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♪ ♪ JOHN KATKO: Welcome, America, to "Balancing Act", the show that aims to tame the political circus of two-party politics.

I'm John Katko.

This week: tariffs.

Who has the power to impose them-Congress or the President?

In the center ring: business professor and Dean Emeritus at the University of California, Berkeley, Ann Harrison, helps us answer these questions.

Then, we'll speak to experts from the Manhattan Institute and the Ethics and Public Policy Center in the trapeze about how the President uses tariffs as a tool on the global stage.

Plus, I'll give you my take, and we'll find out what's happening next week in Washington with Bloomberg's Mario Parker.

But first, let's walk the tightrope.

♪ The power of the purse or control over taxation and spending.

Article I of the Constitution places powers squarely in the hands of Congress to serve as a critical check on the President's control.

But over time, U.S.

lawmakers have delegated portions of that power to the executive branch.

A prime example: trade and tariffs.

For much of our history, Congress was responsible for setting tariff rates, but starting in the 20th century, most notably after the Great Depression, lawmakers gave presidents much more flexibility to negotiate and adjust tariffs.

The logic was simple.

In the global economy, Congress often moves too slowly.

Trade wars and international negotiations can't wait months or even years for debate on Capitol Hill.

Step by step, Congress gave up the power of the purse through laws like the Reciprocal Trade Agreements Act of 1934 and the Trade Act of 1974.

The power to levy tariffs shifted toward the White House.

That shift allowed presidents to strike deals and respond to crises without delay.

But it also meant one person could raise tariffs on steel, lumber, cars, and even everyday goods without Congress having to sign off.

And the result could lead to higher costs for American businesses and consumers.

Cut to today: the world moves faster than ever.

Markets shift overnight.

Supply chains reroute in days.

Global shocks demand immediate responses.

Some argue that's exactly why the President needs this tariff power -- speed is essential to protecting the economy and national security.

Others believe Congress could reclaim its role by finding ways to move faster itself.

For example, one bipartisan proposal cooking in Congress right now, the Trade Review Act of 2025, would require lawmakers to sign off on new tariffs within a short window, but it would also allow Congress to nullify a trade deal immediately.

Supporters say it restores balance without losing agility.

But for now, the bill sits in committee, and the White House strongly opposes it, to no one's surprise.

So, was Congress right to hand off tariff authority, or has too much power shifted to the Oval Office?

With trade disputes flaring and supply chains under strain, who should hold the pen on tariffs?

Congress, the President, or some new balance between the two?

Will they compromise, or will insults be the only thing they trade?

Let's discuss it in the center ring.

♪ KATKO: Joining us is business professor and Bank of America Dean Emeritus at the University of California, Berkeley, Ann Harrison.

Welcome, Ann, and let's get right to it.

Let's talk from the beginning, why has Congress given so much tariff power to the executive branch over time?

ANN HARRISON: Thanks, John.

Thanks for this opportunity to be here.

Well, in emergency situations, when the country needs to act quickly, it's important for the President to be able to use emergency powers to protect the country.

During a pandemic, for example, if you need to import masks quickly.

So generally, the power resides with Congress.

Remember, when we were created as a nation: no taxation without representation.

That's in the Constitution.

But in an emergency, the President may need to act quickly.

KATKO: It seems it does give the President a lot more power.

And I wonder, as a former member of Congress, why we don't just hold Congress' feet to the fire and have them react more quickly.

Why can't we do that?

ANN HARRISON: That's a really great question.

But as you know yourself, Congress finds it hard to act quickly, especially when a lot of trade agreements require negotiations with many countries, and we are rule-bound by the WTO.

We can't just do anything quickly.

I should say, though, that we actually haven't ceded that much power to the President.

Our current President has just taken it.

In fact, it's such an unusual development that it's been challenged in court, and the Supreme Court will hear the case in early November.

KATKO: So briefly, what do you mean when you say you think he's taken too much power?

