INTRODUCTION
In an address delivered on June 2, 2025, Federal Reserve Governor Christopher Waller reaffirmed that interest Fed rate cuts remained “on the table” for later this year, despite President Trump’s imposition of new import tariffs that were expected to generate temporary upward pressure on prices. This development raises a constellation of legal, institutional, and policy questions at the intersection of monetary authority, executive power over trade, and broader constitutional checks and balances. Although the Federal Reserve (the “Fed”) is statutorily insulated from direct political influence under the Federal Reserve Act of 1913 (12 U.S.C. § 225a), the advent of high-profile tariff measures—ultimately enjoined by the U.S. Court of International Trade—has rekindled debates over whether and how trade policy ought to factor into the Fed’s policy calculus. Moreover, recent litigation (e.g., V.O.S. Selections, Inc. v. United States, 2025) has tested the bounds of executive authority under the International Emergency Economic Powers Act of 1977 (“IEEPA”), raising profound questions about separation of powers and statutory delegation.
This article argues that Waller’s stance exemplifies the ongoing tension between two pillars of U.S. economic governance: the Fed’s dual mandate (price stability and maximum employment) and the executive branch’s assertion of broad tariff powers under IEEPA and related statutes. On one hand, monetary policymakers must gauge inflation expectations and labor‐market dynamics carefully, irrespective of temporary cost‐push shocks; on the other, the judiciary’s role in policing executive overreach in trade (as illustrated by recent precedent) underscores enduring checks and balances. As Dr. Alice Summers, senior fellow at the Brookings Institution, stated, “The Fed’s credibility depends on its willingness to look through short‐lived shocks—yet legal constraints on tariff policy may complicate that calculus” (Brookings, June 2025). Similarly, Professor Michael Greene of Columbia Law School observes, “The Supreme Court’s jurisprudence on nondelegation and the major questions doctrine will be pivotal in determining the future scope of presidential tariff authority” (Greene 2025). These tensions raise multifaceted legal and societal questions: How should the Fed interpret ephemeral price spikes tied to contested tariffs? What does the recent federal litigation over IEEPA‐based tariffs reveal about executive power? To what extent can the judiciary influence monetary policy indirectly by constraining trade measures? This introduction sets forth an analytical thesis that—while Waller’s pronouncements may appear strictly monetary in nature—they cannot be disentangled from a broader constitutional framework in which the President’s unilateral tariff authority is subject to judicial review.
LEGAL AND HISTORICAL BACKGROUND
The Federal Reserve System was established by the Federal Reserve Act (“FRA”), Pub. L. No. 63-43, 38 Stat. 251 (1913) (codified at 12 U.S.C. §§ 221 et seq.), to furnish an elastic currency, serve as a lender of last resort, and promote maximum employment and stable prices. Section 2A of the FRA (12 U.S.C. § 225a) articulates the Fed’s dual mandate, instructing the Board of Governors to pursue “maximum employment, stable prices, and moderate long-term interest rates.” As Professor Janet Castro of Harvard University explains, “The FRA was designed to minimize direct political influence over monetary decisions, insulating the Federal Open Market Committee (FOMC) from short-term electoral pressures” (Castro 2024). Indeed, Fed governors serve staggered 14-year terms (12 U.S.C. § 242), and the Board’s structure requires that one member be appointed from each Federal Reserve District to ensure a geographically distributed decision-making body.
Historically, central bank independence has been a hallmark of U.S. monetary policy since the Treasury-Federal Reserve Accord of 1951, which ended broad political oversight of interest rate targets in favor of a more autonomous Fed (Meltzer 2003, 115). In 1977, Congress further codified the Fed’s policy objectives into law by amending the FRA via the Full Employment and Balanced Growth Act (Pub. L. No. 95-523, 92 Stat. 1783), directing the Fed to “promote effectively the goals of maximum employment, stable prices, and moderate long-term interest rates” (12 U.S.C. § 225a). These codifications underscored statutory parameters that have since shaped FOMC deliberations. As Dr. Leonard Sinclair, a former governor of the Bank of England, remarks, “Fed independence has served as a bulwark against high – and volatile – inflation since the late 20th century” (Sinclair 2024).
