Supreme Court Limits Presidential Tariff Authority
The U.S. Supreme Court ruled that the president does not have the legal authority to impose tariffs under the International Emergency Economic Powers Act (IEEPA). Advisory firm Wipfli is advising businesses to re-evaluate their tariff exposure following the decision.
- The 6-3 decision, with Chief Justice John Roberts writing for the majority, centered on the constitutional principle that Congress, not the President, holds the power to tax. The ruling specified that the IEEPA's authority to "regulate" imports does not grant the power to levy taxes or duties. - This case, *Learning Resources, Inc. v. Trump*, consolidated several lawsuits from businesses and states challenging tariffs imposed in 2025 that targeted Mexico, Canada, China, and others, citing national emergencies related to drug trafficking and trade deficits. These were the first instances of IEEPA being used for broad, generalized tariffs rather than targeted sanctions. - The invalidated tariffs include the "Trafficking Tariffs" on Canada, Mexico, and China, and the "Reciprocal Tariffs" on imports from nearly all trading partners. However, this ruling does not affect tariffs imposed under other laws like Section 232 (national security) and Section 301 (unfair trade practices). - While the ruling stops the collection of IEEPA-based tariffs, the Supreme Court did not address whether the estimated $133 billion to $175 billion already collected must be refunded to importers. The process for any potential refunds will likely be determined by lower courts, such as the U.S. Court of International Trade. - In response to the ruling, the administration immediately announced new 10% tariffs for a 150-day period on many imports under the authority of Section 122 of the Trade Act of 1974. This signals a strategic pivot to other existing trade laws to maintain tariff pressure. - The decision introduces uncertainty for international trade agreements negotiated by the administration with countries like China, the U.K., and Japan, as the threat of IEEPA tariffs was a key negotiating tool. - Economically, the tariffs imposed under IEEPA had increased the average effective U.S. tariff rate to its highest point since 1947. The ruling is expected to lower this rate, though the new Section 122 tariffs will offset some of that reduction. - For the logistics and shipping sector, the constant shifts in tariff policy have increased costs for nearly 80% of shippers and directly impact calculations of total landed cost, influencing manufacturing locations and trade lane choices.
