Supreme Court Hears Oral Arguments on Trump’s Tariff Authority, But Don’t Expect Tariffs to Go Away

Yesterday, the Supreme Court heard oral arguments for and against President Trump’s authority to utilize tariffs as he’s done thus far in his second term. Headlines that “justices appear skeptical that Trump’s tariffs are legal,” they “sharply question Trump tariffs,” the “Court appears dubious of Trump’s tariffs,” and CNN’s going so far as including the phrase “Trump’s rocky Supreme Court arguments over global tariffs” make it sound like a foregone conclusion that the highest court in the land is about to rule the tariffs are illegal.

That means the tariffs are going to be thrown out, right? Any of you importers who paid tariffs over the last year should be holding out your palms, getting ready for a big, fat refund, right? And we shouldn’t even get into exporters preparing for foreign spending on American goods based on trade deals underpinned by Trump Administration tariffs, because the Supreme Court is doing away with all of those tariffs, right?

Don’t bet on it.

Don’t Get News from Headlines

Not surprisingly, the above-mentioned headlines are misleading. I listened to the entire hearing, so you wouldn’t have to. I don’t claim to be a legal expert, but one of my all-time favorite university courses was an honors one called Philosophy of Law, where all we did was examine Supreme Court cases and decisions. That’s to say I didn’t really suffer listening to the legal arguments. I even enjoyed it. And, in my opinion, U.S. Solicitor General D. John Sauer, arguing in defense of President Trump’s usage of tariffs, did not appear to have rocky arguments. They certainly were not rockier than the arguments Neal Katyal, the lawyer for companies against tariffs, and Oregon Solicitor General Benjamin Gutman made on the other side.

Were justices skeptical of the legality of President Trump’s tariffs? Of course. Their entire job in this case is to be skeptical of the legality of the tariffs and make a ruling on that very issue. While President-Biden-nominated Justice Ketanji Brown Jackson sounded almost like she came in on the side against the tariffs (often sounding like she was trying to make legal arguments on Gutman and Katyal’s behalf), other justices sounded just as skeptical of the arguments made against the tariffs, bringing up supporting arguments for them.

The justices questioned the arguments on both sides, looking for holes and scrutinizing how they stood up against counterarguments. The hearing did not sound like lopsided against the tariffs as many headlines make it sound.

Does IEEPA Grant the President Tariff Power

President Trump invoked the International Emergency Economic Powers Act, known as IEEPA, for the tariff authority he’s been utilizing. Thus, much of the hearing revolved around the powers that Congress grants the President in IEEPA. I pulled up the section of the Act that describes the power granted:

4. International Emergency Economic Powers Act – 50 U.S.C. 1702, 1706

Sec. 203. (a)(1) At the times and to the extent specified in section
202, the President may, under such regulations as he may prescribe, by
means of instructions, licenses, or otherwise–

(A) investigate, regulate, or prohibit–

(i) any transactions in foreign exchange,

(ii) transfers of credit or payments between, by,
through, or to any banking institution, to the extent
that such transfers or payments involve any interest of
any foreign country or a national thereof,

(iii) the importing or exporting of currency or
securities,

by any person, or with respect to any property, subject to the
jurisdiction of the United States;

(B) investigate, block during the pendency of an
investigation, regulate, direct and compel, nullify, void,
prevent or prohibit, any acquisition, holding, withholding, use,
transfer, withdrawal, transportation, importation or exportation
of, or dealing in, or exercising any right, power, or privilege
with respect to, or transactions involving, any property in
which any foreign country or a national thereof has any interest
by any person, or with respect to any property, subject to the
jurisdiction of the United States

Reading that, you may notice that it does not use the words tariff or tariffs. However, it does grant the President power to regulate importation and exportation. That tariffs have always been a major –if not THE major– import regulation, historical precedent that includes President Nixon using IEEPA’s precursor statute to impose a 10% tariff on all imports, and the Act’s broad language – including but not limited to the “otherwise” wording – were all part of the argument that IEEPA includes tariff power for the President.

Justice Jackson argued the purpose of this Act that grants emergency regulatory power to the President was somehow to limit the powers granted. She went so far as to call that historical fact, though she didn’t give any historical background to support that. To my mind, this did make it clear that she agreed with the argument that the lack of the word tariff in the Act meant tariffs weren’t in the scope of the President’s IEEPA powers.

