WSJ What’s News - Two Rulings Deal Blow to Key Trump Policies

Episode Date: March 19, 2025

A.M. Edition for Mar. 19. A federal judge in Maryland ruled that the Department of Government Efficiency’s dismantling of USAID was likely unconstitutional, while a judge in Washington D.C. has blocked President Trump’s executive order which excludes transgender individuals from serving openly in the military. Plus, WSJ autos reporter Stephen Wilmot explains what a decades-old chicken tax has to do with the barrage of new tariffs being pursued by the Trump administration. Kate Bullivant hosts. Sign up for the WSJ’s free What’s News newsletter. Learn more about your ad choices. Visit megaphone.fm/adchoices

In a blow to Elon Musk, a judge rules Doge's move to dismantle USAID was likely unconstitutional. Plus how a decades-old chicken tax sheds light on the barrage of new tariffs being pursued by the Trump administration. What the history of the chicken tax shows is that it really means there aren't any imports of vehicles which are taxed at 25 percent because it's impossible to make them competitive at that level. And Fitch Ratings adds its name to a slew of prominent forecasters downgrading the outlook for economic growth. It's Wednesday March 19th.

I'm Kate Bulevant for the Wall Street Journal filling in for Luke Vargas. And here is the AM edition of What's News, the top headlines and business stories moving your world today. A federal judge has blocked the Pentagon from implementing President Trump's executive order that excludes transgender individuals from serving openly in the military, marking a major legal setback for one of the administration's policy priorities. Judge Ana Reyes ruled the order likely violated the constitutional guarantee of equal protection and issued a preliminary injunction that halted it while litigation continues. The government defended the policy, saying that military leadership has the broad authority

to decide medical criteria for service members, while current and prospective transgender service members challenge the executive order as discriminatory. Reyes' ruling is set to go into effect Friday. The White House didn't immediately respond to a request for comment. Meanwhile, a federal judge in Maryland has similarly ruled that the Department of Government Efficiencies' move to dismantle the U.S. Agency for International Development was likely unconstitutional on multiple fronts. The ruling directed DOJ to halt its work in closing down USAID and ordered it to reinstate

access to electronic systems for employees and contractors who were shut out. The judge took particular issue with Elon Musk's role, saying the billionaire has acted as the de facto head of Doge without having been properly appointed with Senate approval, likely in violation of the Appointments Clause in the Constitution. The Trump administration's lawyers have maintained that Musk is a presidential adviser, giving recommendations with no binding legal effect. Without comment on the specific ruling, Musk appeared on Fox News last night

and again defended the need to cut government spending. The reason I'm here is because I'm very worried about America going bankrupt due to the corruption and waste. And if we don't do something about it, the ship of America is going to sink. And we're all on that ship. White House Deputy Press Secretary Anna Kelly called the ruling against Doge a quote, miscarriage of justice and said the government plans to appeal the decision.

And setting up yet another legal fight, President Trump has fired two Democratic commissioners from the Federal Trade Commission, countering Supreme Court president that says the FTC's commissioners can only be removed for cause. It's the latest move in Trump's campaign to exert more control over independent government agencies. The FTC has a bipartisan structure, but Tuesday's dismissals mean only two members remain, both of whom are Republican. FTC chief Andrew Ferguson maintains that any of the FTC's commissioners can be removed by the president.

Alvaro Bedoya and Rebecca Slaughter have both called their dismissal illegal, with Bedoya saying that he will challenge it. An FTC spokesman declined to comment. In market news today, it's all about the Fed, with policymakers widely expected to keep rates on hold. But as finance editor Alex Frangos explains, it'll be Federal Reserve Chair Jerome Powell's speech today that really matters to investors. One of the things that people are really looking out for with Powell this week is how much is he going to talk about the economy slowing down?

We're seeing it in a whole bunch of different indicators in terms of consumer sentiment and retail sales. People in all income spectrums are sort of starting to feel a little bit of a pinch. So if he highlights that, it may indicate that his inclination is that the economy is going to need more support, need rate cuts, you know, sooner than people are expecting. On the other hand, if he highlights the risks of tariffs in terms of reigniting inflation, maybe they're not going to cut so quickly. So those are the things people are looking out for. Fitch Ratings has added its name to a slew of prominent forecasters, downgrading the outlook for world economic growth.