ANN HARRISON: Well, remember, a tariff is a tax, right?

And in America, there's no taxation without congressional approval.

So these acts that have been passed that allow the President to use his authority are very narrow.

They're under specific emergency situations: if there's a surge in imports, if our national security is threatened.

What our President has done - first in April, and then in August - is he has enacted very large ranging flat tariffs across many, many countries.

It's hard to imagine we have an emergency situation with Vietnam, for example.

So the way the President has enacted these tariffs is not in the spirit of all these emergency powers, at least that's what critics say.

KATKO: He went outside the scope of his authority, and that's what the Supreme Court's going to have to decide: even though Congress has given him authority, has he gone too far?

Is that basically going to be the issue?

ANN HARRISON: That seems to be the issue, yes.

I mean, is it an emergency that justifies across-the-board tariffs against many, many countries, it's not clear.

The other issue, of course, is that these tariffs are against our previous agreements with all These countries.

They're in violation of our membership in the World Trade Organization, which organizes rules with the rest of the world.

KATKO: So what can Congress do to be more involved, let's say, changing the course entirely on tariff policy?

ANN HARRISON: Well, Congress could, but it would probably require a two-thirds agreement.

Congress could override the agreement that's been made, or enact rules saying that when there are broad-based agreements that aren't clearly an emergency, Congress needs to approve those.

KATKO: Okay, so let's take a step back first.

A tariff itself, you said it's a tax, but really it's a tax on incoming products.

So therefore, you're saying it's a tax on Americans because it raises the prices Americans have to pay those higher prices, basically, right?

ANN HARRISON: Right, that's right, exactly.

So right now, tariffs are the highest they've been since 1935.

They're on average 17%.

So if you import a dollar's worth of goods from anywhere in the world, it's going to cost $1.17 in the United States.

And somebody has to pay that 17 cents.

It could be the importer, often it's the consumer.

KATKO: We look at the economic factors right now, and the President has imposed a whole slew of tariffs, and one of the things that is interesting to me is that, inflation hasn't jumped, it ticked up a little Bit, but it hasn't jumped.

It's still less than 3% overall.

So are the costs really being passed on, and is it really having that big of an effect on American consumers?

ANN HARRISON: That's a great question, John.

So what the Yale Budget Lab estimates is because of these tariffs, prices have gone up almost 2%.

So that's most of the inflation we're seeing.

The reason it is not higher even with an increase in tariffs of, you know, to 17% is in our country, imports only account for about 15% of GDP.

So that's why it is not bigger is because we're not a heavily import-dependent country.

But 2% is big.

That translates to several thousand dollars a year for each Consumer in the United States.

KATKO: So let's look at the other side of the coin.

We talk about what happens domestic by but what happens to our trading partners when we have tariffs imposed that, in especially the way the President imposed tariffs this time, it seems that some of our traditional trading partners are not too happy about this How does that affect relationship with other countries?

ANN HARRISON: Quite frankly, it's really destroyed our relationships with other countries.

In particular, our closest trading partners-Mexico and Canada-are really quite upset with us.

For a country like Canada or Mexico where I just told you That you our trade is only 15% GDP, for those countries, it's more like 30 or 40% of GDP, so it is a huge hit on these countries in the short run, and it is really very painful for them, much more painful for them than it is for us.

KATKO: What about India for an example?

It seems like we have significant tariffs on India.

What does that have on that as far as a case study?

What effect does that have on our relationship with India as a case study?

ANN HARRISON: So India is not happy either.

Remember, in the last 100 years, poverty in the world has been cut in half, so many fewer people live on less than $2 a day.

There is evidence that suggested That a lot of that reduction in global poverty happened because those countries were able to export to the rest of the world.

So, when we cut off India's opportunity to export with these very high tariffs on India, we're basically cutting off their opportunities to grow themselves out of poverty.

That is concerning and also very destabilizing for the world.

KATKO: So what about the other side of that argument that is why should other countries have tariff opens of goods and open borders that flood people into our country like Mexico does.

