The Tariff Fired, Then Vanished, Aug 25

RachelOkay, so remember three weeks ago when we sat right here and said Section 338 was gonna fire eventually?

JordynWe did say that.

RachelWe called it on the record.

JordynThis is Red Flag. I'm Jordyn, that's Rachel, and apparently we're psychic now.

RachelNinety-six years this law just sat there untouched, and then boom, actually used.

JordynWait, wait, wait. First time ever?

RachelFirst time ever.

JordynShut up.

RachelI'm not kidding, Jordyn.

JordynOkay, but here's the plot twist nobody saw coming.

RachelOh, you mean the pause?

JordynI mean the pause that showed up out of absolutely nowhere.

RachelThree days, a tariff nobody believed would fire, fires, and then somebody hits pause like it's a Netflix show.

JordynAnd there's a whole other thread in here, something JD Vance apparently said about Mark Carney that is not gonna be pretty.

RachelOh, we're getting to that.

JordynNot yet, though.

RachelNot yet. Because first, we gotta talk about Friday night when this whole thing actually fell apart. Okay, before we get into how we actually got here, can we sit with what this statute even is for a second?

JordynPlease, because that account we were following weeks ago barely explained it.

RachelRight. And one more thing, White & Case, the law firm that tracks this stuff, says there's no implementing regulations. None. No judicial precedent either.

JordynWait, so the President just used a law that's never had a rule book written for it?

RachelThat's the one.

JordynUgh, that's not reassuring.

RachelAnd they flagged something else. This could become the new fast lane, a substitute for Section 300 authority going forward.

JordynSo this is basically a template going forward?

RachelThat's the theory.

JordynOkay, so what's actually getting taxed here? Because tariffs on Canada is doing a lot of work in that sentence.

RachelAnother account had it down before it even happened. Fifty percent duties on dairy, alcohol, and cars. Cars being the big one, right? Autos are almost the whole ballgame. ABC News had analysts putting the total around twenty billion dollars.

JordynTwenty billion sounds huge until you...

RachelIt's about five percent of what Canada sells us here in a year.

JordynOkay, that's a useful number. Doesn't feel like the sky falling.

RachelAnalysts are calling the near term hit moderate. Long term, they're less sure. So how exactly do talks that were supposedly still going turn into tariffs live at midnight? So Friday night, the talks just died.

JordynMid-conversation. No dramatic press conference, no walkout footage, just poof.

RachelAnd by Saturday morning, the tariffs are live.

JordynThat's the part that gets me. Overnight.

RachelLess than twenty-four hours from we're talking to we're taxing.

JordynBut here's what makes it worse. Trump was on record days earlier saying they already had a deal in place.

RachelWait, when?

JordynTuesday. Axios reported it straight from him. He told everyone the two sides had an agreement in place.

RachelSo Tuesday deal, Friday dead, Saturday fire. Efficient collapse. That's not a negotiation timeline, that's a soap opera.

JordynAnd nobody's explained what actually broke between Tuesday and Friday. No leak, no statement, nothing. Just a guy saying, "We have a deal," and then forty-eight hours later, the countries are taxing each other.

RachelWhich tells you the deal Tuesday probably wasn't much of anything.

JordynOr it was real and somebody blew it up on purpose.

RachelOoh, conspiracy Jordan.

JordynI'm just saying that gap is suspicious.

RachelMaybe, but you'd think somebody on either side would want credit for saving that Tuesday deal, and instead we get total silence.

JordynRight. If it was real, wouldn't Ottawa be pointing to receipts right now instead of matching us tariff for tariff?

RachelUnless the whole point was optics. Say we have a deal Tuesday, look strong for a few days, then let it collapse when nobody's really checking the fine print.

JordynThat's the part I keep circling back to. The confidence on Tuesday and the collapse on Friday don't match up, and nobody's bridged that gap for us.

RachelFair. Either way, Saturday morning, the tariffs are actually running.

JordynRight. They're not hypothetical anymore, they're being collected.

RachelOkay, so what's actually sitting inside this tariff package that's now hitting people's wallets? So dairy, alcohol, cars, that's the anchor list we already sized up.

JordynRight, but here's the piece that actually made my jaw drop.

RachelGo.