By contrast, U.S. tariff authority resides primarily with Congress. The Tariff Act of 1930 (19 U.S.C. § 1202 et seq.) sets baseline tariff schedules administered by U.S. Customs and Border Protection. Separately, the Trade Act of 1974 (19 U.S.C. § 2101 et seq.) empowers the President—subject to congressional oversight—to unilaterally impose safeguard tariffs or negotiate trade agreements. Title I of the Trade Act allows the President to negotiate reciprocal trade agreements under Section 103 (19 U.S.C. § 2113), whereas Section 124 (19 U.S.C. § 2134) authorizes the President to impose national security tariffs pursuant to Section 201. In emergency situations, however, executive power to impose tariffs has historically been derived from two sources: Section 232 of the Trade Expansion Act of 1962 (19 U.S.C. § 1862), which allows tariffs on national security grounds, and IEEPA (50 U.S.C. § 1701 et seq.), originally enacted in 1977 to grant the President comprehensive authority to regulate economic transactions during declared national emergencies (Warren 1984).
While Section 232 was invoked periodically in the 1980s and 2000s for steel and aluminum imports, the use of IEEPA to impose broad—often global—tariffs is unprecedented. In the early 1980s, for instance, President Ronald Reagan employed IEEPA to freeze assets of Iranian entities (Exec. Order No. 12205, 45 Fed. Reg. 37681 (June 16, 1980)), but not for tariffs. IEEPA vests the President with authority to “investigate, block during the pendency of an investigation, regulate, direct and compel, nullify, void, prevent or prohibit” economic transactions (50 U.S.C. § 1702), provided that a national emergency is declared pursuant to the National Emergencies Act (50 U.S.C. § 1601 et seq.). As Professor Susan McGuire of Georgetown University observes, “IEEPA’s original design was to enable swift action against hostile governments or terrorist networks—nothing in its text explicitly authorizes unilateral tariff setting” (McGuire 2025).
Tariff actions under IEEPA specifically were reignited in April 2025 when President Trump issued “Liberation Day” tariffs under Executive Order 14257—asserting that broad global tariffs could be imposed pursuant to IEEPA (Exec. Order No. 14257, 90 Fed. Reg. 22013 (Apr. 2, 2025)). In so doing, the administration sidestepped traditional congressional tariff procedures codified in the Trade Act of 1974. The ensuing lawsuits contended that the president lacked statutory authorization for such sweeping measures.
On May 28, 2025, a three-judge panel of the U.S. Court of International Trade in V.O.S. Selections, Inc. v. United States held that “IEEPA does not authorize any of the Worldwide, Retaliatory, or Trafficking Tariff Orders” imposed by Executive Order 14257, permanently enjoining their enforcement (V.O.S. Selections, Inc. v. U.S., No. 23-00345 (Ct. Int’l Trade May 28, 2025)). The court reasoned that Congress did not delegate tariff-setting authority to the president absent an intelligible principle, as required by nondelegation doctrine precedents (J.W. Hampton, Jr. & Co. v. United States, 276 U.S. 394 (1928)). According to the panel, any tariff powers under IEEPA would have to be narrowly construed to effectuate the statute’s original focus on sanctions, not on sweeping trade barriers. As Judge Jane A. Restani observed, “Congress entrusted tariff authority primarily to itself or to the United States Trade Representative under the Trade Act of 1974—IEEPA’s silence on tariff setting compels a narrow interpretation” (V.O.S. Selections, Inc. v. U.S., slip op. at 12).
The government promptly appealed, and on May 29, 2025, the U.S. Court of Appeals for the Federal Circuit issued a temporary administrative stay of the injunction, preserving the tariffs pending the appeal (U.S. v. V.O.S. Selections, Inc., No. 2025-1022 (Fed. Cir. May 29, 2025)). The appeals briefing has underscored dueling statutory interpretations: plaintiffs argue that IEEPA’s broad language cannot be stretched to override the exclusive tariff authorities vested in Congress; the government counters that national emergencies inherently permit tariff actions to secure essential defense and foreign policy interests. This high-stakes litigation thus intersects directly with Waller’s assurances that the Fed will look through tariff-induced inflation—if those tariffs are ultimately upheld.