Shouldn't we have tariffs and use that as the tool fight back against the the unfair trade balances or unfair things happening on our borders?

ANN HARRISON: That's a really great question, John.

It's certainly true that there is a very important segment of America that's been hurt by import competition.

Forty years ago, one in four workers in the U.S.

were manufacturing workers, and those were good jobs.

Now it's only one in ten workers.

And it's also true that all these measures we've taken since 2015 have slowed manufacturing decline.

We're now keeping steady instead of losing our share of manufacturing.

That's a good thing.

But what most economists would tell you is using tariffs to resurrect manufacturing back to the U.S.

is the worst form possible.

KATKO: Ann, thanks so much for your keen insight.

Now let's take to the trapeze.

♪ ♪ On the trapeze this week: Senior Fellow from the Manhattan Institute, Judge Glock, and Senior Fellow from the Ethics and Public Policy Center, Henry Olsen.

Welcome, gentlemen, both to the show.

Let's start right out with you, Henry.

Do you think the Trump administration's tariff policy holds up legally?

HENRY OLSEN: No, I don't.

I think he's trying to do too much on too little congressional authority, and I would expect the Supreme Court to strike down his invocation of tariffs using the IEEPA, which covers the vast majority of what he's done.

KATKO: But didn't Congress cede a lot of its Article I authority on tariffs to the President, giving him a lot of flexibility?

OLSEN: They have not done so explicitly, and that's going to be the main question.

There are acts under which they have explicitly given the President tariff authority, and he has invoked those.

But those are sector-specific, like for steel or aluminum.

The broad, nation-based tariffs they have not done that specifically.

And I would expect the conservative majority, joined by the three liberals on the Court, To rule that he has exceeded his constitutional authority in the lack of that explicit congressional authorization.

KATKO: Judge, does the current policy on tariff bypass Congress' authority?

JUDGE GLOCK: I think so.

Just as Henry said, Congress has given the President a fair amount of authority to impose tariffs in different laws.

But President Trump, in this administration chose not to use those other laws.

He used this very expansive International Emergency Economic Powers Act.

And that did not allow him to impose tariffs.

No President before Trump and this administration has ever used it to impose tariffs.

And yes, most likely, the High Court will do what other Courts have done and strike down those most expansive tariffs Trump has used.

KATKO: Well, Judge, let's take a step back then.

Let's look at the bigger picture.

How should the office of the presidency use tariffs?

They have some authority from Congress.

How should they use it?

JUDGE GLOCK: Absolutely.

For over 100 years, Congress has given the President the authority to impose tariffs if other countries discriminate against the U.S., if they're dumping products in the U.S., if there's a national security purpose, or so forth.

But each of those acts gives pretty clear, limited reasons for imposing tariffs and procedures with which to impose Them.

That's how these kinds of executive administration tariff policies should be used.

They should be used like other aspects of the American regulatory state, and ideally used in a very limited fashion.

For years, conservatives have warned about the executive having excessive power over private actors, over the economy.

And here, in this administration, we're seeing a very clear demonstration of - the President going far too far and imposing costs on the American public without congressional say-so.

KATKO: Henry, what's your take?

OLSEN: Yeah, I think that the President doesn't have the authority, as I mentioned.

But I think that what Congress Should do is, when it convenes, have a second reconciliation bill that provides for a lot of what the President has already imposed.

They should do legally what he has done, perhaps extra-constitutionally, and have broad 10-15 percent tariffs that are imposed against most of the world.

KATKO: Talking about Congress, should they did more involved in this process, and if so, how, Henry?

OLSEN: Yeah, absolutely, they should be more involved.

It's very clear, both from the text and from the background of the text of the Constitution, that the Founders intended for Congress, and particularly the House of Representatives, to have the primary say in raising revenue.

And tariffs, at the time, were the primary way of raising revenue.

Congress should decide: does it want tariffs?

And if so, against whom and for what?

