In April, President Donald Trump declared a national emergency. The United States, he said, had “been looted, pillaged, raped, and plundered” by other countries through trade deficits.
Imposing a tariff of at least 10% on nearly every single country in the world would address the problem, Trump said. Select countries, like Brazil and India, would be subjected to even higher tariffs, which are taxes imposed on imported goods.
It was “Liberation Day,” Trump announced.
On Wednesday, the Supreme Court is set to hear arguments over whether those tariffs can stand.
If the Supreme Court kicks Trump’s tariffs to the curb, it’ll be taking away one of the most powerful and flexible tools the president has used to pursue his economic agenda. If it lets Trump keep them, it’ll reflect the Supreme Court’s ever-broadening view of presidential power.
To legally justify the “Liberation Day” taxes on American importers, the White House leaned on the International Emergency Economic Powers Act, or IEEPA. The Carter-era law allows presidents to limit international transactions after declaring a national emergency, and has typically been used to justify sanctions.
The Supreme Court is considering whether the IEEPA allows presidents to impose tariffs, a power no previous president has ever claimed. If the court decides yes, it’ll take up a second issue: Whether giving the president this power tramples upon Article I of the Constitution, which says it’s Congress’s job to set and collect taxes and duties.
Those questions give the justices room to choose their own adventure in how they approach the case, according to Rachel Brewster, a professor of international trade at Duke Law School.
If they zero in on the text of the IEEPA, they might be more inclined to uphold the decisions of lower courts, which found the tariffs illegal, she said. If their questions center on national security, things could swing in Trump’s favor, according to Brewster.
“There’s multiple frames,” Brewster told Business Insider. “It’s a mix of all these things — it’s a mix of domestic taxation, it’s a mix of domestic regulation, but it also implicates foreign imports and foreign negotiation. So I think there’s a lot of wiggle room.”
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No taxation without justification
IEEPA doesn’t say anything about letting presidents invent new taxes or tariffs in response to national emergencies. Instead, the law allows presidents to “regulate” importation, which the Trump administration says covers the power to unilaterally impose tariffs.
Attorneys opposing the IEPPA tariffs have argued that Congress has passed plenty of other laws that, under certain circumstances, allow presidents to impose tariffs without explicit congressional permission. Legislators could have included that power in IEEPA if they wanted to, they say.
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Trump has taken the unprecedented measure of using this novel power as the basis for one of his biggest economic priorities, said Alan Wolff, a former deputy director of the World Trade Organization, who has negotiated trade deals in both Republican and Democratic administrations.
“We’re in uncharted territory,” Wolff told Business Insider. “No president has ever done anything like this.”
Whatever the Supreme Court decides, it would apply only to the “reciprocal” tariffs announced on “liberation day” and the “trafficking” tariffs Trump issued earlier on imports from China, Canada, and Mexico, which he said were meant to stem what the White House described as a tide of foreign-made fentanyl into the United States.
Those IEEPA-justified tariffs, if they are upheld, would raise four times as much revenue as the other Trump tariffs combined, according to an estimate from the Tax Foundation, a think tank.
The Supreme Court’s November 5 hearing will address two different tariff cases, both brought by groups of small businesses, as well as twelve states that oppose the tariffs. Victor Schwartz, the founder of VOS Selections, a New York-based wine importer that is the lead plaintiff in one case, previously told Business Insider that he’s suing because bigger companies wouldn’t take on the challenge.
“One of the big motivating factors for me to step up is that the big guys in business were not getting involved,” Schwartz said. “The big guys who have the money and power are cowering or defending their own self-interest.”
Tariffs are a Trump administration priority
Courts are typically loath to second-guess presidents on national security issues. And for that reason, it’s likely the Supreme Court will uphold the tariffs, said Wolff, now a fellow at the Peterson Institute for International Economics.
“I think that it’s very tough for the Supreme Court of the United States to say the foreign economic policy of the United States, which is based on this statute of this 1977 law — we’re going to determine that actually the President had no authority to do this,” Wolff said.
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Neither the Court of International Trade nor the US Court of Appeals for the Federal Circuit disagreed that Trump had the ability to determine emergencies. But both said that the tariff powers Trump claimed just aren’t in the IEEPA toolkit.
“They just said, even if there has been a finding of an emergency, IEEPA doesn’t authorize this,” Brewster said.
If the Supreme Court knocks down the IEEPA tariffs, Trump could still accomplish his trade policies, but it would be “a lot messier and more difficult,” Wolff said.
The laws that explicitly grant Trump the ability to issue tariffs without Congress’s permission are much less flexible than the powers Trump claimed under IEEPA.
Those tariffs can only be imposed against specific countries or particular industries, and they typically have built-in expiration dates and caps on how high the tariff can be. Some of them also require investigations by government agencies, which could further slow things down.
“For IEEPA, we need none of that,” Brewster said. “We don’t need any investigation. We don’t need any substantive limits. You just have this completely unbound power in IEEPA, which is why the president is now so fond of IEEPA.”
