Trump Considers Declaring National Emergency for Tariff Rollout

Reuters
By Yuval Rosenberg

Good evening. On this date in 1964, President Lyndon B. Johnson gave a State of the Union address in which he declared an "unconditional war on poverty in America." Tonight, President-elect Donald J. Trump is meeting with Senate Republicans in Washington, D.C., as the party tries to settle on a strategy for enacting his agenda on immigration, energy and tax cuts. Some Senate Republicans reportedly aim to convince Trump to split his plans into two legislative packages. Trump is in the nation’s capital for former president Jimmy Carter’s funeral tomorrow.

Here's what else we’re watching.

Massive Wildfires Ravaging Los Angeles Area

Four massive, uncontrolled wildfires continue to sweep across the Los Angeles area, powered by hurricane-force winds. The blazes have reportedly consumed more than 20 square miles and destroyed more than 1,000 homes and buildings, leaving whole neighborhoods burning and filling the skies with smoke and ash thick enough to blot out the sun.

President Joe Biden and California Gov. Gavi Newsom were briefed on the fires at a Santa Monica fire station during the day, and Biden approved a major disaster declaration that the White House said would allow survivors to quickly access funds and resources to aid their recovery.

The White House also said that the Federal Emergency Management Agency had approved a grant to reimburse California for firefighting costs and the federal government would provide additional resources and personnel to fight the fire and help response efforts.

A preliminary estimate by AccuWeather of the damage and economic loss put the total as high as $57 billion.

Trump Considers Declaring National Emergency to Speed Tariff Rollout

Donald Trump’s unwavering faith in the power of tariffs was on display again this week as he threatened to use import taxes "at a very high level" against Denmark in his quest to acquire Greenland, and the president-elect is reportedly now considering declaring a national emergency once he takes office to speed the rollout of a new set of tariffs potentially aimed at friends and foes alike.

CNN’s Kayla Tausche reports that, according to multiple sources she has spoken to, Trump is considering the use of the International Economic Emergency Powers Act, a 1977 law that empowers the president to regulate international commerce when there is an extraordinary threat to the nation. Invoking the IEEPA would empower Trump to manage imports during a declared national crisis, providing legal authorization to impose tariff increases.

Although no final decisions have been made on how tariffs will be handled in the coming months, Trump did not shy from using emergency powers for a variety of purposes in his first administration. According to Andrew Boyle of the Brennan Center for Justice at NYU Law School, Trump declared emergencies relying on the IEEPA at least eight times in various contexts. "Once unlocked, its powers are sweeping," Boyle writes, adding that the law provides few guardrails on what the president can do under its authority.

Trump linked the IEEPA specifically to tariffs at least once during his first administration. In 2019, he threatened to impose tariffs on imports from Mexico using IEEPA powers in response to illegal immigration coming across the border, but did not do so after Mexican officials took action to slow the flow of migrants. In another trade-related incident, Trump in 2019 claimed that he ordered U.S. importers to look for alternative suppliers located outside of China, using his IEEPA powers, but no formal declarations were ever made.

Kelly Ann Shaw, a trade attorney who worked in the first Trump administration, told CNN that the IEEPA could work for the incoming president’s stated intention of imposing higher tariffs on many if not all exporters to the U.S. "I think the president has broad authority to impose tariffs for a variety of reasons, and there are a number of statutory bases to do so," she said. "IEEPA is certainly one of them."

An analysis published by the law firm Skadden, Arps, Slate, Meagher & Flom indicates that the IEEPA could be the basis of an increase in tariffs against specific countries, including China, Mexico and Canada, though such a use is untested. "To invoke IEEPA, President-elect Trump would need to declare a national emergency under the National Emergencies Act," the analysts wrote. "In this case, he presumably would declare a national emergency with respect to drug trafficking, particularly involving fentanyl, and with respect to illegal immigration."

It’s not clear, however, whether the law would cover a universal tariff against all exporting nations, as Trump has threatened.

The president has other options for managing tariffs. As CNN’s Tausche notes, Section 338 of the Tariff Act of 1930 empowers the president to impose new duties against countries that are discriminating against the U.S. in trade. The use of that provision lacks a recent track record, however, having not been used since 1949, according to attorneys at the firm Covington & Burlington.