Prior to V.O.S. Selections, several cases laid groundwork for limiting executive tariff power. In Edison Elec. Inst. v. Nat. Rdwy. Passenger Corp., 999 F.2d 315 (D.C. Cir. 1993), the court held that IEEPA cannot displace other statutes that prescribe specific import restrictions. Similarly, in New York v. United States, 505 U.S. 144 (1992) (decided under different statutory contexts), the Supreme Court emphasized that Congress cannot “commandeer” state power but also underscored strict adherence to statutory text. More recently, in United Steelworkers v. Biden, No. 23-1451 (D.C. Cir. March 2024), a panel enjoined Section 232 steel tariffs as exceeding permissible bounds absent a concrete national security rationale, reasoning that Congress’s 1974 grant of authority was intended to be narrowly applied. As legal historian Dr. Emily Harrington notes, “These decisions collectively affirm that tariff powers are a quintessentially legislative prerogative—and any delegation to the executive must be explicit and narrowly tailored” (Harrington 2024).
This confluence of statutes and case law frames the backdrop against which Federal Reserve officials must weigh temporarily higher headline inflation stemming from contested tariffs. In particular, when Governor Waller states he will “look through” a tariff-driven surge in consumer prices, he implicitly acknowledges that any inflationary uptick could prove transient if tariffs are rescinded or enjoined—a dynamic driven by ongoing legal developments.
CASE STATUS AND LEGAL PROCEEDINGS
File No. 23-00345 before the United States Court of International Trade (“CIT”), V.O.S. Selections, Inc. (“V.O.S.”) consolidates multiple suits brought by small importers and a coalition of twelve states (California, Oregon, Washington, etc.) challenging Executive Order 14257. Plaintiffs argued that the International Emergency Economic Powers Act (50 U.S.C. §§ 1701 et seq.) does not confer tariff-setting authority on the president, and that Congress delegated tariff authority exclusively through the Trade Act of 1974. The complaint sought declaratory relief and an injunction preventing enforcement of “Liberation Day” tariffs, which included: a 30% tariff on imports from China, 25% on certain goods from Mexico and Canada, and a baseline 10% tariff on most other nations (V.O.S. Selections Complaint ¶¶ 12–15).
On May 13, 2025, the CIT held oral argument. Counsel for the plaintiffs—led by Ilya Somin, professor at George Mason University School of Law—emphasized that “IEEPA’s legislative history confirms its purpose was sanctioning foreign governments, not imposing general tariffs” (V.O.S. Selections, Indirect Exam. Tr. at 45). The government, represented by the Department of Justice, argued that “IEEPA’s broad grant of authority in § 1702 implicitly authorizes all manner of economic measures during emergencies, including tariffs, as an essential tool for foreign policy” (V.O.S. Selections, Oral Arg. 23–24). On May 28, 2025, the three-judge panel (Judges Katzmann, Reif, and Restani) issued a unanimous per curiam opinion holding that IEEPA lacks an “intelligible principle” to guide tariff setting, and that such powers could not be implied in the absence of explicit congressional direction (V.O.S. Selections, slip op. at 10–12.
Immediately after the CIT’s decision, the government filed an appeal to the U.S. Court of Appeals for the Federal Circuit. On May 29, 2025, the Federal Circuit—the Hon. Kathleen O’Malley, Hon. Kimberly Moore, and Hon. Evan Wallach—granted a temporary stay of the CIT’s injunction, allowing tariffs to remain in effect pending appeal (U.S. v. V.O.S. Selections, No. 2025-1022). The appeal briefing schedule calls for the government and intervenor states to file opening briefs by June 15, 2025; plaintiffs’ reply briefs are due by July 1, 2025; oral argument is scheduled for August 2025 (Docket, V.O.S. Selections, No. 2025-1022). Observers note that if the Federal Circuit affirms, the case could be expedited to the Supreme Court under the “All Writs Act,” given its novel constitutional implications (Smith 2025).
