Trump Escalates Tariff Fight

- The Supreme Court's 6-3 decision in *Learning Resources, Inc. v. Trump* found the administration's use of the International Emergency Economic Powers Act (IEEPA) to set tariffs was unconstitutional, asserting that the power to levy taxes is reserved for Congress. - In place of the IEEPA tariffs, the administration is now invoking Section 122 of the Trade Act of 1974. This law permits the president to enact a temporary tariff of up to 15% for a maximum of 150 days to address a significant balance-of-payments deficit. - The now-illegal IEEPA tariffs had raised an estimated $160 billion since their implementation. The Supreme Court's ruling prevents what the Tax Foundation estimated would have been an additional $1.4 trillion in taxes over the next decade. - This ruling does not impact tariffs imposed under separate legal authorities. Levies on steel, aluminum, cars, and other goods implemented under Section 232 of the Trade Expansion Act of 1962 for national security reasons remain in effect. - Before the court's decision, the administration's use of IEEPA and other authorities had pushed the average effective U.S. tariff rate to 7.7% in 2025, its highest point since 1947. - The administration may also turn to other tools, such as Section 301 of the Trade Act of 1974. This authority, which targets unfair trade practices, was previously used to apply tariffs of up to 25% on Chinese imports during Trump's first term. - Studies of the administration's tariff policies in 2025 projected a reduction in long-run U.S. GDP and an average tax increase of over $1,000 per household that year. - Trading partners in Asia and Europe, including major export economies like Japan, South Korea, and Taiwan, had been significantly impacted by the IEEPA tariffs and are now assessing the uncertainty of the new tariff measures.