President-Trump-nominated Justice Brett Kavanaugh seemed to think it a bad argument that tariffs wouldn’t be included within that scope of power, as evidenced by a funny exchange between him and one of the lawyers arguing against the tariffs.

Justice Kavanaugh saw Gutman’s interpretation of the Act as not making sense, building off of a contradiction Justice Amy Barrett (also a Trump-nominated justice) pointed out earlier that it “would allow the president to shut down all trade with every other country in the world or to impose some significant quota on imports from every other country in the world, but would not allow a 1 percent tariff.” He called that absence of tariff power in the middle of broad trade power, which Gutman agreed he was arguing, lacking in common sense and an “odd donut hole” for Congress to put into the law.

Gutman replied with, “It’s not a donut hole. It’s a different kind of pastry,” which got a laugh.

To a layman, like myself, reading the law, it’s hard to imagine that tariffs wouldn’t fall into the scope of the powers Congress granted to the President in IEEPA. Additionally, there was even an argument in the hearing that licenses, which is listed in the Act, are in some cases identical to tariffs. Ultimately, I don’t think the argument that tariffs couldn’t be part of the President’s tools to regulate trade will convince the Supreme Court’s majority. But there are other arguments the lawyers are making against the tariffs that could give hope to those who want to see the tariffs ruled illegal.

Additional Arguments Against the Tariffs

Without getting deep into them, the other arguments against the tariffs’ legality include that President Trump’s tariffs violate America’s separation of powers by breaking the “non-delegation doctrine” and/or the “major questions doctrine.”

The “non-delegation doctrine” prevents Congress from delegating its legislative powers to other entities. However, there are exceptions as well as precedents of Congress delegating trade power to the President all the way back to George Washington, as was brought up in the hearing.

The “major questions doctrine” seems much more recent, but it basically requires some kind of congressional authorization when the President is enacting an issue “of large economic and political significance, something very dramatic,” as one of C-SPAN’s commentators described it. I’d think Trump’s tariffs would certainly fall under that description. However, the President has increased authority when it comes to foreign policy and national security. U.S. Solicitor General Bauer argues that because the tariffs fall under foreign policy authority, it makes the “major questions doctrine” inapplicable in this case.

Both Justice Neil Gorsuch, considered a conservative judge, and Justice Elena Kagan, considered a liberal one, seemed to have concerns with the size of presidential authority. Seeing that concern from both a liberal and a conservative may make it the most likely issue that could lend toward the Supreme Court ruling against the tariffs.

Justice Kegan in particular postulated that congressional delegation should include a meaningful limit and asked how the Sauer’s legal opinion defending the tariffs would fit with the idea of a “tax with no limit.” She called tariffs a tax and said these taxes being whatever the President wants “would raise a pretty deep, um, delegation problem.” Sauer quickly clarified that they’re not talking about a tax but regulatory tariffs, which became a debate about whether or not tariffs are taxes.

If Ruling Goes Against Trump, Don’t Expect Tariffs to Go Away

If I had to make a prediction, I would expect the Supreme Court to rule that President Trump’s tariffs are legal under IEEPA. However, if the ruling goes the other way, shippers shouldn’t expect tariffs to go away.

First, not all of President Trump’s tariffs are derived from IEEPA. Thus, not all tariffs would be impacted by this ruling. Second, the Trump Administration will turn to other sources of legal authority for the tariffs if the court rules President Trump does not have tariff authority from the Act in question.

All-Ways sent out an email talking about tariffs that nicely summed up the administration plans if they lose the Supreme Court case:

Even if the Court limits his authority under IEEPA, Treasury Secretary Scott Bessent said the administration would quickly pivot to other legal paths — including Section 122 of the Trade Act of 1974 (allowing 15% tariffs for 150 days) and Section 338 of the Tariff Act of 1930 (allowing up to 50% on discriminatory countries).

“You should assume that they’re here to stay,” Bessent told Reuters.

Shippers shouldn’t expect an end to tariffs. However, we did just see a reduction in tariffs on goods from China with a deal that came after a recent meeting between President Trump and President Xi Jinping.