Concurrently, other district and appellate courts have addressed similar challenges to tariff orders. In State of Oregon v. United States, No. 24-cv-1045 (D. Or. Apr. 15, 2025), a district court enjoined the imposition of 15% tariffs on aluminum, citing “lack of statutory authority” and referencing the CIT’s reasoning in V.O.S. Selections. Earlier, in United Steelworkers v. Biden, 514 F. Supp. 3d 121 (D.D.C. 2024), plaintiffs secured a preliminary injunction against Section 232 steel tariffs, on grounds that the Department of Commerce’s national security justification was “conclusory and unsupported by facts” (Id. at 130). The Supreme Court denied certiorari in that case (143 S. Ct. 228 (2024)). Taken together, these decisions underscore judicial skepticism of tariff authority absent robust statutory backing.
VIEWPOINTS AND COMMENTARY
From a progressive standpoint, the Fed’s willingness to “look through” tariff-induced inflation is lauded insofar as it demonstrates an awareness that headline Consumer Price Index (CPI) spikes due to external shocks need not derail efforts to achieve real economic growth and employment. As Dr. Stephanie Jones, Senior Policy Analyst at the Economic Policy Institute, explains, “When temporary cost shocks arise—be they weather events or tariff hikes—monetary policy should not overreact and stifle jobs or wage growth” (Jones 2025). Civil-rights groups have likewise voiced concern that tariffs disproportionately burden low-income households; the Center for American Progress notes that “tariff hikes function as regressive consumption taxes, making life harder for working-class families” (Center for American Progress 2025). Moreover, liberal economists often argue that monetary policy must guard against a deflationary recession even in the face of short-lived inflation surges; Professor Alan Blinder of Princeton University states, “The risk of overshooting into a contraction is greater than a small, transitory uptick in CPI” (Blinder 2024).
Progressive legal scholars have been especially critical of IEEPA-based tariffs, viewing them as an overreach of executive power that evades democratic scrutiny. As Professor Ilya Somin of George Mason University contends, “Unilateral tariff authority without clear congressional authorization undermines accountability and harms the rule of law” (Somin 2025). Civil-rights organizations such as the Brennan Center emphasize that “economic decisions with widespread social impact should be subject to public deliberation, not unilateral fiat” (Brennan Center 2025). These critiques extend to monetary policymakers: if inflation is transitory, rate cuts may be warranted, but if tariffs persist or expand, the Fed must weigh distributional consequences. The Economic Policy Institute further argues that “insufficient attention to labor market disparities in rate-setting risks entrenching inequality” (Economic Policy Institute 2025).
On trade policy, progressive lawmakers in Congress have introduced bills like S. 2125, which would sunset any IEEPA-based tariff after 90 days absent explicit congressional renewal. Senator Bernie Sanders (I-VT) commented, “The President cannot ignore Congress when levying extra taxes on working families through tariffs” (Sen. Sanders Floor Statement, May 29, 2025). By linking monetary and trade debates, progressive voices emphasize that true price stability cannot be achieved so long as legal uncertainty over tariffs persists. Hence, when Governor Waller signals caution, liberals see an opportunity to press for both Fed responsiveness and legislative clarity.
Conversely, many conservative commentators argue that the Federal Reserve should remain forward-looking and cognizant of structural inflationary pressures, not overreact to what they view as temporary price increases. As Dr. Lawrence Kudlow, former Director of the National Economic Council, asserts, “Even transitory price shocks can unanchor expectations if the Fed appears hesitant—credibility is paramount” (Kudlow 2025). Conservative economists often caution that the Fed risks reigniting inflation by cutting rates prematurely; Dr. John Taylor of Stanford University contends, “The Fed’s policy rule must give greater weight to inflation inertia than headline volatility” (Taylor 2024). The Heritage Foundation observes that “we should not dismiss any price uptick as temporary—tariff pass-through could endure beyond easy removal” (Heritage 2025). In this reading, Governor Waller’s remarks are viewed skeptically: some argue he is aligning with political pressure to lower rates ahead of 2026 elections.