Before the 1930s, that's what every Congress did.

And I think President Trump has put that back on the agenda, and I think they should rise to the challenge.

KATKO: Judge, isn't part of the argument against what Henry's saying that Congress doesn't act quickly enough, and therefore they had to cede power to the President because things move much faster these days?

Trade policies can change overnight, a crisis can happen with shipping overnight.

I mean, look at COVID, for example.

Should Congress have more power, and if so, what should that power look like?

JUDGE GLOCK: Yes.

Well, speed can be both an advantage and a disadvantage in tariff policy.

So on one level, Congress has given the President some authority to respond immediately to tariffs from other countries, to national security issues and so forth.

What Congress has not done is given the President indefinite, expansive power to impose tariffs whenever he likes.

Precisely because those are the Sort of areas where speed can be a detriment.

People are thinking about investing in the United States, providing, say, tens of billions of dollars for a new car factory, a new pharmaceutical manufactory, or so forth.

A tariff that can be removed one day and reimposed the next day is exactly the sort of thing you don't want to have.

So speed is necessary when we're responding to particular countries or economic emergencies.

But for long-term tariff planning, you definitely want Congress to be involved.

Otherwise, the private sector doesn't know how to respond and can't respond.

KATKO: At the inception of our country, Judge, we had no income tax, and tariffs were the main Source of revenue.

Once income tax came online, is there really a need anymore for the tariffs at all?

I mean, should we abolish tariffs and just rely on our revenue system that we generate from taxes, which we all pay so much of these days?

JUDGE GLOCK: Well, some voluntary tariffs certainly can be justified.

You do want tariffs when there are those issues of rebasing certain kinds of national security industries or so forth.

You want tariffs that can be imposed on other countries to help negotiate, as Trump has done in the past and did in the first administration.

You do not want tariffs as a major revenue source.

Before this administration, they were only about 2.5% of federal Revenue, very tiny.

It's not a major way to raise revenue for the U.S.

government, and it could be very damaging for the economy.

We know about half of all imports go into other manufacturing processes, and we don't want to kneecap manufacturing by putting high taxes on exactly what we need to build.

KATKO: Henry, what's your take?

OLSEN: You know, tariffs cannot supply the needs of the modern welfare state.

When tariffs were the main revenue-raising feature of the government, the government was really quite small, one, two, three percent of GDP.

We spend twice as much, or three times as much, on that for Social Security alone.

But tariffs do have a role to Play in determining economic policy.

And given the offshoring of American jobs, given the difficulty that we would have in actually waging a long war against China, given how many of our important capacities have left American shores, I think tariffs are absolutely important to bring those back.

They happen to raise a substantial amount of revenue that can help close the budget deficit.

We just can't rely on it to fund the federal government anymore.

KATKO: So what would the path look like, Henry?

What's a good example of what you're talking about?

OLSEN: You know, I think that if we had a baseline 15% tariff on the rest of the world, with some specific tariffs imposed on Certain sectors or national security risks like China, that would be above that.

That would provide the long-term incentive for private-sector businesses to reinvest in the United States.

And it would probably raise 2% or so of GDP, which is enough to close 20 or 30% of the current budget deficit.

I think the twin benefits of that justify the congressional institution of a broad-based, moderate-range tariff, which gives the private sector the predictability that it needs and gives us the budgetary and the national security interest advantages that tariffs can bring.

KATKO: Okay, what's your take on that, Judge?

JUDGE GLOCK: All right, well, I think, unfortunately, if We did impose a tariff rate in the range of 10 to 15%, we would become one of the most restrictive trading nations on earth-which is something we absolutely don't want right now.

Especially when we're trying to assemble international coalitions against our foes such as China and Russia.

Imposing limited tariffs on our opponents - on people in countries with which we have national security concerns - makes perfect sense.

But in the Cold War, one of the main reasons the U.S.

became an international vanguard of a free-trading regime is precisely because we knew we needed to counteract the Soviets, who were trying to establish their own economic sphere of interest.

