Supreme Court Rules on Tariff Authority
The U.S. Supreme Court has reaffirmed that the authority to set tariffs is reserved for Congress, not the executive branch. This ruling clarifies constitutional powers regarding trade and could impact the economic environment for imported goods, including building materials.
- The ruling specifically addresses tariffs imposed by the executive branch under the International Emergency Economic Powers Act (IEEPA), a 1977 law intended to address foreign threats. In the 6-3 decision, the Court stated that for the nearly 50 years of the law's existence, no president had previously used it to impose tariffs. - Chief Justice John Roberts, writing for the majority in *Learning Resources, Inc. v. Trump*, argued that the power to "regulate" imports under IEEPA does not include the power to tax them, a right the Constitution reserves for Congress. The Court's opinion invoked the "major questions doctrine," which requires Congress to speak clearly when it wishes to delegate issues of major economic and political significance to the executive branch. - This decision invalidates several specific tariff programs, including the "Reciprocal Tariffs" and tariffs related to fentanyl and immigration. However, it does not affect tariffs on materials like steel and aluminum, which were enacted under a different authority, Section 232 of the Trade Expansion Act of 1962. - The ruling could trigger one of the largest tariff refund opportunities in history, with importers potentially eligible to claim an estimated $100 billion to $175 billion in duties paid. The Supreme Court did not outline a process for these refunds, meaning U.S. Customs and Border Protection will need directives, and further litigation is likely. - Prior to the ruling, tariffs had added significant costs to residential construction, with one analysis estimating an additional $30 billion in expenses for investment in residential structures. The effective tariff rate on U.S. construction imports had surged to nearly 28% from less than 1% before the recent wave of tariffs. - In immediate response to the decision, the White House announced its intention to use a different law, Section 122 of the Trade Act of 1974, to implement new global tariffs, signaling a continuation of its trade strategy through other legal avenues.
