The Supreme Court’s decision to invalidate President Donald Trump’s reliance on the 1977 International Emergency Economic Powers Act (IEEPA) for imposing extensive global tariffs could remove a key tool for penalizing countries that provoke his displeasure on non-trade political issues. The court, comprising a 6-3 conservative majority, including three justices appointed by Trump, is considering the challenge brought forth by small business associations and various states. The timing of the court’s opinion release remains uncertain.
Trump became the first president to utilize this statute, typically employed for imposing punitive economic sanctions on adversaries, to enforce tariffs. The law grants the president authority to address “an unusual and extraordinary threat” to U.S. national security, foreign policy, or economy. Trump declared the $1.2 trillion U.S. goods trade deficit in 2024 as a national emergency, despite the country recording trade deficits annually since 1975.
If the Supreme Court invalidates the IEEPA-based tariffs, Treasury Secretary Scott Bessent anticipates the administration shifting to alternative tariff provisions, such as Section 122 of the Trade Act of 1974 allowing for 15% tariffs for 150 days to address trade imbalances. Additionally, Trump can invoke Section 338 of the Tariff Act of 1930, permitting tariffs of up to 50% on countries discriminating against U.S. commerce.
Apart from the IEEPA, Trump has been implementing tariffs under various other authorities, including Section 232 of the Trade Expansion Act of 1962 related to national security concerns in sectors like autos, copper, semiconductors, pharmaceuticals, robotics, and aircraft. Section 301 of the Trade Act of 1974 enables the application of tariffs in unfair trade practices investigations.
Challengers argue that the U.S. Constitution grants Congress, not the president, the power to levy taxes and tariffs, emphasizing the need for explicit and limited delegation of such authority. The major questions doctrine, requiring clear congressional authorization for significant executive actions, has been invoked to challenge Trump’s tariffs.
Trump’s reliance on tariffs has been a focal point of his administration’s trade strategy, targeting trade deficits with individual countries and using tariffs as leverage in various trade negotiations. The administration contends that the tariffs have pressured major trading partners into concessions, despite potential Supreme Court rulings.
The financial markets, accustomed to the status quo of Trump’s tariffs, could face disruption if the Supreme Court nullifies the IEEPA tariffs, posing risks in Treasury debt market refund obligations and revenue losses. The growing dependence on tariff revenue raises concerns about future administrations’ ability to reduce tariffs effectively.