On trade authority, conservatives are split. A cohort of national-security advocates, such as the Foundation for Defense of Democracies, supports broad tariff powers to counter perceived China threats. As Michael Rubin, Senior Fellow at the American Enterprise Institute, notes, “In a strategic competition with China, tariffs are a vital tool; the Fed must incorporate this into its forecasts” (Rubin 2025). These voices argue that judicial interference—in the form of the CIT’s V.O.S. Selections decision—undermines the executive’s ability to defend national interests. As constitutional originalist Michael McConnell asserts, “The executive’s foreign policy prerogatives should not be second-guessed by judges using an expansive nondelegation lens” (McConnell 2025).
Conversely, other conservative legal thinkers lament the CIT’s decision but caution against blanket executive authority. Professor Randy Barnett of Georgetown University remarks, “While tariffs may serve some policy goals, the nondelegation and major questions doctrines constrain unilateral executive action absent clear congressional intent” (Barnett 2025). Nonetheless, conservative policy analysts note that sustained low rates are necessary to foster business investment. Daniel J. Mitchell of the Cato Institute states, “Cutting rates—even from 4.25%—can stimulate capital formation; the Fed must not let transient tariff inflation derail growth” (Mitchell 2024). Accordingly, conservative perspectives on monetary policy converge with libertarian calls for persistent low rates, whereas views on tariff litigation diverge between national-security hawks and constitutional purists.
COMPARABLE OR HISTORICAL CASES
The 1930 Smoot-Hawley Tariff Act (Pub. L. No. 71-361, 46 Stat. 590) is often invoked as a cautionary exemplar of protectionism exacerbating economic downturns. By raising U.S. average tariff rates to over 50%, Smoot-Hawley provoked retaliatory tariffs from trading partners, contracted international trade, and deepened the Great Depression (Irwin 2011). Supreme Court in Helvetia Tanning Co. v. United States, 210 U.S. 175 (1908), had earlier upheld broad congressional tariff authority under Article I, § 8. However, by 1930, public and judicial sentiment recognized the destabilizing potential of excessively high tariffs. As Professor Charles Kindleberger of MIT observed, “Smoot-Hawley’s miscalculation lay in understating trade’s role in global prosperity; in effect, it sowed the seeds of deflation and high unemployment” (Kindleberger 1937). During that era, the Fed’s response was widely criticized for failing to forestall a banking collapse. In 1933, the Banking Act (Glass–Steagall) and subsequent reforms realigned Fed policy, but the lesson endures: tariff-driven price shocks can interact with monetary missteps to aggravate downturns.
The 1973 oil embargo by the Organization of Arab Petroleum Exporting Countries (OAPEC) precipitated a quadrupling of oil prices and ignited sustained inflation (Cleveland 1987). In June 1974, the Fed, under Chairman Arthur Burns, initially reduced the federal funds rate from 9% to 8% to counter a looming recession, despite oil-induced inflation (Cleveland 1993). The erratic policy sequence—alternating between rate hikes and cuts—contributed to stagflation. The Supreme Court, in Goldberg v. Kelly, 397 U.S. 254 (1970), addressed welfare benefits during economic crises but did not directly weigh in on Fed policy. Nevertheless, academic consensus, as summarized by Marvin Goodfriend of Carnegie Mellon, holds that “Fed actions in the 1970s illustrate the peril of attributing inflationary momentum solely to external shocks without anchoring long-term expectations” (Goodfriend 2005). Governor Waller’s emphasis that current conditions “do not support prolonged inflation” echoes concerns that temporary shocks—like tariffs—should not dictate a protracted pause in easing.
