The Peter Zeihan Podcast Series - While I Was Gone, Part 1: Trade Policy Updates || Peter Zeihan

Episode Date: September 10, 2025

A US federal appeals court has ruled that most of Trump's tariffs are illegal since the president needs congressional authority to declare trade emergencies or impose tariffs.Join the Patreon here: https://www.patreon.com/PeterZeihanFull Newsletter: https://mailchi.mp/zeihan/while-i-was-gone-part-1-trade-policy-updates

Hey all, Peter Zion here, coming to you from the Lake of the Ozarks. I just got back from backpacking in Yosemite for a couple of weeks, and holy crap, you guys have lost your mind. So I'm doing a series of videos this week, basically on what's happened while I was gone and what it means. This has a very frog in a boiling pot sort of situation. The water has been heating up, and I don't know how many people have actually noticed what's been doing on, but a lot of things are breaking pretty quickly. So let's start with trade. Just before I got back, An appeals court in the U.S. federal level ruled that most of the tariffs that Donald Trump has been executing over the last few months are illegal under current law. Specifically, the Trump doesn't have the ability to declare a trade deficit as an emergency. He can't use fentanyl as a justification for a trade war, and he can't just establish tariffs however he wants, wherever he wants, and for as long as he wants.

Which, you know, honestly, not a particularly strict reading of the law. According to the Constitution, Congress has the authority to set tariffs, and Congress has in bits and pieces over the last several decades, given some of that power to the president, but never to the degree of expansiveness that Donald Trump has asserted. This is the second court ruling on this issue against Trump. It will now go to the Supreme Court probably before the end of the year, and it throws everything about the Trump tariff policy, which is the core of Trump's economic and foreign policy into doubt. Part of the problem that Trump is going to experience here is that once you get past the tariffs, there really isn't anything else under the hood. The federal government is still not staffed out. The U.S. Trade Representative Office, which is supposed to negotiate in trade deals, still hasn't been staffed out. The Commerce Department still hasn't been staffed out.

It's so bad that the Treasury Secretary has been involved in some of these trade talks. And none of the trade talks, none of them, none of the deals we've seen so far deal with any of the traditional irritants in economic relations between the trade talks. None of them. None of the deals we've seen so far deal with any of the traditional irritants in economic relations between the United States and the rest of the world. They're just about a tariff number. So if this number goes away, Trump is not simply starting from scratch. He has yet to build the team that is necessary to start a new policy. And we basically need to go all the way back to January 20 and start over. So big defeat for the president. As for corporate America and the American experience, everything is in flux. We still don't have a meaningful deal with Canada,

Mexico, or China, three of our four largest trading partners. And the deals we have with places like South Korea, Japan, and the United Kingdom are wishy-washy at best. And we're almost designed to allow the other countries to avoid the tariffs in many ways. So these are sloppy deals. that are very light on details that have yet to really be determined. And now we're looking at probably having to start the entire thing over, which means if you are in the business of working in the United States, you still have no clarity. And the closest clarity you might get is on the other side

of the Supreme Court ruling, which is at the moment unscheduled. So what we're seeing is the beginnings of a de-industrialization of the American complex, because companies are now moving their facilities and their production capacity outside of the United States, knowing that they'll have to pay tariffs when they bring stuff back in, but there's no advantage to participating in a multi-state supply chain. Normally with manufacturing, especially more advanced manufacturing, different countries, different companies produce different pieces of whatever the final product is, and those pieces fly back and forth or ship back and forth across international boundaries

as value add is added at every step. With the United States with this tariff policy, you get taxed every time something comes in, even if it's not a finished product. And so the solution is just to avoid the United States completely, make it entirely an international system, ship the final product to the United States consumer, and pay the tariff once. So in its current form, we're seeing a significant breakdown of American manufacturing. And that'll continue until we have some clarity on what trade policy will be used. if the Supreme Court decides to reinstate the tariffs, that will accelerate the de-industrialization of America. If the Supreme Court decides to ban the tariffs, then we have to start over, and we have all the uncertainty all over again from the beginning. So, no matter how you look at this, this is not a great situation for the United States for at least the remainder of this calendar year.