Tariff powers once tightly constrained by Congress have steadily migrated to the US presidency. That shift is reshaping global trade – and exposing countries like Australia to greater economic coercion.

The United States Constitution grants Congress – not the president – the authority to tax and regulate foreign commerce. Yet recent decades, and particularly the Trump era, have seen an extraordinary shift of tariff power to the executive branch. Understanding how this occurred is essential for grasping today’s fracturing global trade order – and for Australia’s place within it.

When we speak of tariffs today, especially in the United States, we are not simply speaking about taxation. We are speaking about power to shape global supply chains, reward friends, punish rivals, and signal strategic intent. And increasingly, that power rests not with Congress, but with the president.

This arrangement would have startled the framers of the US Constitution. For more than 150 years, tariff schedules were determined line by line through congressional legislation. The most infamous example, the Smoot-Hawley Tariff Act of 1930, was the result of precisely such congressional bargaining. Special interests lobbied for protection, Congress obliged, and the result was the highest tariff wall in modern US history. The economic damage was swift and deep, contributing to the collapse of world trade in the early 1930s.

The response to this crisis led to one of the great conceptual turning points in modern trade policy. In 1934, President Franklin Roosevelt and his Secretary of State, Cordell Hull, persuaded Congress to pass the Reciprocal Trade Agreements Act (RTAA). Hull, a long-time believer that trade fosters peace, understood that tariff-setting needed to be rescued from parochial domestic pressures. His solution was to delegate limited negotiating authority to the president – but only to reduce tariffs on a reciprocal basis.

Hull’s vision of reciprocity was simple: “I reduce my tariffs if you reduce yours.” It was cooperative, negotiated, and expansionary. This was the intellectual foundation of the General Agreement on Tariffs Trade (GATT) and, eventually, the World Trade Organization (WTO). It created coalitions of exporters who benefited from openness. It replaced retaliation with negotiation.

The contrast with today could not be sharper.

The modern US president draws tariff authority from several delegated statutes. Three are particularly significant: Section 232 of the Trade Expansion Act (1962) permits tariffs where imports threaten national security; Section 301 of the Trade Act (1974) allows retaliation against foreign practices deemed unfair; and Section 201 of the same Act provides temporary protection (“safeguards”) against surges of imports that are more competitive and not produced “unfairly”.

All three were designed to be conditional and targeted. They required investigations, evidence, procedures, and consultation. And they operated in a rules-based world where WTO discipline constrained excess.

Yet in recent years, a fourth statute has entered the picture: the International Emergency Economic Powers Act (IEEPA) of 1977.

This law was never designed for tariff policy. It was intended for financial sanctions during national emergencies – freezing assets, controlling financial flows, and pressuring adversaries. But by framing trade disputes as national security emergencies, presidents have attempted to use IEEPA to impose tariffs without congressional approval and outside WTO norms.

This is the legal frontier now facing the United States. Appellate courts have already ruled that IEEPA does not authorise broad tariff measures, and the issue has moved to the US Supreme Court. The outcome could reshape presidential trade power for decades.

This legal story matters because it has been accompanied by a profound conceptual shift in what “reciprocity” means.

Hull’s reciprocity meant negotiated mutual reductions that enlarge the gains from trade.

Trump’s reciprocity means using tariffs to “equalise” tariff levels or punish countries with trade surpluses against the United States.

This is reciprocity turned inside-out: from a tool to expand trade to a tool to restrict it.

Under this reinterpretation, countries can be targeted even when there is no underlying trade violation, no subsidy finding, no anti-dumping evidence, and no injury test. A trade deficit becomes evidence enough.

This approach naturally invites escalation. What begins as a tariff becomes a signal, which becomes a threat, which becomes a weapon.

Middle powers like Australia are disproportionately exposed to such trends. Our prosperity depends on predictable, rules-based trade flows. We do not have the leverage of the United States or China to impose or resist economic pressure. We rely on the law.

Australia cannot restore the multilateral trading system alone. But it can help explain, with historical clarity, how we arrived at this point – and why the stakes are high.

The greatest risk is not that the system collapses outright. It is that it continues to function, but with its binding disciplines replaced by discretionary power.

In such a world, the difference between stability and coercion may depend on nothing more than the signature of one person.