How the Supreme Court’s decision on President Trump’s tariffs could affect President Trump’s policy agenda, the economy, the federal budget, presidential power, and costs for businesses and households.
How the US is eating up President Trump’s tariffs
Early signs indicate that U.S. businesses and consumers are bearing the brunt of the country’s new import tariffs.
WASHINGTON – As President Donald Trump sees it, the Supreme Court faces a tough choice on Nov. 5 as it considers whether to keep in place the steep tariffs it has imposed on almost all products coming into the United States.
Removing tariffs would give the country “unprecedented success.”
Overthrowing them would have “devastating national security, foreign policy, and economic consequences,” the administration told the justices in a brief before Wednesday’s oral argument.
Trump’s rhetoric may be unusually dramatic for a court filing, but there is no doubt that the stakes are huge for his policy agenda, the economy, the federal budget, presidential power and the businesses and households bearing the brunt of the tariffs.
“No matter how you look at it, this is a big problem,” said Daniel Walters, an administrative law expert at Texas A&M University School of Law.
“A breathtaking statement of power”
Trump has argued that trillions of dollars in new tariffs are needed to reduce persistent trade deficits, which he says are hollowing out the nation’s manufacturing base, weakening critical supply chains and allowing other countries to take advantage of the United States.
Companies and states challenging the import fees say they do more harm than good, including increased costs and uncertainty for consumers and businesses.
And they argue that the president lacks the legal authority to take such sweeping and consequential action.
“This is a breathtaking assertion of power,” lawyers for some of the challengers said in a high court filing.
It is not unusual for the Supreme Court to hear major economic cases.
To be sure, it is not unusual for the Supreme Court to decide on cases that have a major economic impact.
In 1935, the court narrowly upheld a contract change that prevented Congress from demanding repayment in gold rather than dollars, notes legal historian Stuart Banner, author of “The World’s Most Powerful Court.”
President Franklin D. Roosevelt had recently devalued the dollar, so had he made the opposite decision, most debts would have increased by 60%. The Roosevelt administration considers the case so important that the president intends to disobey the court if the ruling differs, Banner said.
Michael McConnell, a professor at Stanford Law School and one of the attorneys representing some of the companies challenging the tariffs, said the first case he teaches in his constitutional law class is the court’s 1952 ruling that President Harry Truman could not take over private steel mills to continue production during the Korean War.
“In times of war, I can’t think of anything more important than having an armament,” he says. “And the Supreme Court said, ‘No, we don’t have that authority.'” And this is widely considered to be the Supreme Court’s finest hour. ”
The high court considered the case central to the president’s agenda.
Historically, it is not unprecedented for courts to make litigation as central to a president’s agenda as tariffs are to President Trump’s economic and foreign policy plans.
Matthew Fitzgerald, a partner at law firm McGuireWoods and a former clerk to Justice Clarence Thomas, said the case is reminiscent of the court’s rejection of challenges to President Barack Obama’s health care policies.
“There were some justices on the court, including some conservative justices, who were very cautious about overturning the president’s signature accomplishments on any dubious basis,” Fitzgerald said at a preview event for the court’s tenure at McGuire Woods. “I wonder if a similar impulse will work in Trump’s favor here.”
But Alan Morrison, a professor at the George Washington University School of Law, pointed out that unlike President Trump’s tariffs, Obamacare was explicitly created by Congress through the Affordable Care Act. If the Supreme Court had struck down the measure, it would have faced both the legislative and executive branches.
“The legislation that President Trump is relying on here is legislation that was passed in 1977 and it doesn’t address trade at all,” Prime Minister Scott Morrison said. “I can’t think of a time when a president has asserted so much power over the economy.”
President’s emergency powers could be expanded
The 1977 law, called the International Emergency Economic Powers Act, has historically been used to impose economic sanctions and other penalties on foreign countries. But the administration contends that the law gives the president the power to “regulate” imports in response to “unusual and unusual threats” to national interests, including the power to impose tariffs.
The U.S. Chamber of Commerce argues that it defies common sense to believe that Congress intended to give the president “unprecedented powers to upend the nation’s economy through taxation” without directly saying so.
“In other words, the president asked the court to uphold the tariff decision because of its enormous economic and political importance,” influential business groups said in a brief opposing the tariffs. “But it is precisely this importance that requires explicit approval from Congress.”
Peter M. Schoen, a separation of powers expert at New York University, said if the courts don’t agree, President Trump could use the same law to impose excise taxes on many other things, including the transportation of goods, wire communications, banking transactions and more.
“He could put excise taxes on a lot of things,” Shane said. “It’s going to be very difficult.”
A ruling in Trump’s favor could also show how much deference the courts will respect the president in deciding when to use emergency powers, said Walters, of Texas A&M University School of Law.
“If this is interpreted broadly by the Supreme Court and Mr. Trump is allowed to do this, it’s not hard to imagine that there will be other emergency laws that allow for other things beyond economic regulation,” he said.
A ruling against Trump would leave a huge hole in the budget.
But if the courts rule against Trump, the administration could have to return at least $90 billion in customs revenue, according to U.S. Customs and Border Protection data. (The longer it takes for the court to issue a judgment, the larger the amount will be.)
“That would create a lot of problems for the federal government,” said Juscelino Corrales, a trade expert at Case Western Reserve University. “This is by far the biggest trade event in history.”
This could be a logistical problem, could be the subject of further litigation, and would have an impact on the federal budget.
In addition to paying back tariffs already collected, the government will not raise the roughly $2.2 trillion over the next decade that Republicans had hoped would pay for much of Mr. Trump’s massive tax and policy bill, according to the bipartisan Committee for a Responsible Federal Budget.
“This is a huge amount,” said Mark Goldwein, the group’s senior policy director.
President Trump could use other non-emergency laws to impose new tariffs, but doing so could take time and face challenges.
Congress could find other ways to raise revenue, such as a tax-like business tax.
But Goldwein thinks it’s likely that lawmakers won’t replace the revenue, which would bring the U.S. closer to a precarious situation where the national debt grows quickly enough to trigger a debt crisis.
“We are right on the brink of that,” he said.
Experts say they are ‘acting blind’ to what the court will decide
No one knows what decision the high court will make.
Corrales believes the odds are slightly in Trump’s favor.
“It’s not like the president is acting in areas that we’re not used to seeing him act in,” he said. “Trade is diplomacy. Diplomacy includes trade.”
Schoen believes the odds are slightly against Trump.
“There are many other ways Congress has explicitly given the president the power to adjust tariffs, but to do so implicitly here seems quite surprising,” he said.
And Walters, the administrative law expert, said he can’t stress enough that everyone is “acting blind trying to figure out what the courts are going to do.”
“There are a lot of legal factors, political factors, etc. that are at play here,” he said. “That doesn’t provide much certainty.”
