DP20789 Commandeering the Customs: An Economic and Legal Perspective on the President's "Emergency" Imposition of "Reciprocal Tariffs"

• Gene M. Grossman Alan O. Sykes
27 Oct 2025

This paper analyzes the Trump administration’s 2025 "reciprocal tariffs," imposed under the International Emergency Economic Powers Act (IEEPA) after a declaration of national emergency tied to U.S. trade deficits. We assess both the economic rationale and the legal implications of using IEEPA to raise U.S. tariffs and abandon Most Favored Nation (MFN) treatment. The Executive Order’s claims—that trade deficits have surged, result from a lack of reciprocity, and have caused an "emergency" in manufacturing—rest on economic fallacies. Merchandise trade deficits are long-standing and largely endogenous; tariffs based on bilateral imbalances neither correct unfair foreign practices nor address any true emergency, let alone an ‘unusual and extraordinary threat’ as required by the statute. We further argue that the tariffs fail IEEPA’s requirement that emergency measures "deal with" the asserted threat and that Congress never intended IEEPA to delegate sweeping tariff powers. The episode illustrates the perils of "commandeering the customs" through emergency powers to pursue trade policy by executive fiat.