President Donald Trump's legal rationale for tariffs targeting major US trading partners ran into a skeptical review during a Supreme Court hearing on Wednesday, including from the justices appointed by him.
The high court heard an appeal of two decisions by lower courts that found Trump's administration has overstepped its authority by placing emergency tariffs on most goods imported into the US. Trump has cited a 1977 law called the International Emergency Economic Powers Act (IEEPA), which previous presidents only used to impose targeted economic sanctions, to impose tariffs on all US trading partners.
IEEPA omits references to tariffs. But the Trump administration justifies imposing them by citing two words in the text of the law — that "regulation" of "importation" is among the possible measures that the president can take to address an economic emergency.
Tariffs are a foreign policy issue, which the Constitution delegates to the executive branch, solicitor general John Sauer argued on behalf of the administration. Tariffs are not a tax but a regulatory tool, Sauer said. The revenue from tariffs is incidental to the exercise of Trump's regulatory power in foreign policy domain, Sauer said.
Both liberal and conservative justices challenged those arguments.
Trump's reliance on a law never before used to impose tariffs raises the "major questions doctrine", said Chief Justice John Roberts, a conservative. Roberts was referring to recent Supreme Court decisions, which state that it is up to Congress to decide prominent questions of economic significance.
The president has a constitutionally granted authority over foreign policy but in this case, he exercised it by imposing "taxes on Americans, and that has always been the core power of Congress," Roberts said.
The possibility that future presidents would use tariffs to advance unrelated policy priorities featured prominently in questions from the bench.
"Could the president impose a 50pc tariff on gas-powered cars and auto parts to deal with the 'unusual and extraordinary threat' from abroad of climate change?", conservative justice Neil Gorsuch asked. Sauer acknowledged that the scenario was "highly likely", albeit not under Trump, as "this administration would say 'that's a hoax.'"
The legal argument advanced by Trump means that former president Joe Biden could have declared a climate emergency, imposed tariffs and then used the tariff revenue for his student loan relief program, liberal justice Sonia Sotomayor said. "That's all Biden would have had to do with any of his programs."
Gorsuch also challenged the government's argument that Congress can at any time remove the power of the president to impose tariffs under emergency authorities.
"Congress, as a practical matter, can't get this power back once it handed it over," Gorsuch said. An extension of presidential powers can be enacted with a simple majority but has to be removed by a veto-proof majority, Gorsuch said. "It's a one-way ratchet toward the gradual but continual accretion of power in the executive branch and away from the people's elected representatives."
The legal cases before the court pit the Trump administration against a group of private companies and, separately, a coalition of states, who argued that IEEPA does not explicitly authorize Trump to use the tariffs he imposed.
Conservative justice Brett Kavanaugh indicated that he would be open to defending the presidential authority to impose tariffs in at least some specific emergency situations, citing Trump's imposition of a 25pc tariff on imports from India in a bid to stop Indian purchases of Russian oil.
Next steps
The Supreme Court could take weeks, if not months, to make a decision. Trump's preferred outcome is for the high court to overturn the lower courts' decisions and keep the tariffs he imposed in place.
"With a Victory, we have tremendous, but fair, Financial and National Security," Trump posted ahead of the hearing. "Without it, we are virtually defenseless against other Countries who have, for years, taken advantage of us."
If the Supreme Court decides to keep the lower courts' decisions in place, Trump's administration would have to immediately lift the so-called "fentanyl" tariffs affecting Canada, Mexico and China and the so-called "reciprocal" tariffs of 10pc and higher, in place since 5 April on nearly every US trading partner.
The courts' decisions will not affect tariffs Trump imposed on imports of steel, aluminum, cars and auto parts, as the administration has used other, unequivocal legal trade authorities.
The Supreme Court would separately have to decide what to do about the revenue collected from emergency tariffs. One of the lower courts ordered that the defendants who challenged tariffs in courts must receive refunds, while another court ordered that all importers must receive refunds. The US government's tariff revenue ran at about $30bn/month as of August, according to an estimate by the Federal Reserve Bank of New York.
