Tariffs and Legal Uncertainty

by Stephan Kinsella on March 16, 2025

Regarding various new or increased or changed tariffs being proposed by Trump: of course free trade is good and the US should unilaterally abolish tariffs. ¹ (I seem to recall other arguments for unilateral free trade—perhaps by Mises, Rothbard, Hazlitt, Friedman—but cannot find them; if anyone recalls any of these please notify me.)

The uncertainty faced by businesses and actors in the US as a result of these changes is simply one consequence of the state having the very power to legislate.

See, e.g.:

“Justice must stand quite still, or else the scales will waver and a just verdict will become impossible.” —Franz Kafka ²

“No man’s life, liberty, or property are safe while the legislature is in session.” ― Gideon J. Tucker

On legal uncertainty generated by the mere possibility of legislation, see Kinsella, “Legislation and the Discovery of Law in a Free Society”:

… as Leoni points out, there is much more certainty in a decentralized legal system, than in a centralized legislative system. When the legislature has the ability to change the law from day to day, we can never be sure what rules will apply tomorrow.^[31] As Leoni observes, in a system of legislative supremacy:

[N]obody can tell whether a rule may be only one year or one month or one day old when it will be abrogated by a new rule. All these rules are precisely worded in written formulae that readers or interpreters cannot change at their will. Nevertheless, all of them may go as soon and as abruptly as they came. The result is that, if we leave out of the picture the ambiguities of the text, we are always “certain” as far as the literal content of each rule is concerned at any given moment, but we are never certain that tomorrow we shall still have the rules we have today.^[32]

Thus:

[A] legal system centered on legislation, while involving the possibility that other people (the legislators) may interfere with our actions every day, also involves the possibility that they may change their way of interfering every day. As a result, people are prevented not only from freely deciding what to do, but from foreseeing the legal effects of their daily behavior.^[33]

We may have, then, either rule by legislators or the rule of law, but not both.^[34] In the words of the Italian scholar Giovanni Sartori, “Mass fabrication of laws ends by jeopardizing the other fundamental requisite of law—certainty.”^[35]

^[31] As the not-quite-trite bumper sticker or plaque reads, “No man’s life, liberty or property is safe while the legislature is in session.” (Attribution: Gideon J. Tucker; Wikipedia, https://perma.cc/PB8G-DP4J.)

^[32] Leoni, Freedom and the Law, p. 75.

^[33] Ibid., p. 10.

^[34] See Giovanni Sartori, Liberty and Law (Menlo Park, Ca.: Institute for Humane Studies, 1976), at 15–16 et pass. The “other” fundamental requisite of law is that law be based on rules of general application, a requisite that special statutes tend to undermine. I am grateful to Leonard Liggio for calling Sartori’s works to my attention. But having statutory, artificial law be predictable, known ahead of time, and of “general applicability” is not sufficient for law to be just. If this is your only criteria, you can support all manner of statist laws, as Hayek does. See Walter E. Block, “Hayek’s Road to Serfdom,” J. Libertarian Stud. 12, no. 2 (Fall 1996; https://mises.org/library/hayeks-road-serfdom), pp. 327–50. [See also Kinsella, Hoppe on Hayek]

^[35] Ibid. at 38. See also Ridgway K. Foley, Jr., “Invasive Government and the Destruction of Certainty,” The Freeman (Jan. 1988; https://fee.org/articles/invasive-government-and-the-destruction-of-certainty/); Peter H. Aranson, “Bruno Leoni in Retrospect,” Harv. J. L. & Pub. Pol’y 11 (1988): 661–711, pp. 672–73 & 681–82; Leonard P. Liggio & Tom G. Palmer, “Freedom and the Law: A Comment on Professor Aranson’s Article,” Harv. J. L. & Pub. Pol’y 11 (1988; http://tomgpalmer.com/selected-publications/): 713–25.

And:

As explained by Hoppe:

[T]he mere fact of legislation—of democratic law-making—increases the degree of uncertainty. Rather than being immutable and hence predictable, law becomes increasingly flexible and unpredictable. What is right and wrong today may not be so tomorrow. The future is thus rendered more haphazard. Consequently, all around time preferences degrees will rise, consumption and short-term orientation will be stimulated, and at the same time the respect for all laws will be systematically undermined and crime promoted (for if there is no immutable standard of “right,” then there is also no firm definition of “crime”).^[61]

Leoni anticipated a similar effect of legislation. Leoni called the illusory certainty generated by written legislation the short-run certainty of the law, as opposed to genuine, long-run legal certainty. The desire for short-run certainty over long-run certainty corresponds to an immature desire for immediate gratification. Leoni writes:

I am reminded of a conversation I had with an old man who grew plants in my country. I asked him to sell me a big tree for my private garden. He replied, “Everybody now wants big trees. People want them immediately; they do not bother about the fact that trees grow slowly and that it takes a great deal of time and trouble to grow them. Everybody today is always in a hurry,” he sadly concluded, “and I do not know why.” ^[62]

The answer is, in part, because an increased climate of uncertainty increases the general time preference rate.

