Are President Trump’s tariffs too big to fail at the Supreme Court?
Reporter Maureen Groppe explains the importance of the Supreme Court hearing the tariff case that could define President Trump’s term in office.
The Supreme Court is hearing oral arguments in a case challenging the legality of many tariffs President Donald Trump issued during his second term.
If the nation’s highest court strikes them down, businesses can expect refunds and consumers can expect lower prices in the long run. Both should expect further uncertainty.
The Supreme Court has agreed to hear Trump’s appeal of a lower court ruling that went too far when he invoked a 1977 law that imposed tariffs on imports from most countries. If the court rules against him, many, but not all, tariffs that will be imposed in 2025 could be affected.
President Trump said the United States would face “economic catastrophe” if the tariffs were not continued, and in a post on Truth Social the night before oral arguments began, called the case a “life or death” issue for the country.
Economists aren’t so sure.
Rohit Tripathi, RELEX’s vice president of industrial strategy for manufacturing, said in September that refunds could be good for companies’ bottom lines, but consumers are unlikely to see lower prices immediately in stores.
“So far, it’s just because a lot of companies are absorbing these cost increases or forcing their suppliers to absorb these costs,” Tripathi said.
Which tariffs will be affected?
The lawsuit concerns tariffs enacted by President Trump under the International Emergency Economic Powers Act (IEEPA). The law authorizes the president to take economic measures, such as restrictions or bans on imports and exports, to address “unusual and unusual” foreign threats to the national security, foreign policy, or economy of the United States, so long as the president declares a national emergency.
On February 1, President Trump activated IEEPA by announcing that he would impose tariffs on imports from China, Canada, and Mexico in connection with his declaration of a state of emergency regarding drug trafficking and illegal immigration. These are sometimes referred to as “fentanyl tariffs” and refer to various duties imposed on imports from the three countries.
On April 2, the president declared another state of emergency over what he called the U.S. trade deficit and unfair trade practices. Under the declaration, President Trump imposed tariffs of at least 10% on nearly all imports, and even higher “reciprocal tariffs” on a country-by-country basis.
The case does not involve sectoral tariffs on imports such as steel and aluminum issued under Section 232 of the Trade Expansion Act of 1962.
Should the government refund the money?
Treasury Secretary Scott Bessent told NBC’s “Meet the Press” on Sept. 7 that the U.S. Treasury would have to refund “about half of the tariffs,” which would be terrible for the agency.
President Trump has said he will ask the Supreme Court to rule quickly, but it is unclear how quickly the Supreme Court will rule.
“The longer a final ruling is delayed, the greater the risk of economic disruption,” Bessent said in a statement to the Supreme Court. “For example, if we delay the ruling until June 2026, between $750 billion and $1 trillion in tariffs have already been collected, and reversing those tariffs could cause significant disruption.”
Will President Trump impose more tariffs?
Drew DeLong, head of the geopolitical dynamics practice at global strategy and management consulting firm Kearney, said in September that it was reasonable to think the White House would immediately implement contingency plans if the high court rules against Trump.
It may appear that the administration is using Section 122 of the Trade Act of 1974 to impose new tariffs. This provision authorizes the president to take measures, including temporary import duties of not more than 15%, if necessary to address a “large and severe U.S. balance of payments deficit” or other circumstances that create “basic payment problems.” However, the law only allows tariffs to continue for a maximum of 150 days.
“It has a fuse. So what do you do if the fuse blows? That was another big question mark: Can you re-fuse it?” DeLong said.
He imagines the White House’s backup plan could be something like the administration using Section 122 to establish that 150-day interval and then using Section 301 of the Act to allow the administration to impose tariffs in response to actions by foreign governments that burden or restrict U.S. commerce. DeLong said this method requires a country-by-country investigation and is “much more cumbersome.”
DeLong also said the White House has a “wild card” option of enlisting the help of Congress, which has the power to regulate foreign trade and impose import tariffs.
“Tariffs aren’t all that popular,” DeLong said. “So what will Congress do?”
What companies can expect
Tripathi said if the courts side with Trump, Wall Street could, at least temporarily, reward companies hit hard by the tariffs through higher stock prices.
But DeLong said the decision would create “extensive headaches” for management.
Businesses that paid tariffs during President Trump’s second term will first ask whether they are eligible for a refund and how they can get one.
The question then arises: “What’s going on now?” Businesses will be watching to see if the White House comes up with a quick stopgap solution.
“Before the White House takes any action, it begs the question of how quickly we can restock shelves or replenish inventory if there is a window of time in which they will not take effect,” DeLong added.
Economic uncertainty has weighed on boards this year, but some companies aren’t putting their plans on hold. They plan for multiple scenarios and have their data infrastructure in place to pivot if rates change.
“When you have this much volatility, the strategy is to wait,” DeLong said.
What consumers can expect
Tripathi said that even if the Supreme Court cancels the tariffs, the ruling will not provide relief to consumers as decisions regarding imports and stocks for this holiday season were made months ago.
Tripathi said consumers may see more stock on shelves six to eight months after the decision, but it will likely be a year or more before consumers notice any price reductions.
Katie Thomas, who heads Carney’s in-house think tank, the Carney Consumer Research Institute, said in September that it was unlikely that consumers would receive any refunds for past tariff costs. But some companies may try to bring prices down to reasonable levels, and the refunds they receive could lead to fewer layoffs, he said.
“Could interest rates change? Could inflation change? Those heavy questions and unemployment are what I’m really looking at,” Thomas said. “Broadly speaking, I don’t think what will benefit consumers most for many years in the foreseeable future, but it’s just less uncertainty.”
Contact Rachel Barber rbarber@usatoday.com X Follow her at @rachelbarber_
