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Unbridled Powers
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The small businesses and states that brought the three cases being jointly heard by the Supreme Court argue that while IEEPA has been correctly used to impose other financial sanctions, it does not allow presidents to levy tariffs. No other president has done so, they point out.
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The law itself was part of a Watergate-era wave of congressional action to put boundaries on presidential powers. The absence of the word “tariffs” from its text is a deliberate omission that shows Congress didn’t delegate its constitutional powers to collect duties and regulate international commerce, lawyers opposing Trump’s tariffs say.
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While the final verdict may be some way off, clues to which way justices are leaning often emerge during exchanges in oral arguments.
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Any ruling against Trump may only bring a temporary halt to his trade wars, experts say. There are other, more legally solid authorities he can use, as he did during his first term and has again this year with duties on specific products such as cars or steel.
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But Trump’s enthusiasm for the IEEPA as a pillar of his second-term agenda arose from his belief it gave him unbridled powers. Other tariff-granting statutes require investigations and can take as long as nine months to come together.
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‘Mind-Blowing’
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Invalidating most of Trump’s import taxes could be disruptive.
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The US is collecting $556 million daily in IEEPA tariffs, accounting for 75% of additional customs revenue this year, according to a Bloomberg Economics analysis.
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The total take from IEEPA duties alone is set to exceed $140 billion in 2025, even after Trump announced a deal last week to halve the 20% fentanyl tariffs on Chinese imports.
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Were the Supreme Court to throw out all of Trump’s IEEPA taxes, it would reduce the effective tariff rate to 6.5% from 15.9% currently, Bloomberg Economics calculates. That would halve the drag on US growth, though rates would remain significantly higher than the 2.3% level when Trump returned to office in January.
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One key question is whether, if Trump loses his Supreme Court case, his government would be ordered to refund the tariffs, which would deprive the Treasury of revenue and push the budget deficit higher.
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Kent Smetters, a Treasury official under former President George W. Bush now at the Penn Wharton Budget Model, said refunds could actually provide an economic tailwind in the short run. Returning the cash to companies would cushion profits and free up funds for new investment, he said.
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That’ll depend on the federal bureaucracy’s ability to handle such a request. Jess Nepstad, who runs Planetary Design, a coffee accessory business based in Montana, said he was wrongly overcharged by $200,000 on a recent shipment of imports. The company was able to prove to Customs and Border Protection that the bill was an error, but the agency said it would take 300 days to pay him back.
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“If all this gets repealed, how long is it going to take for all of us businesses to get our money back?” Nepstad said during a conference call last week organized by a coalition of small businesses opposed to the tariffs. “It’s going to be mind-blowing.”
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‘Who Holds Power’
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Beyond the Main Street and Wall Street consequences are the Constitution’s “bright lines” between legislative and executive power and the erosion of democratic accountability, according to an amicus brief filed earlier this year by a bipartisan group of constitutional law experts including former federal judges and three former US senators.
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“This dispute is not about the wisdom of tariffs or the politics of trade,” they wrote. “It is about who holds the power to tax the American people.”
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