The U.S. Supreme Court heard oral arguments last week on a case that will decide whether President Donald Trump has broad legal authority to impose tariffs as a key part of his foreign economic policy. Based on the justices’ questions, it appears more likely than not that the Court will hold the president lacks this legal authority. An administration loss would call into question the status of the tariffs already imposed and would affect the specifics of administration trade-negotiation tactics. Nevertheless, the administration still could use alternative legal means as leverage to change other nations’ trade practices.
Background
Earlier this year, Trump announced tariffs on imports from many U.S. trading partners. He used two main rationales for the decision: first, a “trafficking” emergency that justified imposing tariffs on goods from Canada, Mexico, and China due to their lack of accountability for alleged involvement in drug trafficking and illegal immigration. Second, an economic emergency caused by the large U.S. trade deficit that was said to have led to the “hollowing out” of the U.S. industrial base.
In implementing these tariffs, the administration invoked the International Emergency Economic Powers Act (IEEPA), a 1977 law that empowers the president to “regulate” or prohibit imports and other trade transactions when he declares a national emergency. Critics argued that Trump is treating IEEPA as a blank check to impose economy-wide tariffs, displacing Congress’ constitutional power to “lay and collect” duties.
Various states and small business harmed by the Trump tariffs sued in federal court. They argued that:
- IEEPA did not authorize the tariffs; and
- In any event, IEEPA could not constitutionally have granted the president sweeping tariff authority.
Some challenges were filed before the U.S. Court of International Trade, with others before a federal district court. The district court held the tariffs were unconstitutional, the trade court held that they were not authorized under IEEPA. The U.S. Circuit Court of Appeals for the Federal Circuit affirmed the trade court. The administration appealed, and the Supreme Court agreed to review the matter.
The Two Positions
The challengers argue that the president should not be authorized to impose tariffs under IEEPA, first, because tariff authority belongs to Congress. The Constitution’s Taxing and Spending Clause gives Congress, not the president, exclusive power to set tariff policy. A broad and far-reaching congressional conferral of tariff power on the president, as the administration claims it enjoys under IEEPA, would be an unconstitutional delegation of legislative authority.
Moreover, the challengers argue that IEEPA does not authorize tariffs. The law gives the president authority over foreign assets and transactions during a national emergency but does not explicitly mention the power to impose tariffs. If Congress intended to grant the executive branch such immense economic power, it would have done so explicitly. Relatedly, under the Supreme Court’s “major questions doctrine,” the executive branch cannot regulate on a matter of “major national significance” without “clear statutory authority,” which is not found in IEEPA.
Precedent is against the president. For nearly 50 years, no prior president has ever used IEEPA to impose tariffs. On the other hand, the government justifies the tariffs imposed under IEEPA for these reasons:
- Broad Emergency Authority: IEEPA’s broad language gives the president the necessary authority to impose restrictions on imports, including tariffs, during a declared emergency.
- Inherent Executive Power: The president has inherent authority in matters of international economic policy. In fact, Congress confirmed the broad scope of the president’s powers in foreign affairs during an emergency. Relatedly, the major questions doctrine does not apply to the president when he exercises his foreign-affairs powers.
- Historical Acquiescence: Congress historically has allowed presidents broad leeway in these situations, and IEEPA’s procedural requirements, which notify Congress of emergency actions, confirm this delegation of power.
- Economic Necessity: The tariffs were a necessary move to overcome the trade deficit that threatens an economic and national security catastrophe.
The Supreme Court Argument
A Divided Court
The Nov. 5 oral argument revealed a split on the Court. A key issue that generated many questions was whether tariffs were covered by the IEEPA term “regulate.” The constitutionality of IEEPA tariffs was also raised, in light of Congress’ specific constitutional authority to lay and collect taxes.
The three Democratic appointees—Justices Elena Kagan, Sonia Sotomayor, and Ketanji Brown Jackson—clearly favored the position of the IEEPA challengers. The two most conservative Republican appointees—Justices Clarence Thomas and Samuel A. Alito—sharply challenged counsel for parties challenging the IEEPA tariffs and seemed sympathetic to key administration arguments.
The four other Republican appointees fell along a spectrum from the most likely (Neil M. Gorsuch) to the least likely (Brett M. Kavanaugh) to side with the challengers to IEEPA.
- Gorsuch emphasized that the “breadth of the president’s inherent foreign affairs powers” claimed by the government “would threaten to undermine the Constitution’s separation of powers between the federal government’s executive and legislative branches.” Of the four, he appeared least supportive of the administration’s position.
- Chief Justice John G. Roberts stated that “the imposition of taxes on Americans . . . has always been the core power of Congress,” but he also noted that foreign affairs is a core executive power and has given the president leverage in making foreign agreements.
- Justice Amy Coney Barrett focused on questions of IEEPA statutory construction. She also stated that it could be “a mess” for courts to administer refunds to U.S. importers who have already paid Trump tariffs. Barrett asked difficult questions to both sides, and appears to be “on the fence.”
- Kavanaugh seemed somewhat sympathetic to prior precedents that supported the administration’s reading of IEEPA. He may be slightly more inclined toward the Administration’s position, but he acknowledged good points made by both sides.
Bottom line, the probabilities seem to favor the IEEPA challengers
The best-case scenario for the challengers would be a 7-2 win, the best for the administration 6-3. The key swing justices appear to be Chief Justice Roberts and Justice Barrett. My guesstimate would be a 5-4 or 6-3 decision striking down the IEEPA tariffs.
Keep in mind, however, that the tone of a Supreme Court oral argument does not guarantee the outcome. And as Yogi Berra pointed out, “it’s tough to make predictions, especially about the future.”
What’s Next
If the administration wins, its trade policy can proceed as normal. But even if it loses, it may be able to apply other legal tools to use as leverage in changing trading partners’ economic policies.
A loss by the administration would not automatically make whole businesses that have paid tariffs. They would have to go through administrative procedures and perhaps file suits with the U.S. Court of Federal Claims to obtain refunds. Whether these costly initiatives would be worth it could depend on the amount they have paid.
The administration might consider using IEEPA authority to impose specific quotas or other non-tariff trade restrictions. Based on the oral argument, the Supreme Court seemed to view such alternatives somewhat favorably.
The administration also might choose to invoke other tariff-granting statutory authority to obtain leverage in trade deals. Those laws come with their own requirements, limitations, and assorted justifications to impose tariffs. They do not offer the same broad, discretionary authority to act quickly that the Trump administration has enjoyed under IEEPA.
The administration might also seek changes in anticompetitive foreign regulations that distort international trade and harm the U.S. and foreign economies. It could emphasize that it is in the process of rescinding anticompetitive U.S. regulations and that trade agreements on reducing anticompetitive market distortions would be a “win-win” for all parties.