JordynThe auto goods getting hit, a bunch of those were supposedly locked in under USMCA.

RachelWait, the trade deal Trump himself signed?

JordynThat one. Fast Company flagged it. Cars that were carved out, protected, safe under that pact are now sitting inside the fifty percent bucket anyway.

RachelSo the agreement that was supposed to be the fix is just getting stepped over?

JordynBasically. Nobody's calling it a violation out loud, but that's what it looks like on paper.

RachelOkay, so picture a Kentucky bourbon distiller, a Wisconsin cheese plant, and a Michigan auto parts supplier all getting the same invoice increase. That's the range we're talking about.

JordynDifferent industries, same blunt instrument.

RachelAnd the auto piece stings differently because they were supposed to be a shield.

JordynA shield with a hole cut in it, apparently.

RachelRight. ABC News had trade economists sizing this whole thing up, and the phrase that stuck with me was, "Moderate near term, bigger risk later."

JordynWhich is a very polite way of saying, "Wait for the second invoice."

RachelSure. Business school phrasing for "This gets worse."

JordynSo we know what's covered now: dairy, booze, cars, and cars that weren't even supposed to be on the list.

RachelCovering the goods is the easy part, though.

JordynMeaning?

RachelMeaning somebody still has to explain why a law written for a completely different era lets a president wave a wand over an existing trade pact.

JordynThat's a different fight than what's taxed.

RachelA much bigger one. So here's the question hanging over this whole thing. Is Section 338 even legal to use here?

JordynCool. Cool. Casually asking if the entire tariff is built on sand.

RachelKind of, yeah. White and Case put it plainly. No implementing regulations, no judicial precedent because nobody's ever fired this thing before.

JordynRight. We know the gun had never been used. The question is whether it was even loaded to code.

RachelThat's where a law professor named Ilya Somin comes in. He argues Section 338 basically got replaced by two later trade laws, one from 1962, one from 1974, and that Trump's version doesn't meet what the statute actually requires.

JordynSo he's saying wrong tool, wrong decade.

RachelPretty much, and he's not hedging. Somin predicts legal challenges are coming, and soon.

JordynOkay, but that's one law professor. Who else is saying this?

RachelIt's not just him. Online, people were calling this thing illegal almost the second it dropped, before any of the legal write-ups even caught up.

JordynVibes-based jurisprudence.

RachelKind of. I mean, it's not a ruling. It's just the temperature of the room, but the room got hot fast.

JordynWhich tells you something. Even non-lawyers smelled the same problem the actual lawyers are now writing law review posts about.

RachelExactly. Nobody's confident this survives a court challenge intact.

JordynAnd if a judge tosses it, does the whole tariff just evaporate?

RachelThat's the open question nobody's answering yet.

JordynOkay, legal mess aside, because we could go another 20 minutes on that alone.

RachelWe could.

JordynBut here's what actually happened to the tariffs themselves. They didn't just sit there once they went live. Three days in, somebody hit pause.

RachelOh, an actual pause? Okay, let's get into that. Okay, so three days, three days of tariffs actually running, and then Trump pauses it and calls it a deal with Ottawa.

JordynA deal, announced like it's a press conference ribbon cutting.

RachelCNBC's headline out of that presser is wild too. Trump's saying Canada wants the benefits of being a US state.

JordynWait, what?

RachelThat's the line, in the middle of announcing this supposed win.

JordynOkay, so what's actually in this deal?

RachelThat's the fun part. Canadian Press reporting says the draft reportedly cuts steel and aluminum tariffs from 50% down to 25%.

JordynHalf off. Fine. That's something.

RachelAnd it reportedly keeps Canada's dairy supply management system intact.

JordynWhich Canada has fought to protect for years.

RachelRight. So on paper, both sides get to claim a win.

JordynBut?

RachelBut nobody's published the actual text, not the White House, not Ottawa.

JordynSo we've got a percentage everyone's repeating, and a dairy line everyone's repeating, and zero pages to check it against.

RachelAnd that's not nothing. Cutting steel and aluminum in half is a real number if it holds, but "if it holds" is doing a lot of heavy lifting in that sentence.

JordynEspecially when the dairy line and the tariff cut are the only two specifics anyone on either side is willing to repeat on the record.

