The Supreme Court Deals Major Blow to President Trump

The Supreme Court Deals a Major Blow to Trump’s Tariffs Regime: What’s Next?

As tariff revenues hit historic highs, the United States Supreme Court has brought the hammer down on Trump’s economic policy. Trump has aggressively wielded tariffs as a diplomatic tool to remake U.S. trade deals and collect tens of billions of dollars from companies that import foreign goods. He has advanced this policy choice persistently despite tariffs being politically unpopular.

The Supreme Court’s high-stakes decision was grounded in a rather tiny sliver of law: the executive branch's decision to impose broad, far-reaching tariffs of unlimited duration and scope under the International Emergency Economic Powers Act (IEEPA). The Court held that President Trump lacked the power to impose tariffs under this statutory provision.

But before we proceed, readers should note that Americans are in for the roller coaster ride of their lives. This ride is inevitable because President Trump has responded to the Supreme Court’s decision by imposing a 10% global tariff with immediate effect. That decision was followed the next day by the president’s decree raising global tariffs to 15%. 

These moves are grounded in the president’s belief that tariffs are necessary to protect working class Americans from members of the elite, predator class. The president also noted in a Wall Street Journal editorial that, while U.S. tariffs have risen by more than five-fold, U.S. inflation has fallen.

Whether the president exceeded his authority or not, the Court’s decision has implications for individuals, businesses, churches, and private and public schools. Equally clear, this decision raises four issues: (A) first, it has implications for workers, taxpayers, consumers, and the stock market, no matter how much or how little we have thought about international trade; (B) second, it creates uncertainty about how and whether tariff refunds will be paid; (C) third, to whom will refunds be paid; and finally (D) what are the legal and political repercussions of this decision.

Whether the president is right or wrong as an economic policy matter and whether tariff implications are sunny or dire, readers should consider the law. As Chief Justice Roberts notes, the tariff decision concerned Learning Resources, Inc. v. Trump.  This case arises out of a challenge to broad tariffs issued by the executive branch and imposed pursuant to the IEEPA’s grant of authority to “regulate . . . importation.” The key legal question is whether the statutory text gives the president power to levy tariffs as a form of taxation.

Reading the relevant statutory language—regulate importation—against its textual and statutory neighborhood, the majority of the Court found that the president lacked such authority since a tariff constitutes a tax. The Court also found that it could not identify a single statute in which Congress used “regulate” to authorize a tax. The Court also resolved a companion case, Trump v. V. O. S. Selections. On the Court’s view, the IEEPA is not a tariff statute.

Dissenting justices relied on history and a comprehensive understanding of the tariff policy statute to defend President Trump’s tariff approach. Among other things, dissenting Justice Kavanaugh states:

The sole legal question here is whether, under IEEPA, tariffs are a means to “regulate . . . importation.” Statutory text, history, and precedent demonstrate that the answer is clearly yes: Like quotas and embargoes, tariffs are a traditional and common tool to regulate importation.

Justice Kavanaugh continues. He notes that in “recent years, Presidents George W. Bush, Obama, and Biden have all imposed tariffs on foreign imports under … statutory authorities.

But Justice Kavanaugh has difficulty locating President Trump’s authority within the precise statutory framework outlined in the IEEPA. Indeed, U. S. Trade Representative Jamieson Greer has now announced that the government will rework its tariff playbook to pivot to durable tools available after its defeat before the United States Supreme Court.

The Supreme Court’s opinion, coupled with Justice Kavanaugh and Trade Representative Jamieson Greer's statement that the Trump Administration has “found ways to really reconstruct” its approach to tariffs, suggests one conclusion: The plain reading of the statutory language of the IEEPA indicates that the Supreme Court majority opinion comports with the plain language of the statute.

What does that conclusion suggest for consumers, churches, private and public schools, and businesses? It suggests that the Trump Administration’s policy may be sound, but its legal approach was erroneous.

Many questions remain, including whether the courts will order tariff refunds and who is entitled to them. That said, one thing is clear: good policy can only be redeemed and enforced by good law; otherwise, legal errors will inevitably lead to painful experiences for all of us.