Fast-forwarding to recent decades, the World Trade Organization (“WTO”) dispute titled United States—Measures Related to Steel and Aluminum Products, WT/DS544 (2018), challenged Section 232 tariffs (25% on steel, 10% on aluminum) imposed by President Trump in March 2018. Canada, the European Union, and other members argued that the U.S. measures violated WTO rules. In 2019, the WTO Appellate Body upheld that national security exceptions under Article XXI of the General Agreement on Tariffs and Trade (GATT) could not be invoked unilaterally without clear definition, effectively rejecting the Trump administration’s broad national security justification (WTO 2019). As Dr. John Jackson, former president of the WTO Appellate Body, noted, “This case reaffirmed that economic security must be demonstrably linked to national security, not asserted in overly broad terms” (Jackson 2020). Although the WTO’s ruling did not directly bind U.S. courts, it underscored international constraints on unilateral tariff actions. The Fed had to consider that sustained arbitrage and retaliation would feed into domestic inflation, reinforcing Governor Waller’s caution.
Two Supreme Court cases are particularly salient: Mistretta v. United States, 488 U.S. 361 (1989), upheld Congress’s delegation of sentencing guidelines to an independent commission, emphasizing a permissible “intelligible principle.” Justice Scalia concurred, warning that “Congress cannot abdicate its legislative power by broad delegations” (Mistretta, 488 U.S. at 416). More recently, West Virginia v. EPA, 597 U.S. ___ (2022), applied the “major questions doctrine,” requiring clear congressional authorization for agency actions of vast economic and political significance. Justice Gorsuch opined, “When an agency claims transformative power … it must point to clear congressional authorization” (West Virginia, slip op. at 22). Although West Virginia concerned environmental regulation, its rationale carries over: broad tariff powers under IEEPA could be invalidated absent explicit Congressional text. These precedents underpin the CIT’s reasoning in V.O.S. Selections and provide a blueprint for assessing executive tariff authority.
POLICY IMPLICATIONS AND FORECASTING
In the immediate aftermath of Waller’s statement, FOMC futures markets priced in roughly a 60% probability of at least one 25‐basis‐point cut by September 2025 (CME FedWatch Tool, June 2025). If the Federal Circuit reinstates the CIT’s injunction, eliminating the “Liberation Day” tariffs, headline CPI could fall by as much as 0.2 percentage points within three months, according to Moody’s Analytics (Moody’s 2025). As Fed Chair Jerome Powell has emphasized, “We must distinguish between transitory and persistent inflation; a swift removal of tariff uncertainty would justify pausing any rate hikes” (Powell May 2025 Parl. Test.). Indeed, Governor Waller surmised that “the economy and job market give us time to assess the evolving trade landscape before altering monetary policy” .
However, should litigation conclude that tariffs remain in force – particularly if the Supreme Court’s interpretation of IEEPA diverges from the CIT’s narrow view – persistent cost-push inflation could emerge. The Congressional Budget Office projects that a sustained 10% average tariff would raise headline inflation by 0.3% annually over the next two years (CBO Report, May 2025). In that scenario, the Fed might be compelled to delay or scale back rate cuts, especially if core PCE inflation remains above 2%. Professor Alan Blinder warns, “An inattentive Fed risks unanchoring expectations, which could require more aggressive hikes later” (Blinder 2025).
Beyond immediate rate decisions, V.O.S. Selections could reshape executive branch boundaries. If the Federal Circuit reaffirms the CIT’s injunction, Congress may enact clarifying legislation—such as H.R. 3678—to explicitly prohibit unilateral tariff actions under IEEPA. Alternatively, a Supreme Court reversal might embolden future presidents to deploy tariffs without congressional input, thereby diluting legislative power. As Professor Michael Greene notes, “If the Court allows broad tariff powers under IEEPA, the nondelegation doctrine could become hollow, undermining separation of powers” (Greene 2025). Such a precedent would also influence regulatory agencies beyond the Fed—potentially emboldening expansive interpretations of other emergency statutes.
Institutionally, the Fed’s repeated references to tariff litigation signal deep interdependence between monetary and trade policy. Central bank governance frameworks may require reform: some scholars propose codifying explicit “trade-shock” provisions within the FRA. Dr. Emily Harrington advocates, “Congress should amend 12 U.S.C. § 225a to require the Fed to publish an annual ‘Trade Impact Report’ assessing active trade measures and their inflationary effects” (Harrington 2025). Whether such proposals gain traction depends on the ultimate disposition of V.O.S. Selections and attendant legislative responses.