RachelA three-day pause, a verbal handshake, and the paperwork's just not there.

JordynThat's the whole story right there, isn't it? Announcement first, receipts later, if ever.

RachelOr never.

JordynOr never.

RachelRewind for a second, though, because before any of this pause and handshake stuff happened...

JordynThe fight had already turned personal.

RachelOh, it got personal. Before the money stuff, we've got to deal with the tape.

JordynOh, the audio.

RachelCanadian Press got hold of a recording from a New York fundraiser, Vance mocking Carney for trying to out-tough Trump at the table.

JordynOut-tough?

RachelThat's the read, and the date matters. This leaked August 21st.

JordynWhich is before the Friday collapse.

RachelDays before. So while Ottawa's still supposedly negotiating, the Vice President's already backstage laughing at their guy.

JordynNot exactly a sign anyone inside the building was taking it seriously.

RachelNo.

JordynWhich makes the leak land differently. This isn't a hot mic during the collapse. It's mockery from before anyone official even said the deal was dead.

RachelRight. So whatever confidence Ottawa thought it had walking into that week, the Vice President clearly didn't share it. And then Trump adds his own line after the talks actually blow up.

JordynRight. That part comes after the collapse, not before. BBC reported he said afterward that Canada basically wants the perks of being part of the US without actually joining it.

RachelUgh. He said that out loud?

JordynOn the record.

RachelSo the VP's mocking the negotiator before it even falls apart, and the boss is floating annexation jokes after it does.

JordynA real team effort.

RachelDiplomacy.

JordynSet the personalities aside for a second, Rachel, because the fiscal receipts nobody's talking about are the bigger story.

RachelFine, lay it on me.

JordynOkay, so the Congressional Budget Office actually ran the numbers on all this trade chaos.

RachelAnd? The Congressional Budget Office says trade policy changes through July 31st add nine hundred billion dollars to the deficit over the next decade.

JordynA hundred and sixty-six million? Compared to what?

RachelCompared to their own February baseline before any of this tariff mess piled up.

JordynSo that's the price tag for the chaos itself.

RachelBasically. And here's the part that got me.

JordynHit me.

RachelCongressional Budget Office says a huge chunk of that hole comes from about a hundred and sixty-six billion dollars in IEEPA tariff revenue that has to get refunded this fiscal year.

JordynWait, refunded? Money they already collected?

RachelCollected it, spent the political win, and now it's going back out the door.

JordynSo the tariffs weren't just a wash, they're actively costing us because the collection itself gets unwound?

RachelRight. It's not free money sitting in a vault. It's money that has to leave again.

JordynThat's the number nobody puts on a poster.

RachelNo poster, no press conference, just a line in a congressional budget report.

JordynA hundred and sixty-six billion is basically the whole national parks budget times, I don't even know, a hundred?

RachelClose enough for our purposes.

JordynIt's wild that a number that size barely made a headline compared to the tariff drama itself.

RachelBecause deficits don't have a press conference moment, they just show up quietly in a report nobody reads outside Washington.

JordynSo we've got an unprecedented law, no rule book, and now a trillion dollar-ish fiscal footnote attached to it.

RachelAnd that number gets a lot scarier once you think about this law sticking around past one trade fight. So White and Case flags something that outlasts the receipts and the pause. Since this is the first time anyone's actually used Section 338 and it held up, it could become the fast option instead of going through Section 301.

JordynFast meaning skip the whole review process?

RachelExactly that. Section 301 takes investigations, hearings, months of paperwork before you can slap a tariff on anyone.

JordynAnd Section 338 just doesn't.

RachelRight. Nobody's built the guardrails yet, so there's nothing stopping the next president from reaching for this instead.

JordynWhich is the part that should bother anybody who claims they want a smaller executive branch.

RachelSay more. A statute sits unused for almost a century. One administration fires it once, it doesn't get struck down, and suddenly you've got a shortcut that skips the slow lane on purpose. That's not a one-time tool anymore. That's a habit waiting to happen.

JordynAnd the people cheering it right now are the same folks who scream about unchecked power the second the other party's in the chair.

RachelOh, absolutely. The outrage is very selective.

JordynIt's not partisan math, it's just who's holding the pen this week.

