Liberation from the Liberation Day Tariffs

The Supreme Court has decided today that Trump’s “Liberation Day” tariffs are unconstitutional. It seems that the days of constantly shifting tariff policy at the whim of the executive may be coming to a close. Although President Trump will still have some influence on tariffs, making his use of the International Emergency Economic Powers Act (IEEPA) unconstitutional should limit his ability to affect trade policy.

Now that the era that began with “Liberation Day” has come to a close, it is worth looking back to see how America has fared in the last 287 days.

Michael Munger noted not long after “Liberation Day” that the Trump administration had three mutually contradictory objectives for the tariffs: security, reciprocity, and revenue. Protecting industry requires high long-term tariffs, trade deals require high short-term tariffs, and revenue requires low long-term tariffs. Was the Trump administration successful at any of these objectives?

The tariffs certainly did not bring manufacturing jobs back to America. Blue collar job growth has been stagnant or negative, and 72,000 manufacturing jobs were destroyed from April to December of 2025. The Institute for Supply Management’s December report paints a bleak picture of the state of American manufacturing over the past year. New orders and employment are contracting, prices remain high, and the manufacturing sector as a whole has been contracting for the last 10 months. At the same time, their prices paid index indicates that the cost of inputs has been rising this year, meaning any benefit American industry has received from protection has likely been offset by tariffs raising the cost of foreign produced inputs.

There have been 16 trade deals made since the “Liberation Day” tariffs were put in place, well below the 200 that Trump claimed. Some good has come from the trade deals. Some non-tariff barriers, like quotas and import licensing in Malaysia, have been eliminated and tariffs have been lowered relative to their “Liberation Day” rates. However, the number of trade deals is quite small, they have not reduced tariff rates below their pre-“Liberation Day” rates, and the effective American tariff rate is 16.8% (14.4% after adjusting for consumption shifts), well above the effective rate of 2.4% in January of 2025.

President Trump’s tariffs have certainly fallen flat in terms of the revenue they have generated. The administration made some big claims about tariff revenue potential with estimates ranging from $300 billion to $500 billion this year, and President Trump even claimed that tariffs could be used to replace the income tax. None of these goals were met; tariff revenue was $264 billion for January through December of 2025. This revenue comes nowhere near replacing the income tax, which was $2.66 trillion in FY 2025.

In addition to being ineffective at accomplishing the goals set by the Trump administration, the tariffs were also costly for Americans. Americans have suffered the most from the tariffs, despite President Trump’s claim that the costs would fall on foreigners. Estimates of American tariff pass-through are very high, with Americans likely paying more than 80% of the tariff. The Tax Policy Center estimated that had the tariffs remained throughout the year they would have cost about $2,100 per household in 2026. The tariffs have not done much, if anything, to shift tax burdens abroad, and instead have only added to American tax burdens.

Tariffs can also be used as a form of rent extraction. Rent extraction is where a government puts a harmful policy in place to extract rents from affected firms in exchange for protection. Firms that are hurt by tariffs lobby for exemptions in carve outs to protect their businesses. Tariffs essentially become tools for corruption and waste instead of a genuine economic policy. As would be expected if the tariffs were being used for rent extraction, the money spent on tariff lobbying has more than doubled since “Liberation Day.” A number of industries have been successful in securing exemptions already.

Tariffs are also generally bad for economic growth. Today the BEA released real GDP growth figures for Q4 2025. Coming in at just 1.4%, this was well below expectations. GDP growth for 2025 as a whole was 2.2%—the lowest level since 2020, and before that, the lowest since 2016. That means that growth has slowed notably, with GDP growth in 2023 and 2024 being 2.9% and 2.8% respectively. The Yale budget lab has estimated that the tariffs should reduce GDP by about 0.5 percentage points a year for 2025 and 2026. The slowdown in GDP growth in 2025 accords very well with the prediction that tariffs would lower GDP growth by 0.5%, and that would mean that tariffs are the primary driver of the slowdown.

The Supreme Court is right to declare the Trump administration’s use of IEEPA unconstitutional. Tariffs are taxes, and the taxing power resides with Congress. Declaring the IEEPA tariffs unconstitutional is good for America’s political and legal order.

Removing the IEEPA tariffs is also good for the American economy. The tariffs have failed to accomplish any of the contradictory goals the Trump administration laid out, have hurt economic growth, encouraged corruption, and have added to the American tax burden. Hopefully the Supreme Court’s decision will mean that America will have lower tariffs and greater prosperity in 2026.

Caleb Petitt is a research associate at the Independent Institute in Oakland, Calif. @CalebDPetitt