Now, right now, if we impose 10 to 15% tariffs on Europe, on Canada, on Mexico, on our closest allies in the East Pacific as well, such as Taiwan and Japan, we're going to alienate the exact sort of people we want to help counteract China.

We can put tariffs on China and our opponents - not on our closest allies.

KATKO: Gentlemen, thank you so much for a robust discussion.

Now it's time for My Take.

♪ ♪ The Founding Fathers purposely designed our government to be slow and, yes, sometimes inefficient, as a safeguard against tyranny.

But Congress is ceding too much power to the executive branch simply because it's too slow to react is never react is never justified - especially when it Comes to the power of the purse.

We need to find new and creative ways to make Congress more responsive on economic matters, and the bipartisan Trade Review Act of 2025 looks like one idea.

Here are a few of its key provisions: To enact a new tariff, the President must notify Congress within 48 hours of imposing or raising it.

Congress then has 60 days to pass a joint resolution approving that tariff.

If Congress doesn't act, the new tariff automatically expires at the deadline - or, as an adjustment to the bill, the tariff becomes law if Congress does not act.

Either way, there's more congressional oversight, which is needed.

The bill also allows Congress to End tariffs at any time by passing a resolution of disapproval.

It seems like a reasonable approach, even with my suggested edits.

So let's give it a chance and take back some of Congress's Article I authority.

That's my take.

♪ ♪ KATKO: Joining us now for what's happening next week in Washington is Bloomberg's Mario Parker.

Welcome, Mario.

What's going on next week?

MARIO PARKER: Thanks so much for having me, John.

Really appreciate it.

Well, we enter Washington with another action-packed week.

We start the week off with President Trump meeting with Israeli Prime Minister Benjamin Netanyahu, as the two try to find some resolution the Israel-Gaza-Hamas conflict that has been stemming the administration for the better part of the last eight to nine months, but also the war that's persisted for the last couple of years.

President Trump, in recent days, as has one of his top aides, Steve Witkoff, have expressed optimism that we could finally be nearing a deal.

I mean, we're uncertain, just given what we've seen play out with Hamas and also Netanyahu's strident position.

Domestically, some of the biggest news this week is Pete Hegseth's gathering of military officials in Quantico, Virginia.

The early speculation - should I say worries - had been that there could be mass firings.

Recall that the military has been wrought with staff reductions and retirements during President Trump's second term here in office.

But President Trump has billed this event that he says he will attend as more of a pep rally to recognize what he says have been the military achievements of the top brass as well.

Obviously, a lot of this is against the backdrop of a shutdown, in which both sides, Republicans, Democrats, the White House as well, have little incentive to reach some sort of deal, and instead are digging in their heels for their own political purposes.

KATKO: So, Mario, let's just talk for a second about the ongoing and seemingly intractable Gaza situation.

You know, a lot of countries are starting to recognize and acknowledge a Palestinian state.

And I don't know if that muddies the waters any more than they possibly could be muddied, but is there genuine optimism coming from the White House that they can strike a deal in the near future?

PARKER: That's a great point, John.

I mean, on the one hand, you have the frustration on the part of the White House at some of the unilateral moves that Netanyahu has taken.

Again, think about the strike in Qatar.

However, some of the global pressure that was applied over the past week that you're alluding to, particularly with longtime allies of both the U.S.

and Israel recognizing a Palestinian state, given the frustration that they've had with this war, does at least give the U.S.

a bit more leverage here.

It isolates Israel in some ways and perhaps pushes both sides - Israel and Hamas - closer to a deal.

KATKO: Mario Parker from Bloomberg News, thanks so much.

That's all for this week, folks.

To send in your comments for the show, or see Balancing Act extras and exclusives, follow us on social media or go to BalancingActWithJohnKatko.com.

Thank you for joining us.

And remember: in the circus that is politics, there's always a balancing act.

I'm John Katko.

We'll see you next week, America.

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