The US Supreme Court may be weakening Trump’s tariff strategy, but he still has other options | Explained news

Second, the measures being objected to by a number of small businesses and a group of US states, which have sparked allegations that the president has exceeded his authority to impose tariffs, appear to have some basis. Trump increasingly adopts an expansive view of presidential power, since he likes to push the limits on everything. However, this raises some relevant legal questions when it comes to tariffs, because under the US Constitution, the US Congress has the right to impose taxes. So the key question here is: Are tariffs a tax, and therefore are Trump’s tariffs legal? The first line of questioning by the justices seemed to indicate that they believe tariffs are clear taxes, paid by American companies and citizens.

Third, the International Emergency Economic Powers Act (IEEPA), passed in 1977, has been widely interpreted as granting US presidents certain emergency powers. But do the reasons that US Attorney General John Sawyer put before the justices as a basis for triggering these IEEPA definitions – addressing the fentanyl crisis and addressing the trade deficit – constitute a real reason for the emergency? For example, the fentanyl crisis has affected the United States for much of the past two decades, while America has run trade deficits with most trading partners since the late 1970s. So, where is the emergency operator? The general conclusion after the oral hearing appears to be that there may be an element of executive overreach in the use of IEEPA.

The first big legal test

The US Supreme Court – which has a 6-3 conservative majority – typically takes several months to reach a decision in major cases, but expectations are that the high court will move faster in this case, which is also seen as the first major test of the Trump administration’s push to expand presidential power. This is seen as his first major brush with the US judiciary, although Trump faced opposition last month when the US Supreme Court allowed Lisa Cook – a member of the Federal Reserve System’s board of governors – to continue in her job for at least a few months while it heard arguments in a case over whether the president can fire her.

On the tariff issue, while all three liberal justices — Justices Ketanji Brown Jackson, Sonia Sotomayor, and Elena Kagan — have expressed clear signs of doubt, of greater concern for Trump is that three conservatives have also publicly expressed some doubt. It prompted Justice Amy Coney Barrett Sawyer to name “no other time in history” when the landmark phrase in IEEPA, which allows the president to “regulate … importation,” was inferred to refer to tariffs. Justice Neil Gorsuch responded to Sawyer’s assertion that the “key questions doctrine” — a U.S. legal principle that states that if an agency action is of significant economic or political importance, it must be based on “express and clear” authorization from the U.S. Congress and not merely a broad or implied delegation of authority — does not apply in the context of foreign affairs. Both Barrett and Gorsuch were appointed to the US Supreme Court by Trump in his last term.

Chief Justice John Roberts also alluded to the US Supreme Court’s general unwillingness to articulate executive actions not expressly authorized by the US Congress, asserting during questioning that it may be a stretch for the president to assume that the law (IEEPA) authorizes him to impose tariffs “on any product, from any country, in any amount, for any period of time.” The other three conservative justices — Samuel Alito, Brett Kavanaugh, and Clarence Thomas — appeared more accommodating to Sawyer’s arguments in defending Trump’s tariffs.

The White House’s justification for these import tariffs, especially so-called reciprocal tariffs, was that they were necessary to restore the American industrial base and repair the trade imbalance. The matter is within the scope of foreign policy and there is a need for urgent action. Trump’s legal case really rests on the idea that international economic law, on which he based his so-called reciprocal tariffs, allows him to take a huge range of actions against foreign powers. The consistent line of Sawyer’s argument seems to be that the IEEPA grants major powers to the President of the United States, and that he is the most important actor in the world of foreign affairs, not any other player (which by implication is the US Congress).

The response from Neel Katyal, an Indian American lawyer who is among those arguing against President Trump’s authority to impose blanket tariffs under IEEPA, is a stern reiteration of the fact that tariffs are taxes and that America’s Founding Fathers gave this taxing power to the US Congress alone. In this case, President Trump has “bypassed Congress and imposed one of the largest tax increases of our lifetime.” What may be a bit difficult for the administration is that Trump himself often uses the words tariffs and taxes interchangeably.

Although US courts, in general, have accorded greater deference to the President of the United States when the proceedings are in the realm of foreign affairs, there is a clear judicial view that the power to impose taxes and impose duties unquestionably belongs to the US Congress. This is what Chief Justice Roberts alluded to.

At the end of the nearly three-hour hearing, because a majority of the Supreme Court justices appeared skeptical about the legality of Trump’s tariffs, they may, within a few weeks or months, move to strike them down, as every lower US court has done so far. Three lower courts had previously ruled against the Trump administration on the issue: The case was first heard in the US District Court for the Northern District of Illinois, which in April rejected the government’s argument; The US Court of International Trade also held in June that IEEPA does not authorize the president to impose blanket tariffs; The US Court of Appeals for the Federal Circuit ruled in August that Congress had never delegated such sweeping authority to the executive branch.

Trump’s other legal options

If this same trend occurs in the Security Council, the Trump administration expects a “disaster.” Eliminating all tariffs could reduce the overall effective rate from about 18 percent currently to about 9 percent, according to the Yale Budget Lab.

But if Trump loses IEEPA authority, the US administration will likely invoke Section 122, a provision that allows the president to impose tariffs of up to 15% for up to 150 days. The US Trade Representative and the US Department of Commerce could resort to Section 301 and Section 232, which give the US President the ability to impose focused tariffs on targeted countries and selected industries. The latest duties on aluminum, steel and other sectors were issued through Section 232.

The outcome of the case could have some consequences for the multiple trade deals the US has signed since early this year, as well as for India, which is currently the hardest hit along with Brazil due to cumulative 50 per cent tariffs. India’s shipments to the United States, its largest export destination, fell by 12 percent in September, and exporters are seeking mitigation measures.

“If the Supreme Court overturns Trump’s use of emergency powers, forcing him to withdraw his ‘Emancipation Day’ tariffs, the ruling will reverberate beyond US borders. The decision will dismantle the foundation of several recently negotiated trade arrangements with key partners such as the European Union, Japan, South Korea and the United Kingdom — all of which were signed under those tariffs and were based on mutual concessions. It will also disrupt ongoing talks with India, where the influence of the tariffs has shaped the situation Washington. “Negotiating position,” the Delhi-based think tank GTRI said in a report.

In addition, if the US administration loses the case and the reciprocal tariffs are declared invalid, the Trump administration will have to begin refunding amounts worth up to $100 billion to US importers. According to PricewaterhouseCoopers estimates, the total tariffs collected by the end of October amounted to $108 billion, with China receiving the largest share at $34 billion. In the case of India, the corresponding figure was $487 million, according to estimates by PricewaterhouseCoopers.

“If the Supreme Court invalidates the Trump administration’s IEEPA tariff system entirely, the decision could declare the challenged tariffs invalid, requiring U.S. Customs and Border Protection to stop collecting tariffs and dismantle the current tariff structure. At the same time, importers may face a complex question about how to obtain refunds, as invalidation of the IEEPA tariffs could open the door to the possibility of refunds for tariffs paid,” PwC said in a report.