RachelSo next time, it's not dairy and cars, it's whatever the sitting president feels like taxing on a Saturday.

JordynWith none of the process. That's the actual precedent here, not the tariff, the shortcut.

RachelPrecedent's one thing, though.

JordynRight. The theory's ugly, but somebody's actually paying for this today.

RachelIn the grocery aisle, no less.

JordynSo let's follow the receipt all the way to the checkout line.

RachelOkay, grocery aisle. Dairy, alcohol, cars. Who's actually eating this 50%?

JordynABC News talked to trade economists, and their rate is near term, it's moderate. Nobody's grabbing pitchforks over cheddar prices this month.

RachelModerate now.

JordynRight, but they're flagging the longer game. If this drives on, dairy and alcohol and autos are the categories that creep up slowest and stick around longest.

RachelBecause those margins are already thin.

JordynExactly. A car dealer can eat a hit for a quarter. A dairy importer can't.

RachelMeanwhile, and I love this, while all that's happening, Trump quietly waived the higher tariffs on beef.

JordynWait, beef specifically?

RachelGround beef imports. CBS News reported it. He rolled back the higher rate specifically to try to bring prices down.

JordynSo tariffs up on one aisle, tariffs down on another in the same news cycle?

RachelSame guy, same week.

JordynThat's not a strategy, that's a thermostat. Whichever price complaint gets loudest first.

RachelWhich tells you the White House is watching the same grocery receipts we are.

JordynThey just get to move the number. We just get to pay it.

RachelOr not pay it, apparently, if you're buying ground beef instead of cheddar. Small mercies. It does make you wonder which grocery aisle gets the next surprise discount once this news cycle moves on.

JordynProbably which everyone starts trending first. That's apparently the whole methodology at this point.

RachelSo let's finally answer the question we opened with weeks ago. Did we call it? And was any of this actually trade policy? Okay, grading time. We said Section 338 would eventually fire. It fired.

JordynFull mark so far.

RachelThen it got paused, then it turned into a handshake Nobodys allowed to read.

JordynWe didn't call that part.

RachelNo, I thought it'd just sit there and tax people quietly. I didn't think we'd get a pause with a press release attached.

JordynSo B-plus? We nailed the mechanism, missed the theater.

RachelI'll take a B-plus. Speaking of theater, Canada's not just sitting there either. An industry watcher account posted that Canada retaliates dollar for dollar starting September 8th.

JordynWait, that's a real date?

RachelThat's a real date, and it's after the pause expires.

JordynSo the clock resets, and we're right back at the table.

RachelMaybe, or the deal holds, and nobody has to. Which is basically the whole question, right? Is a three-day pause before a midterm actual trade policy, or is it just time to the calendar?

Speaker 3I think it's the calendar. You don't pause for three days if you're confident in the deal.

RachelI'm less sure. I think Trump genuinely wanted a win to point to, and the pause bought time to get the language right.

Speaker 3The language that still doesn't exist.

RachelMaybe, but you don't get a three-day pause for a deal you're totally sure about either. Confident people don't need extra time to find the words.

Speaker 3Sure, but confident people also don't leak audio of their own VP trash-talking the other side's negotiator days before it falls apart.

RachelFair. Okay, I'm sliding toward your side.

Speaker 3Look at that. Agreement.

RachelDon't get used to it. So if you're grading us, I'll take my letter and go home. We called the fire. We missed the pause.

Speaker 3I'll take that same grade. Predicting the how is always the hard part.

RachelRight.

Speaker 3But that pause or policy question, still open. Nobody's closed that book.

RachelGenuinely open.

Speaker 3Ask us again in three weeks, and we might have a totally different answer.

RachelOr the exact same one, just angrier.

Speaker 3Also valid.

RachelSo sit with that one. Is this actual trade policy or a calendar trick before people vote?

Speaker 3You know who should sit with it too? Whoever you're arguing with over Turkey this November.

RachelOh, send them the episode. Let them do the yelling for once.

Speaker 3Subscribe while you're at it. Leave us a rating, the whole deal.

RachelAnd if Section 338 fires again before Thanksgiving...

Speaker 3We'll be right back here arguing about it. Some things you can actually count on. See you next week.