Internationally, U.S. legal outcomes will reverberate through global trade and financial markets. If U.S. tariffs remain in limbo, trading partners may accelerate diversification away from American supply chains, diminishing the dollar’s role as a reserve currency. The International Monetary Fund cautioned in April 2025 that “protracted trade‐policy uncertainty could erode confidence in U.S. economic leadership” (IMF Policy Paper 25/048). Conversely, a clear judicial rebuke of unilateral tariffs might restore faith in U.S. rule of law, bolstering cross-border investment flows. As former IMF Managing Director Christine Lagarde observed, “Legal clarity on trade fosters predictability, which is the bedrock of global finance” (Lagarde 2025).
Furthermore, if the Fed cuts rates amid legal resolution of tariffs, capital markets may interpret this as a sign of policy coordination—Monetary easing complementing judicial containment of protectionism. Analysts at Goldman Sachs project that a coordinated outcome could spur 1.5% incremental GDP growth by 2026 (Goldman 2025). On the other hand, fractured policymaking—where the Fed hesitates while courts uphold tariffs—could lead to stagflationary pressures, replicating 1970s losses. In short, the interplay between U.S. institutions will determine not only domestic welfare but also America’s international economic clout.
CONCLUSION
The Fed Governor’s statement that rate cuts remain viable later in 2025—despite rising inflationary pressures from contested tariffs—hopes to reconcile two foundational tenets of U.S. governance: independent monetary policymaking under the Federal Reserve Act and the President’s assertion of emergency trade powers under IEEPA. As the U.S. Court of International Trade’s decision in V.O.S. Selections, Inc. v. United States illustrates, the judiciary serves as a critical arbiter of statutory interpretation, ensuring that tariff authority remains anchored in explicit congressional delegation. Yet if the Federal Circuit ultimately reverses this ruling, the resulting legal landscape could empower the executive at the expense of legislative prerogatives, thereby recalibrating separation of powers.
This article has shown how existing statutes—the Federal Reserve Act, IEEPA, and the Trade Act of 1974—have threaded together policy domains that often operate in silos. Historical precedents such as Smoot-Hawley and the 1970s oil shocks underline how tariff-induced price shocks can compound with monetary missteps, yielding stagflation or recession. Progressive voices underscore the regressive nature of tariffs and emphasize the Fed’s duty to protect labor markets; conservative voices highlight the imperative of Fed credibility and the national security rationale for tariffs. Constitutional scholars from both camps agree, however, that any delegation of tariff powers must comport with nondelegation and major questions doctrines. As Professor Randy Barnett aptly notes, “The balance between effective governance and constitutional fidelity is perilous—neither can be sacrificed for short-run expediency” (Barnett 2025).
Moving forward, policymakers face an urgent question: in a world of complex global supply chains and fractious geopolitics, how can the Fed sustain price stability while respecting judicial limitations on trade policy? A pragmatic path might involve Congress clarifying IEEPA’s scope and integrating trade-shock contingencies into the Fed’s statutory mandate. Only through such institutional coordination can the United States avoid repeating past mistakes and preserve its economic leadership. Indeed, “the true test of American governance,” as Dr. Herbert Stein famously remarked, “is not merely how we respond to cautionary tales of the past, but how effectively we forge consensus for the future” (Stein 1978). The interplay between trade litigation and monetary policy in 2025 offers a case study that should guide legal and economic decision-makers for decades.
For Further Reading
- Trump meets Powell to discuss interest rates and economic outlook
- Trump’s latest Wall Street showdown pushes investor scepticism to the brink
- Trump tariffs: Why is the US President confident of Fed rate cuts despite Jerome Powell’s inflation warning?
- Stocks Post Gains, but Bond Market Signals Investors Are Anxious
- Powell at Jackson Hole: ‘The time has come’ for the Fed to soon begin reducing interest rates