^[61] Ibid., at 340.

^[62] Leoni, Freedom and the Law, p. 80.

For Hoppe’s comments on the relative merits of the English common law versus the European continental and Romanesque civil law, see ibid, text at n.152.

Hayek seems to think the negative effects of the ability to legislate may be avoided (so that he can have his welfare state) by a requirement that legislation be of only “general applicability” and of prospective effect only:

The “other” fundamental requisite of law is that law be based on rules of general application, a requisite that special statutes tend to undermine. I am grateful to Leonard Liggio for calling Sartori’s works to my attention. But having statutory, artificial law be predictable, known ahead of time, and of “general applicability” is not sufficient for law to be just. If this is your only criteria, you can support all manner of statist laws, as Hayek does. See Walter E. Block, “Hayek’s Road to Serfdom,” J. Libertarian Stud. 12, no. 2 (Fall 1996; https://mises.org/library/hayeks-road-serfdom), pp. 327–50. ³

This is not pipedream. Once you have legislature there is no way to ensure that all laws will be of only “general applicability” only (whatever this even means). Just as you can’t give the power to print money to the central bank and expect it to avoid inflating the money supply and setting in motion the business cycle.

Update: See also William L. Anderson, “Regime Uncertainty and the Trump New Deal,” Mises Wire (05/22/2025), citing Robert Higgs, “Regime Uncertainty Why the Great Depression Lasted So Long and Why Prosperity Resumed after the War,” The Independent Review I, no. 4 (Spring 1997): 561–590. From Anderson:

In his 1997 paper “Regime Uncertainty,” economist Robert Higgs wrote that the combination of anti-business policies and hostile anti-business rhetoric from the Roosevelt White House during the 1930s contributed to the reluctance of businessmen to make long-term capital investments. Wrote Higgs:

The hypothesis [of “regime uncertainty”] is a variant of an old idea: the willingness of businesspeople to invest requires a sufficiently healthy state of “business confidence,” and the Second New Deal ravaged the requisite confidence (Krooss 1970, 199–201; Collins 1981, 23–52; Fearon 1987, 209–11; Brinkley 1995, 31–34). Of course, one difficulty with the hypothesis is that business confidence is a vague notion and one for which no conventional empirical measure has been developed. I shall try to narrow the concept somewhat and to show that one can shed empirical light on it by using the findings of systematic opinion surveys and evidence on the behavior of investors in the financial markets.

To narrow the concept of business confidence, I adopt the interpretation that businesspeople may be more or less “uncertain about the regime,” by which I mean, distressed that investors’ private property rights in their capital and the income it yields will be attenuated further by government action.

As Higgs points out, business owners during the 1930s didn’t know what was going to come out of the Roosevelt regime, especially in the second half of the 1930s when the administration firmly stood behind punitive measures against the business community. Higgs writes:

Accepting his party’s nomination for the presidency in 1936, Roosevelt railed against the “economic royalists” allegedly seeking a “new industrial dictatorship” (quoted in Leuchtenburg 1963, 183–84). Privately he opined that “businessmen as a class were stupid, that newspapers were just as bad; nothing would win more votes than to have the press and the business community aligned against him” (Leuchtenburg 1963, 183). Just before the election of 1936, in an address at Madison Square Garden, he fulminated against the magnates of “organized money…[who were] unanimous in their hate for me” and declared, “I welcome their hatred.” To uproarious applause, he threatened: “I should like to have it said of my second Administration that in it these forces met their master” (quoted in Leuchtenburg 1963, 184).

And it was more than just the rhetoric that dampened business investment. Higgs writes that the passage of punishing taxes and empowering of labor union organization of much of the manufacturing sector took its toll:

In the starkest demonstration of their new power, unionists began sit-down strikes, occupying employers’ facilities and refusing either to work or to leave until their demands were met. President Roosevelt declined to use force to eject the sit-down strikers; likewise, many state and local officials would not enforce the law against this willful trespassing on private property. As historian William E. Leuchtenburg (1963) observed, “Property-minded citizens were scared by the seizure of factories, incensed when strikers interfered with the mails, vexed by the intimidation of nonunionists, and alarmed by flying squadrons of workers who marched, or threatened to march, from city to city” (242).