Why A Court Overturning The Tariffs Might Not Actually Help Car Buyers

The original headline for today’s installment of The Morning Dump was going to be “No One Knows Anything.” That’s because, really, no one knows anything. There is no strategy, only tactics, and at best a vague idea of the outcomes the current administration wants. As an observer, I can only make guesses, but as an observer, I’m also struck by the notion that the primary decision makers are also only making guesses.

A court you probably never heard of overturned President Trump’s tariffs, and it did it in the strongest way that it could, issuing a summary judgment. That’s probably good news for investors, consumers, and a lot of businesses threatened with being wiped out by these sudden trade barriers. Will the Trump administration overcome this ruling? Maybe! Does it help car buyers? Maybe not. Does anyone know what will happen next? No. No one knows anything.

That goes for Elon Musk, who is officially ending his time with the government and going back to his normal businesses. What did he accomplish? That’s also an open question.

Just to make things more interesting for Musk, he’s got to fight battles on two new fronts in Asia. First, Tesla-like upstart Xiaomi just launched its Model Y fighter in China, and people seem excited. Additionally, iPhone producer Foxconn says it has just landed another Japanese production partner. I wonder who that is?

No One Knows Anything

Unless you work in the legal system, I hope you never have to truly understand just how many random federal courts are sprinkled around lower Manhattan. I was only vaguely aware of them until the day I had to go to the United States Bankruptcy Court with a bunch of other journalists to try to make sure our old company didn’t get absolutely hosed in the proceedings.

A little uptown from that court is the U.S. Court of International Trade. This court exists because the government is a truly complicated enterprise, and it helps to have groups of judges with a lot of specialized knowledge to deal with issues they understand. Specifically, this is an Article III court, which means it falls under the Constitutional authority given to Congress to establish these independent courts. In particular, this court exists partially to sort out messy questions about how and when certain actions are permissible or not.

Yesterday, and somewhat surprisingly, three judges on this court ruled that the justification for President Trump’s emergency tariffs was, in fact, not justifiable. This isn’t the case of some D-appointed lower judge throwing a spanner in the works; two of the judges were Republican appointees, including one nominated by President Trump.

The full ruling is here, if you wish to read it. In the discussion section, it starts out by quoting Federalist 48, written by James Madison (under a nom de plume). You can, and probably should, read that instead. The basic point here is that the Constitution exists to make governing hard, because simply saying “we don’t want kings” isn’t enough.

Or, as Madison put it, “A mere demarcation on parchment of the constitutional limits of the several departments, is not a sufficient guard against those encroachments which lead to a tyrannical concentration of all the powers of government in the same hands.”

It gets complicated, but there are numerous powers granted to the executive branch by Congress in order to protect the economy in times of crisis. The Trump Administration, as a justification for its tariffs, has used various powers, but the main one was something called the International Emergency Economic Powers Act of 1977, or just IEEPA.

The idea here, according to the Trump Administration, was that “to cover the threat to the safety and security of Americans, including the public health crisis of deaths due to the use of fentanyl and other illicit drugs” President Trump had to issue these tariffs. How that applies to, say, Luxembourg, I’m not sure.

Neither is the court, and it issued a ruling tossing out the bulk of the tariffs against other countries:

The court holds for the foregoing reasons that IEEPA does not authorize any of the Worldwide, Retaliatory, or Trafficking Tariff Orders. The Worldwide and Retaliatory Tariff Orders exceed any authority granted to the President by IEEPA to regulate importation by means of tariffs. The Trafficking Tariffs fail because they do not deal with the threats set forth in those orders. This conclusion entitles Plaintiffs to judgment as a matter of law; as the court further finds no genuine dispute as to any material fact, summary judgment will enter against the United States. See USCIT R. 56. The challenged Tariff Orders will be vacated and their operation permanently enjoined. There is no question here of narrowly tailored relief; if the challenged Tariff Orders are unlawful as to Plaintiffs they are unlawful as to all.

This is basically the strongest way you can do this, and while the Administration can and probably will appeal, this is a summary judgment applied to all potential plaintiffs, meaning that the tariffs are dead for now, although an appeal has already been filed with the U.S. Court Of Appeals, which could issue a stay.

What’s the administration saying? Here’s the statement, which does not mention Fentanyl, via CNBC:

White House spokesperson Kush Desai, in a statement on the ruling, said, “Foreign countries’ nonreciprocal treatment of the United States has fueled America’s historic and persistent trade deficits.”

“These deficits have created a national emergency that has decimated American communities, left our workers behind, and weakened our defense industrial base – facts that the court did not dispute.”

“It is not for unelected judges to decide how to properly address a national emergency,” Desai added.

Does this ruling apply to cars? Probably not. The justification for President Trump’s auto tariffs is a little different. In that case, President Trump is using authority given to the Commerce Department under Section 232 of the Trade Expansion Act of 1962, arguing that too many foreign imports materially weakened the domestic production base, which is bad for national security. So those still stand.

Maybe. I don’t know. No one knows anything.

It’s possible President Trump just gets tired of all of this and gives up on tariffs. However, President Trump was also confronted with the popularity of the TACO trade on Wall Street yesterday. If you’re not aware, that’s the Trump Always Chickens Out trade, which is premised on the idea that President Trump eventually walks back his most extreme positions, representing a way to make a lot of money quickly on your investments merely by betting on him to chicken out. It’s all anyone seemingly wanted to talk about yesterday.

