US Supreme Court Curbs Executive Power on Tariffs
The U.S. Supreme Court has ruled that tariffs are a form of "taxing power" exclusively reserved for Congress. The decision serves as a rebuke of executive overreach in setting economic policy. This ruling could significantly alter how trade and economic sanctions are implemented by the executive branch.
- The specific case, *Learning Resources, Inc. v. Trump*, was decided in a 6-3 vote, with Chief Justice John Roberts authoring the majority opinion. The ruling centered on the interpretation of the International Emergency Economic Powers Act (IEEPA) of 1977. - The Court's reasoning was based on the "major questions doctrine," which posits that Congress must provide clear authorization for executive actions with significant economic and political consequences. The majority opinion stated that the IEEPA's language allowing the president to "regulate" importation does not explicitly grant the power to levy taxes in the form of tariffs. - Historically, while the Constitution grants Congress the power to lay and collect taxes and duties, Congress has delegated some tariff authority to the executive branch since the 1930s to facilitate trade negotiations. However, the Court found that no president prior to this had used the IEEPA to impose tariffs. - The ruling could lead to an estimated $175 billion in refunds to importers for tariffs already paid. However, the Supreme Court did not outline a specific process for these refunds, which will likely be determined by lower courts and could involve a complex legal process for businesses to reclaim the funds. - In response to the ruling, the administration has announced its intention to use an alternative authority, Section 122 of the Trade Act of 1974, to impose a new 10% global tariff. This authority, however, has a 150-day time limit unless extended by Congress. - The tariffs affected by this ruling are those imposed under the IEEPA, including "reciprocal" tariffs and those related to fentanyl trafficking targeting China, Canada, and Mexico. The decision does not directly impact tariffs imposed under other laws, such as the Section 232 steel and aluminum tariffs or the Section 301 tariffs targeting China's trade practices. - Economists have estimated that the tariffs have had a negative impact on the U.S. economy, leading to lower GDP, reduced income, and lower employment. One analysis suggested the tariffs resulted in a loss of purchasing power equivalent to $3,800 per household on average in 2024 dollars.
