus California sued, twice in one day, over the tariffs and over sharing benefits Jordyn: Wow! Rachel: data with ICE. Busy Monday for Rob Bonta—very busy. So let's lay the whole receipt on the table: Section 338, never used until now. Picture the pitch sixteen months ago; tariffs are leverage; foreign countries pay the tab; it's temporary squeeze until the deals roll in. Jordyn: Right, they'd be begging for mercy, that was the whole bumper sticker. Rachel: And here we are, chapters deep, measuring every promise against the actual receipts. Jordyn: A lot of chapters. What they do now? Rachel: Okay, so get this: July twentieth, Trump signs proclamations invoking Section 338 of the Smoot-Hawley Tariff Act of 1930. Jordyn: Wait, Smoot-Hawley? The one every econ class uses as the cautionary tale? Rachel: That one. Fortune reported Section 338 has never, not once, actually been used to impose tariffs before this. Jordyn: So it sat in a drawer for ninety-six years. Six years and somebody just dusted it off? Rachel: Pretty much. And it's not small. Roughly $20 billion in Canadian goods now carry an extra 50% duty on top of what was already there. Jordyn: Fifty on top of fifty? That's not a tariff. That's a toll booth. Rachel: Brownstein's law firm and Tech Times both flagged that the duties actually land August nineteenth. Canada's got a thirty day window to cut a deal, Jordyn: which started on the twentieth, so that clock runs out in about two weeks. Rachel: Two weeks. So my question walking into this is why you'd reach for a law nobody touched since Hoover. If you need to reach for a statute that hasn't been touched since Hoover to make the plan work, is that actually a plan or a bluff that ran out of normal tools? Jordyn: What does Section 338 even let him do that the other tariff laws don't? Rachel: Okay, so here's what Section 338 actually does: The President can slap duties up to fifty per cent once he finds a foreign government is discriminating against US exports: fifty per cent flat; no paperwork; no receipts; nothing. And Fortune's reporting is clear that the whole provision was built to deter retaliation, not launch it. A deterrent nobody was supposed to actually fire. So why not 301 or 232, the ones they used when they actually had to work for it? Because those need homework. Thomson Reuters walked through it. 301 means USTR opens a formal investigation. 232 means a national security finding. HEARINGS, months, paper trail. And three three eight proclamation he just signs it; the Globe and Mail calls the whole authority untested for exactly that reason." "Untested? You said this thing's been sitting there since nineteen thirty found, not fired." Peter Harrell, the Georgetown trade scholar, points to a nineteen thirty five case. Regulators found discrimination and stopped. Opt cold; no duties ever followed. Ninety years, and nobody ever actually pulled the trigger? Nobody; which is my whole read. When you skip every review board and every scrap of paperwork and grab the one tool that requires none of it? Which tells me you don't trust your own case. Exactly; nobody sprints for the no paperwork option when the paperwork would actually Speaker 3: help. Rachel: Would actually back them up. So the tell isn't the tariff rate; it's the short cut itself; and that short cut only got attractive once a court room slammed a door shut on the last one. Speaker 4: No! Rachel: Looking at that, here's the pattern nobody wants named: February twentieth the Supreme Court kills the IEEPA tariffs and the White House pivots to Section one twenty two. Same day-like ours-California's Attorney General flagged that exact timeline in the newest suit. Bonta's office says the switch landed within hours. Jordyn: Okay, but Section One twenty two isn't a blank check. Check, capped at fifteen per cent., gone after a hundred and fifty days unless Congress extends it. Rachel: Which is exactly why they needed door number three, section three three eight. Jordyn: Right, that's this whole episode. Rachel: Lose in court, grab a different shell, Jordyn: Hmm? Rachel: repeat. Third time this year. Jordyn: I'd say the courts are catching up. The IEEPA loss actually stuck. Rachel: Eventually, sure; but the duties get collected the whole time the case sits on a docket. And nobody's writing refund checks. Fortune's new piece on the Canada tariffs put it bluntly: Speaker 5: Wow. Rachel: "The Administration's evidence supporting the tariffs is weak at best. Weak evidence, guaranteed revenue. That