Its economic outlook predicts that the global trade war will reduce US and world growth, push up US inflation and delay Federal Reserve rate cuts. The US is now expected to grow 1.7% this year, well below growth rates of closer to 3% in both 2023 and 2024. Fears of a recession in the US have grown sharply in the last month, with the Trump administration ramping up tariffs on Canada, Mexico and China while extending tariffs to imports of steel and aluminium. Coming up, tariffs might be roiling markets and the economic outlook right now, but they're not a new phenomenon. We look at what a decades-old chicken tax

tells us about Trump's tariff plans. That story after the break. Since the 1960s, the US has imposed a 25% tariff on imported trucks after President Lyndon B Johnson introduced a tax hitting back at European levies on American poultry. The so-called chicken tax may be from the history books but as the Trump administration pursues a barrage of new tariffs, Auto's reporter Stephen Wilmot explains how it shows the power of tariffs to reshape global trade, competition and industry over decades. Stephen, take us back to the 1960s. What is the chicken tax? Well it all started in 1962 when what was the predecessor organisation to the European

Union created the common agricultural policy and that involved increasing tariffs on American poultry and Germans in particular had been buying increasing amounts of chickens from American farmers. And then suddenly the tariff increases hit the volumes that they were exporting to Western Germany in particular very hard. Exports plunged in the first half of 1963. So there was a lot of diplomacy, but eventually Lyndon Johnson did hit back with retaliatory tariffs of 25% on trucks, on goods vehicles specifically. And that was very specifically targeted at West Germany because Volkswagen was exporting its so-called Type 2 minivan to the US.

And what the tariff did was it blocked just the goods vehicles. So Volkswagen continued to grow very strongly in the US with the camper van and with the Beetle, but its goods vehicles were hit. And so the chicken tax, as it became known, had a huge impact on the exports of goods vehicles from West Germany to the US. How does the chicken tax compare to the different types of tariffs we're seeing being rolled

out today by the Trump administration? One similarity is the rate. 25% seems to be a golden number. It was the rate for the chicken tax. And it's also the rate that Trump is talking about with automotive tariffs expanded to the whole, to all US vehicle imports, passenger vehicles, as well as goods vehicles. And that's a high level. So it really, what the history of the chicken tax shows is it, it really means there aren't any imports of those vehicles which are taxed at 25% because it's impossible to make them competitive at that level. You don't get trucks imported to the US. They're all essentially made in the US with very few exceptions.

Stephen, what were some of the workarounds to the chicken tax in the 60s? There is this really colourful history of so-called power of engineering that the chicken tax in the 60s. There is this really colourful history of so-called tariff engineering that the chicken tax engendered. One classic example is Subaru, which used to import these small light trucks with seats facing backwards on the flat bed so that it could classify them as passenger vehicles for customs purposes. Another example is Mercedes, which used to ship its Sprinter vans to the US in kits and then kind of reassemble them.

So what are the learnings here from looking back at the chicken tax and how it's impacted US industry? So I think one lesson is that it does work in a sense. There are no imported goods trucks in that category, essentially. So it has kept production of pickups in the US, but it hasn't worked in raising any revenue. Whereas the 2.5% tariff on passenger cars does raise quite a lot more money because it's not such a disincentive to pay. Another lesson really is just how long lasting and unpredictable the consequences can be. It ended up essentially protecting Detroit from an influx of Japanese cars more than a decade later. And the chief lesson therefore is humility in terms of what the consequences

of this will be. Potentially tariffs can become very hard to unwind for that reason. Stephen thanks so much for taking us on this history lesson and how that's impacting what we're seeing today. Thank you. And in other market news, we're exclusively reporting that activist investor Starboard Value is preparing to wage a proxy fight at the design software maker Autodesk. Starboard reportedly has a more than $500 million stake in Autodesk and intends to nominate a minority slate of director candidates ahead of the tech company's coming annual meeting.

Autodesk's shares have fallen steeply since touching a record high in August 2021. The stock is down about 12% so far this year. Meanwhile, an activist investor is pushing for Rio Tinto to unify its dual listed corporate structure into a single Australian based company. London based hedge fund, Palisac Capital, wants an independent review into whether unification would be in the best interest of shareholders. But the Mining Giants Board has unanimously recommended that shareholders vote against the resolution. And that's it for what's news for this Wednesday morning. Today's show was produced by Daniel

Bach with supervising producer Sandra Kilhoff and I'm Kate Bulevant for the Wall Street Journal filling in for Luke Vargas. We will be back tonight with a new show. Until then, thanks for listening.