Donald Trump has suffered his biggest political setback since taking office after a US court stripped the US President of his ability to personally wield the threat of tariffs against the rest of the world.
This is the most substantive check imposed by the judicial arm of government on the new model of executive leadership being championed by Trump, which has seen him test the absolute limits of presidential authority and power.
How he responds to the decision of the US Court of International Trade in New York will be instructive, with his key political adviser, Stephen Miller, warning on Wednesday evening (local time) that “the judicial coup is out of control”.
While an appeal has been lodged by the administration, the ruling of the CIT will deepen the political challenge facing Trump in passing his “big, beautiful bill” through the US congress.
Trump was already at odds with GOP fiscal hawks concerned that his political agenda including his expanded tax cuts would add substantially to US debt.
Raising hundreds of billions in revenue from his sweeping tariffs was an ace up the President’s sleeve in his negotiations with the more stubborn Republicans in congress, but this card has been torn to shreds by the CIT ruling.
In April, US Treasury Secretary Scott Bessent said the tariffs could raise between $US300bn ($466bn) and $US600bn a year. Yet the rivers of gold promised by Trump in his inaugural address to “enrich our citizens” may now never flow.
Senior fellow in economic policy at the American Enterprise Institute Stan Veuger said that striking down the tariffs was “not just a tremendous setback to Trump’s signature economic policy, it also complicates the budget reconciliation process”.
“The house just passed the reconciliation bill and that vote was helped tremendously by the impression fiscal hawks had that tariffs would bring in significant amounts of revenue – maybe $US200bn to $US300bn a year,” Veuger told The Australian. “Without that revenue, Trump’s policies will definitely increase the budget deficit next year, even under the most optimistic possible assumptions.”
The committee for a responsible federal budget warned earlier this month that the Big, Beautiful Bill Act would add “roughly $US3.3 trillion to the debt through Fiscal Year 2034.”
While the massive tax and spending bill was narrowly shepherded through the house last week – by 215 to 214 votes – some Republican senators are pushing hard for deeper cuts, including Wisconsin’s Ron Johnson and Florida’s Rick Scott.
Senator Rand Paul, from Kentucky, told Fox News at the weekend that the cuts in the bill were “wimpy and anaemic” and warned it would “explode the debt”.
In the house, Thomas Massie, from Kentucky, was one of two Republicans along with Warren Davidson, from Ohio, who broke ranks by opposing the bill. Massie this week said Republican senators were “demanding the bill be more fiscally responsible to get their votes. This is good news.”
The politics will only get harder from here for the US President, with the tariff setback likely to encourage more Republicans to speak out and demand changes.
Even Elon Musk has taken aim at the bill as he stands down as the head of the Department of Government Efficiency, warning it undermined his aggressive cost-cutting push.
In excerpts of an interview with CBS Sunday Morning, the world’s richest man said he was “disappointed to see the massive spending bill, frankly, which increases the budget deficit”.
“I think a bill can be big or it can be beautiful,” he said. “But I don’t know if it can be both.”
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