Trump’s reciprocal tariffs could be struck down as soon as this month — and the administration is warning of economic apocalypse
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"In short, the economic consequences would be ruinous, instead of unprecedented success."
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August 16, 2025
10:46 PM
Fortune
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Economy·Tariffs and tradeTrump’s recical tariffs could be struck down as soon as this month — and the administration is warning of economic apocalypseBy Jason MaBy Jason MaWeekend EditorJason MaWeekend EditorJason Ma is the weekend editor at Fortune, where he covers , the economy, finance, and housing.SEE FULL BIO President Donald Trump displays a signed executive order imposing tariffs on imported goods at the White House on April 2.Andrew Harnik—Getty ImagesPresident Donald Trump and his Justice Department have issued doomsday warnings recently on what would happen if a federal appeals court rules against the administration in a legal challenge to his so-called recical tariffs
James Lucier at Alpha Capital Partners said the court could issue a ruling later this month or next month
The Trump administration sees complete disaster for the U.S. economy if its recical tariffs are struck down, revealing its level of concern as a court is expected to issue a critical decision soon
On July 31, a federal appeals court heard arguments in a case challenging the tariffs’ legal basis under the International Economic Emergency Powers Act (IEEPA), and the judges expressed deep skepticism the administration’s side
In a note this past week, James Lucier at Alpha Capital Partners said a decision is expected by the end of September, but could come as soon as late August
A unanimous or near-unanimous ruling could give the Supreme Court cover to avoid taking the case immediately and reject the administration’s request to issue a stay that would keep the tariffs in place in the meantime
The dire warnings also represent “a remarkable change in tune by the administration, which until now has always insisted that it had legal authority to get the deals done one way or another even if the IEEPA tariffs were struck down,” he added
Trump’s “Liberation Day” tariffs helped leverage a series of trade deals, including an agreement with the European Union, which pledged to invest $600 billion in the U.S. and buy $750 billion worth of U.S. energy ducts, with “vast amounts” of American weapons in the mix
Similarly, the U.S.-Japan trade deal entails $550 billion of investments from Tokyo. ‘Financial ruin’ The U.S. hasn’t received immediate cash transfers in those amounts
Still, in a letter to the U.S
Court of Appeals for the Federal Circuit on Monday, Justice Department officials suggested the government would suddenly owe everyone money—leading to catastrophe. “The President believes that our country would not be able to pay back the trillions of dollars that other countries have already committed to pay, which could lead to financial ruin,” wrote Solicitor General D
John Sauer and Assistant Attorney General Brett Shumate
They also warned that unwinding the trade deals would lead to a “1929-style result.” That echoed a post from Trump on Truth Social days earlier, when he predicted another Great Depression would hit America if the court rules against his tariffs
Sauer and Shumate turned up the volume even higher in their subsequent letter, elaborating further on the depression warning. “In such a scenario, people would be forced from their s, millions of jobs would be eliminated, hard-working Americans would lose their savings, and even Social Security and Medicare could be threatened,” they wrote. “In short, the economic consequences would be ruinous, instead of unprecedented success.” ‘The president is in a jam’ To be sure, the government has generated significant tariff revenue since April, and importers who paid the recical duties could seek reimbursement if they are struck down
But that’s only $100 billion and also includes revenue from sectoral tariffs that were imposed under a separate legal basis that’s not at risk. “The real blem, the letter implies, is that Trump does not have legal authority to replicate the IEEPA tariffs under other tariff statutes if the court strikes the IEEPA tariffs down,” Lucier explained. “In other words, the president is in a jam because if the court strikes down the IEEPA tariffs, his trade deals have no legal basis.” A note from Yardeni Re on Wednesday also pointed out that the administration is becoming increasingly concerned losing the court case
The letter from the Justice Department officials appears to anticipate that they will lose the case as they are asking for a stay if the court goes against them
There will be “messy” consequences if recical tariffs are struck down, according to Yardeni, as Trump needs the revenue from tariffs to reduce the budget deficit and help to lower bond yields. “If he loses in court, these yields might move higher
Stock prices might decline on this news initially due to a new round of policy uncertainty,” the note said. “So the dire tone in the letter is understandable, even though it is a wee bit over the top.” Introducing the 2025 Fortune Global 500, the definitive ranking of the biggest companies in the world
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