Additionally, Section 301 of the Trade Act of 1974 empowers the executive to impose tariffs or other restrictions on foreign products after determining that "an act, policy, or practice of a foreign country is unreasonable or discriminatory and burdens or restricts United States commerce." Trump used that authority during his first administration to impose tariffs on China, many of which are still in place. But that statute requires a formal investigation before any new tariffs can be imposed, which may be too high a hurdle for a new administration looking for immediate results.

Taxpayer Advocate Calls on Congress to Maintain IRS Funding

National Taxpayer Advocate Erin M. Collins told lawmakers today that the Internal Revenue Service has made significant progress in improving taxpayer service but warned that "continued funding is critical to enable the IRS to successfully deliver on its mission and transform how it works with taxpayers going forward."

In her annual report to Congress, Collins acknowledged that the additional funding provided for the IRS over 10 years as part of the 2022 Inflation Reduction Act is very much in question — congressional Republicans have already succeeded in getting $40 billion of the original $79 billion clawed back. But she noted that the money provided has already yielded results.

"For the first time since I became the National Taxpayer Advocate in 2020, I can begin this report with good news," she wrote. "The taxpayer experience has noticeably improved. The IRS has eliminated the mountain of paper returns and correspondence that piled up during the pandemic. In 2024, taxpayers and practitioners experienced better service, generally received timely refunds, and faced shorter wait times to reach customer service representatives."

She added that the multiyear funding boost helped the IRS make "major strides toward improving its taxpayer services and information technology (IT) systems."

Given those gains, Collins urged lawmakers not to "inadvertently throw the baby out with the bathwater" if they do decide to cut IRS funding, as Republicans want to do. She repeated a previous criticism that the $78.9 billion provided under the 2022 law suffered from an "extreme imbalance in funding priorities," with 58% of the total allocated for enforcement and 32% for "operations support" while just 6% went toward technological modernization and just 4% was directed to improve taxpayer service.

She suggested that, while the enforcement money generated "controversy," there is strong bipartisan backing for addressing taxpayer service and technology improvements — and funding those needs can help reduce the need for enforcement.

Collins writes that the IRS collected $98.7 billion through enforcement activities in fiscal year 2024. "That is a significant sum, but it accounts for less than two percent of the $5.1 trillion the agency collected overall. Put differently, 98 percent of federal taxes were self-assessed via annual tax filings and timely paid. If the IRS is sufficiently funded to improve taxpayer services and make it easier for taxpayers to interact with the agency through automation, taxpayer experiences will become fairer and more efficient, which likely will improve compliance and reduce the need for costly backend enforcement."

Collins also urges lawmakers to provide the necessary annual appropriations to fund ongoing IRS operations. She says that annual appropriations for the agency have been flat since fiscal year 2022, while prices have risen 14%. "This inflation-adjusted reduction in annual funding has required the IRS to use IRA funds intended for transformational change to maintain its operations. Over the longer term, appropriations that keep up with cost increases will be essential."

Collins also argues that IRS funding is a good value. "Funding the IRS not only enables the IRS to better serve our nation’s taxpayers, but it is important to note that it also provides an excellent return on investment," the report says. "In FY 2024, the IRS collected revenue of $5.1 trillion on an appropriated budget of $12.3 billion. That translates to a remarkable return on investment of 415:1. Paradoxically, the tighter the rest of the federal budget becomes, the more important it is to fully fund the IRS so it can collect the taxes required to fund other government functions."

The bottom line: Despite Collins’s urgings, the outlook for IRS funding appears questionable at best as Republicans look to enact their agenda. Read the taxpayer advocate’s full annual report, including recommendations for improving tax administration, here.

Number of the Day: 23.6 Million

The Biden administration said Wednesday that, with a week to go in the annual open enrollment period, a record 23.6 million Americans have chosen health coverage for 2025 through the Affordable Care Act marketplaces. That’s up from 21.4 million people last year and about double the number in 2021, Biden’s first year in office.

"We've once again set a new all-time record for marketplace enrollment," Neera Tanden, domestic policy adviser to President Biden, told reporters Tuesday. "In fact, every year of the Biden-Harris administration, we've set a new all-time record for ACA marketplace enrollment."

Those gains may not last once President-elect Trump is back in office, given his previous antipathy toward the Obama law and the fact that the Biden era’s enhanced federal subsidies for marketplace plans are set to expire at the end of 2025.

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