Supreme Court Curbs Presidential Tariff Power
A recent Supreme Court decision has limited the U.S. president's authority to impose tariffs without explicit congressional approval, a move that makes China the "big winner." While the ruling complicates President Trump's protectionist agenda, analysts note that legal loopholes may still allow for targeted trade barriers under national security justifications.
The Supreme Court's 6-3 decision hinged on the International Emergency Economic Powers Act (IEEPA) of 1977. Chief Justice John Roberts, writing for the majority, argued that the law, designed to handle national emergencies, contains no explicit mention of tariffs or duties and could not be used to grant the president such broad taxing authority. This marks the first time the court has overturned one of Trump's second-term policies. This ruling immediately invalidates a significant portion of President Trump's tariff program, including the "trafficking tariffs" targeting goods from China, Canada, and Mexico, and the "reciprocal" tariffs that set a baseline of 10% on imports from most countries. The decision opens the door for importers to receive refunds on duties paid under these now-invalidated tariffs, a sum estimated in 2025 to be over $200 billion. The case, *Learning Resources Inc. v. Trump*, was brought forward by small businesses who argued the tariffs were unconstitutional because the power to tax lies with Congress. The Supreme Court's decision reaffirmed this principle, stating that any delegation of tariff authority from Congress to the president must be explicitly clear. While the IEEPA authority has been struck down, the ruling does not affect tariffs imposed under other laws. Tariffs on steel and aluminum, for instance, were enacted using Section 232 of the Trade Expansion Act of 1962, which allows for import restrictions on national security grounds. Similarly, many tariffs on Chinese goods fall under Section 301 of the Trade Act of 1974, which addresses unfair trade practices. In response to the ruling, President Trump immediately announced his intention to use Section 122 of the Trade Act of 1974 to impose a new 10% global tariff. This provision allows for temporary import restrictions to address balance-of-payments issues but is limited to 150 days without congressional extension. This move has already drawn criticism from economists who dispute the existence of a "payments problem." The tariffs had a measurable impact on the U.S. economy, with the average effective tariff rate climbing to its highest point since the 1930s. Research from the Federal Reserve Bank of New York indicated that nearly 90% of the costs from these tariffs were passed on to American firms and consumers. The Tax Foundation estimated that in 2025, the tariffs added approximately $1,000 to household costs. For China, the U.S. tariff hikes negatively impacted the profitability of its exporting firms. Studies showed that for every 1% increase in the tariff-inclusive price of exports to the U.S., the profit margins of Chinese firms dropped by an average of 0.35 percentage points. The tariffs also led to a significant decrease in Chinese exports to the United States.
