Supreme Court Strikes Down Global Tariffs
The U.S. Supreme Court ruled 6-3 to overturn global tariffs enacted by the previous administration under the International Emergency Economic Powers Act (IEPA). The court found the president lacked the authority to use the IEPA for tariffs. The ruling eliminates a major cost for importers, who paid over $134 billion in tariffs in 2024, and creates a significant budget shortfall for the U.S. Treasury.
- The International Emergency Economic Powers Act (IEEPA) was enacted in 1977 to curtail the president's emergency powers under the old Trading with the Enemy Act of 1917, specifying that it could only be used to respond to threats originating outside the United States. This was the first time in the statute's nearly 50-year history that it was used to impose tariffs. - The legal challenge, consolidated under *Learning Resources, Inc. v. Trump*, argued that the power to "regulate...importation" under IEEPA does not grant the authority to impose tariffs, which the Constitution reserves as a taxing power for Congress. The Court's 6-3 majority opinion, authored by Chief Justice John Roberts, affirmed this, stating the power to tax is "very clear[ly] … a branch of the taxing power" vested in the legislative branch. - The previous administration justified the tariffs by declaring national emergencies related to drug trafficking, illegal immigration, and "large and persistent annual U.S. goods trade deficits." The tariffs included "Trafficking and Immigration Tariffs" on imports from Canada, Mexico, and China, and "Reciprocal Tariffs" on goods from nearly all trading partners. - Within hours of the decision, the former president announced a new 10% global tariff under Section 122 of the Trade Act of 1974, which can last up to 150 days. The administration also plans to initiate new trade investigations under Section 301 of the same act, which could result in additional future tariffs. - The ruling opens the possibility for importers to receive refunds on the duties paid, but the Supreme Court did not specify the mechanism for this process. The issue of how refunds will be handled is now expected to lead to further litigation in the U.S. Court of International Trade. - The now-voided tariffs were projected to raise an estimated $1.4 trillion in revenue from 2026 to 2035. Their elimination is expected to increase the federal budget deficit, which was already forecast to exceed $1.85 trillion in the current fiscal year. - While the ruling eliminates a major cost for importers, other tariffs, such as Section 232 duties on steel and aluminum, remain in effect. Economic models project that the remaining tariffs will lead to a long-run GDP contraction of 2.4% in the construction sector.