gap is what keeps me up. Speaker 5: I think it's slow. Give it time. Rachel: Slow enough the tariffs already did their job by the time a ruling lands. Speaker 5: We're not settling this one today. Rachel: Nope, but flip the lawsuit to the checkout line, where somebody actually pays the tab. Speaker 6: The Speaker 3: End Speaker 6: of the Project Gutenberg EBook of The Tale of Peter Rabbit, Speaker 3: by Beatrix Potter Speaker 5: Quick pivot from the courts: let's talk what's actually sitting in the boxes Rachel: Getting hit. Jordyn: Wait, boxes? like real products? Rachel: Yeah, Brownstein's breakdown lists hockey sticks, actual hockey sticks, plus cement, autos, alcohol, dairy. Jordyn: Hockey sticks? Canada's national sport just got tariffed. Rachel: Brownstein pegs the whole basket around twenty billion dollars, about five percent of what we import from Canada. Jordyn: Mm-hmm. Five percent doesn't sound huge until you remember who writes that check. Rachel: And trade lawyers are flagging something importers missed: these duties hit goods that already qualify duty-free under USMCA rules. Jordyn: So the free trade deal doesn't shield you here? Rachel: Nope. Speaker 4: How? Rachel: Section 338 just runs right around it. Jordyn: A fifty per cent duty on dairy imports doesn't stay on a spreadsheet in Ottawa; that shows up on your grocery receipt. Rachel: Exactly; and from the supply chain side, two weeks' notice-you can't resource a supplier that fast-I lived that scramble at Amazon: you eat the cost or pass it straight to the customer. Jordyn: Cute planning forcing companies to pick margin or markup in fourteen days. Rachel: Cute, but not survivable if you're a smaller importer. Jordyn: So who eats it, them or us? Both, eventually. Shifting gears, before 338 there's the original sin, Smoot-Hawley, June nineteen thirty. Speaker 5: Ah, here we go. Jordyn: Hoover signs it and Axios notes average tariffs jump to roughly twenty percent. Rachel: And everybody just-accepts that? Jordyn: Nope, within two years about two dozen countries retaliate. Speaker 6: Wow. Jordyn: Two dozen against the industries it was supposed to protect? Rachel: Exactly the industries. NBER research Axios sites found foreign countries cut American car imports by roughly forty six percent. Jordyn: So the law protecting Detroit torched Detroit's exports? Pretty much. Paul Krugman's newsletter makes the sharper point: Congress didn't just regret it quietly, they passed the nineteen thirty four Reciprocal Trade Agreements Act specifically because they'd admitted Smoot-Hawley failed. Which means the law's whole cultural afterlife is one movie. Say it. Ferris Bueller: some kid asleep a teacher droning about why it didn't work. That's it. That's the legacy-a punch line in a Matthew Broderick movie. And Congress fixed it with an actual vote, which is the part nobody's doing this time. Funny you'd bring up voting. Speaker 7: Convenient? Jordyn: With that in mind, Article One, Section Eight: "Congress gets the tariff power, not the President." That's the actual text. Speaker 7: And yet four statutes deep now! Jordyn: IEEPA, Section 122, 301 and 232, and now 338. Not one vote Speaker 7: Right. Jordyn: on any of them! Speaker 7: Not one. Jordyn: Tech Times had a piece on this. Section three. Section 3(e) thirty eight's original design was to enforce most favored nation treatment equal tariffs every partner, Speaker 7: Wow. Jordyn: no favorites. Speaker 7: And now? Jordyn: Now it's a targeting tool, 50 percent Canada only. Speaker 7: So the tool got repurposed and nobody objected? Jordyn: Republicans hold the House, the Senate, 10 years of speeches about executive overreach. Speaker 7: And the calendar is empty. Jordyn: Not one committee hearing, not one floor vote, zero. And get this, the LA Times reported California filed two lawsuits Monday, one's the tariffs and the other? Blocking Trump's team from handing needy families data to ICE, same filing day, power grabbed twice, no vote either time. Speaker 7: Building on that filing, the data lawsuit isn't about grocery money, it's Temporary Assistance for Needy Families records, and Bonta's office says the target is disclosure to DHS and other agencies. Jordyn: So a benefits application turns into an address book for ICE. Speaker 7: That's close to the AG's own language. His office calls it an attempt to build a mass surveillance database. Jordyn: And it's not a first swing. Bonta's office points to courts already blocking HHS from handing DHS individual health records, blocking USDA's demand for SNAP recipient data, Speaker 7: Mm-hmm. Jordyn: and stopping an expansion of the SAVE program that would have swept in U.S.