U.S. Institutions Held on Trade
Even Damnation is Poisoned with Rainbows
Pessimism comes naturally to analysts. When a pessimistic prediction proves wrong, whoever you are advising feels relief and won’t complain; when an optimistic prediction is wrong, people will blame the analyst. But I tend to be an optimistic person, so even when things look bleak, I recall a line from Leonard Cohen, “Even damnation is poisoned with Rainbows.” There is always hope.
Since the United States Supreme Court ruled that the International Economic Emergency Powers Act of 1977 (IEEPA) does not authorize tariffs (concurring with lower court rulings) there have been several excellent analyses posted here on Substack and circulating from think tanks and faculty who know the law. Many have pointed out that U.S. President Donald Trump has other legal routes to impose tariffs and is likely to use them. Indeed, he quickly announced the tariffs of 10 (then 15) percent would take effect Tuesday, February 24, 2026, under Section 122 of the 1974 Trade Act. These are emergency tariffs that limited to no longer than 150 days, after which they can only be extended if the U.S. Congress votes to extend them. The new 122 tariffs expire on July 24, 2026, just 102 days before the congressional midterm elections on November 3.
Will Congress vote to renew tariffs so close to midterm elections? Not unless voters change their minds on Trump’s tariff policy. The Pew Research Center found in early February that over 60 percent of those surveyed said they disapproved of Trump tariffs. The Marquette University Law School polls asked voters in September and November 2025 and again in January 2026 whether the Supreme Court should uphold lower court rulings against IEEPA tariffs and found majority support for what the court ultimately decided last week. The Fox News poll, taken after the Supreme Court ruling was announced, found majority support for the Supreme Court’s decision.
A further indication of the mood of Congress on the tariffs – specifically, the tariffs imposed on imports from Canada – came with a surprising vote in the U.S. House of Representatives to void the president’s emergency declaration, the legal premise for the imposition of tariffs under IEEPA. The Senate might have agreed, but the Supreme Court ruling makes this less certain.
Which brings me back to rainbows. The U.S. Constitution famously established a system of checks and balances among the branches of government. And here we see both Congress and the Supreme Court checking the executive branch. The pessimists have been questioning the strength of the rule of law and even the U.S. Constitutional order, and as noted earlier that is to be expected. They were wrong in this case, happily.
There is another institution, albeit one of the soft institutions U.S. economist Douglass North identified in his work, that has held up well so far: the United States Mexico Canada Agreement (USMCA) that was negotiated during the first Trump administration. Prior to the Supreme Court’s decision, the administration exempted USMCA-compliant goods from tariffs. To be USMCA-compliant, goods must meet the rule of origin for North American Regional Value Content along with other necessary conditions.
Not only have past tariffs exempted USMCA compliant items from tariffs but the new, Section 122 tariffs exempt them, too. As Andrew Rudman and I wrote back in 2021, for Canada and Mexico, the bet to endure a renegotiation of NAFTA and accept the new USMCA has paid off, and the strength of USMCA once again protects their exports to the United States.
Of course, optimistic forecasts about American politics are often poisoned with plot twists. And as we have learned since 2016, one should never underestimate Donald Trump’s determination, nor (as we learned in 2024) his capacity to go from setback to comeback.
Yet there is hope for our institutions yet. They held when tested. A little optimism about North American trade may therefore be warranted. It would have made Leonard Cohen smile to see trade back on Boogie Street.