This came to a head in the White House yesterday, as CNBC reports:

When asked by CNBC about the term at the White House, Trump denied that he had ever backed down and suggested that his moves have helped the U.S. gain ground in trade negotiations.

“After I did what I did, they said, ‘We’ll meet anytime you want,’” Trump said of the European Union, which he had recently targeted with a 50% U.S. tariff — before announcing two days later that he was delaying that new levy.

“You call that chickening out?” Trump said.

“It’s called negotiation,” he added, after criticizing the question as “nasty.”

We actually have video of that exchange:

So, maybe in light of being called a chicken, President Trump just doubles down.

No one knows anything! I do know that I’ll miss the manual Versa.

Elon Musk Decides To Leave Government

Here’s a brutal headline/lede combination from Bloomberg, which reports that Tesla CEO Elon Musk is leaving the Department of Government Efficiency after creating quite a bit of chaos: “Musk Exits DOGE Leaving Threadbare Agencies and Strained Workers.”

And here’s the lede:

Brendan Demich and his team of research engineers at the National Institute for Occupational Safety and Health in Pittsburgh were racing to complete a virtual reality program to help train miners on what to do in an emergency underground.

They feared that soon, time would run out, and Elon Musk and his Department of Government Efficiency would throw them out of work.

“You’re calling on an incredible day,” Demich said while speaking with a reporter on the phone on May 2. The night before, his group had finished a stable version of their simulator, which could teach thousands of workers how to assist each other in the event of a mine collapse, explosion or fire.

“Nobody else in the world is doing this kind of thing,” Demich said. “And it’s basically going to get shelved.”

Hours later, Demich, along with nearly everyone else at his agency, learned he was out of a job.

That’s rough. Call me crazy, but that sounds like important work.

Musk initially claimed his work would save $2 trillion, but so far, even DOGE itself says it’s saved just $170 billion, and those claims are in doubt. Overall, federal spending has gone up year-over-year since DOGE was created.

It matters less now as Musk is returning back to his other work, which times out nicely with his end as a Special Government Employee. That’s something investors seem to want, as The Washington Post reports:

A group of activist Tesla Inc. shareholders sent a letter Wednesday to board chair Robyn Denholm calling for guarantees that CEO Elon Musk devote at least 40 hours a week to the electric vehicle maker after spending much of the past year focused on federal politics.

The letter was signed by SOC Investment Group, which is sponsored by a coalition of labor unions, and other small investors that together own about 7.9 million Tesla shares — a minuscule fraction of the company’s 3.22 billion outstanding shares. It comes amid investor and employee frustration over the impact Musk’s role with the Trump administration has had on the company’s sales and reputation.

Tesla’s most recent earnings call last month revealed a 71% drop in profits and a 13% slide in sales compared to the same time in 2024. Experts and analysts largely attribute that hit to Musk’s work with the U.S. DOGE Service, where he has inspired sweeping job and budget cuts in the federal government.

The deficit the United States is running is an important issue and certainly, there has to be waste in a system as big as our country’s government. Foregoing your own business interests in order to help your country discover waste is also, in theory, a noble thing to do.

Musk thanked the President and then retweeted a bunch of posts about how they’re both still friends and not to believe anyone who says they’re having a falling out, while also sharing a tweet that opposed cuts in the President’s key legislation.

Building cars is hard, but maybe governing is harder.

Xiaomi Debuts The Model Y-Fighting XU7

It’s great timing for Musk that he’s back in control of Tesla full time(ish), as upstart competitor Xiaomi just took aim straight at the Model Y with the handsome Xu7 SUV.

If I showed you a photo of that and told you it was a new McLaren SUV, you’d probably believe me. It looks great and allegedly has the stats to match. With Tesla already battling to maintain market share in China, this is bad news according to CNBC:

Less than a year after launching its first electric car, Xiaomi late on Thursday revealed its YU7 SUV and claimed it would have a driving range of at least 760 kilometers (472 miles) on a single charge.

That’s well above the 719 km advertised for Tesla’s extended-range Model Y. Driving range has been a selling point for consumers worried about frequent battery charging.

“We expect Yu7 would significantly erode Tesla Model-Y’s China market share,” Citi analyst Jeff Chung said in a report Sunday.

Analysts also think the Yu7 will be a little cheaper than the Model Y, with a starting price around $35,000.

Foxconn Has A New Partner, According To Foxconn

Foxconn, the Taiwanese company known for building iPhones (in China), has been out looking for partners for its automotive business. After spooking Honda into almost merging with Nissan, Foxconn then went on to secure a contract-manufacturing deal with Mitsubishi.

It doesn’t seem like Foxconn wants its own brand of cars. Instead, it wants to design and build a basic EV that can then be modified and branded by other companies. The first Japanese company to take up Foxconn’s offer was Mitsubishi, but it’s not the last if you believe the company’s Chairman Young Liu.

Per Reuters:

“There are two Japanese automakers; one has already been announced, and the other is almost ready to be,” Liu said at the company’s annual shareholders meeting, without elaborating.

Is it Nissan? The company is cutting a bunch of its budgets, so maybe it’s Nissan. My guess is Nissan.

What I’m Listening To While Writing TMD

I don’t know what’s going to happen more than anyone else, but I do know that Sammy Hagar has some real chops. Please enjoy “Paper Money” by Montrose.

The Big Question

What happens next?

Lead photo: Stellantis