-born citizens. Three orders, three agencies, one direction every time. Here's my problem, and it's not a partisan one. A database built to help hungry families shouldn't double as an enforcement tool. Tool. Full stop. Rachel: Whatever your position on immigration, the infrastructure sticks around long after this administration's gone. Jordyn: Right. A movement that talks about small government just watched Washington build a permanent list of addresses and family sizes. Rachel: So which fight matters more: the tariffs everyone's watching or the data grab nobody covered? Speaker 7: Looking at that pattern-ok, so get this: the people yelling about Domin statues getting stretched? They called it! Jordyn: Ouch. That hurts to say out loud. Speaker 7: It does! Section 122, Section 338—that's the exact sequence the skeptics predicted. Jordyn: And CalMatters reported this coalition suing over the tariffs isn't just California. Kentucky, Pennsylvania, 20-some states total. Speaker 7: Twenty-four now, and their filing basically argues the cost's land on families already stretched by affordability. That's a fiscal conservative argument, wearing a very blue jersey. Exactly, I'll take the receipt-same, but here's my line: I'm not conceding their fix, which is: "More federal power just pointed the other direction. Litigation checks this president, it's not a governing philosophy. Rachel: Exactly; a judge blocking a Proclamation isn't the same as Congress voting. Speaker 7: One's oversight, the other's a permission slip nobody asked for! Rachel: And speaking of permission slips, we tell you here what the ITC was actually supposed to have signed off on first. Jordyn: Let's talk odds, not predictions. Here's what jumps out: Peter Harrell flagged on X that Section 338 sits inside Smoot-Hawley's old tariff commission section. That's the ITC's actual ancestor. So the ITC was supposed to investigate before any of this happened. Rachel: Happened? That's the claim; a proclamation by itself might not satisfy that requirement. He's skipped a body that's still active today-looks like that. Forbes's Hawley tariff authority piece raises another wrinkle; the tariff amount should track the actual discrimination found, and fifty per cent across hockey sticks and dairy doesn't look tailored. Sounds sweeping to me. Same read here: then Brownstein's filing notes Canada has until August nineteenth to negotiate. Eh-meaning this whole fight could just disappear before a judge ever touches it? Right! No tariffs landing, no case, no ruling. So we're betting on a date, not a verdict. Two dates to circle: August nineteenth, when the Canadian duties land, no matter what any ITC investigation says. Jordyn: And, whichever Federal court rules first on that TANF injunction, Bonta's coalition wants that data frozen before it ever reaches ICE's servers. Rachel: The standard I'm holding it to is a trade policy that needs a statute nobody's touched since nineteen thirty, isn't the deregulation agenda Speaker 3: at work. Rachel: agenda any one voted for, or a benefits database nobody agreed to hand over. Tariffs are the bigger betrayal to me. This administration ran on cutting costs, then stacked a fresh duty on lumber and dared Canada to blink first. Jordyn: I'd flip that: money's measurable and reversible; a data pipeline, once it's built, Rachel: Right. Jordyn: outlives whoever's in office. Rachel: Different failures, same habit. Skip the process. Keep the power. Jordyn: Direct, August nineteenth, watch it. Rachel: So that's the episode: a ninety six year old tariff law nobody's touched suddenly doing all the work. Fifty per cent stacked on fifty-that's toll booth math, plain and simple-and Fortune's reporting holds up-Section Three Thirty Eight sat dormant until this White House reached for it-which leaves us with the real question: strategy or the last tool left when the fast ones ran out? You call it a tool, I call it a bluff. Either way, circle August nineteenth. Same goes for the TANF injunction: two dates, one calendar, both worth watching. If this got you yelling at your car radio, send it to the one relative still defending the price hikes. Subscribe, leave us a rating, and tell a friend who's politically homeless like we are. Thanks for spending the hour with us. Stay skeptical. We'll see you next time.