The Trump administration’s tariff regime was heavily scrutinized in a landmark Supreme Court hearing on Wednesday that saw even conservative justices questioning the Commander in Chief’s authority to levy hefty and expansive duties.
At the center of the discussion was the statute that President Donald Trump chose to invoke to execute the global “reciprocal” tariff scheme: the International Emergency Economic Powers Act (IEEPA). Little known or referenced until now, the 1977 law grants the president the authority to “regulate… importation or exportation” in order to address an “unusual and extraordinary threat” from outside the United States.
Related Stories
The petitioners in the case—a handful of small American businesses and a dozen state attorneys general—argue that IEEPA doesn’t give the president tariffing power. Firstly, because it’s not spelled out in the text, and secondly, because tariffs amount to a tax, and imposing taxes is a function of Congress, not the executive branch.
In defending Trump’s tariffs, Solicitor General D. John Sauer argued that while the law doesn’t explicitly include the word “tariffs,” duties are a key tool for regulating imports and exports. He characterized the duties as a regulatory mechanism for foreign commerce, not a revenue-generating device or a tax. (This, despite the president’s own claims that they have the potential to generate trillions of dollars for the federal government and help pay down the country’s growing deficit.)
The nine justices evinced ample skepticism of Sauer’s argument, and while they had tough questions for the lawyers for the states and businesses, too, “I do feel that the probabilities favor the [petitioners] here,” said Jason Kenner, a lawyer for Sandler, Travis & Rosenberg.
“I felt that we had four solid justices on the side of striking down the tariffs,” he added, and five are needed to solidify a decision. “For them, it’s not really an issue of tariffs—it’s an issue of presidential power. We have four justices who seem to want to make sure that they’re curbing excessive presidential power.”
The Supreme Court’s liberal justices, including Justice Sonya Sotomayor, Justice Elena Kagan and Justice Katanji Brown Jackson, are all but guaranteed to vote against the president’s duties. Justice Amy Coney Barrett appeared to be having major doubts about their legality, asking the solicitor general, “Can you point to any other place in the code or any other time in history where that phrase together, ‘regulate importation,’ has been used to confer tariff-imposing authority?” He skirted the question.
Conservative Chief Justice John Roberts and Justice Neil Gorsuch were also vocal throughout Sauer’s defense of the tariffs, with Roberts appearing unconvinced by the solicitor general’s argument that foreign producers, not Americans, pay the bulk of the tariffs.
With the president’s IEEPA agenda still standing but certainly on the ropes, the administration has, for weeks, been hinting that they’re prepared to pivot. At a Thursday press conference in the Oval Office, Trump said he thought it would be “devastating for our country” if the administration lost the case, “but I also think that we’ll have to develop a game-two plan.”
According to ST&R’s Kenner, there are a handful of options that the administration is potentially exploring as “Plan B,” and some they’re already using to impose Trump’s other tariff schemes. “They have a variety of tools, and they are already implementing a lot of those tools,” he said.
Section 232 of the Trade Expansion Act of 1962, for example, imbues the Commander in Chief with the authority to restrict imports by imposing tariffs (among other measures) if those imports threaten U.S national security.
The Trump administration has leveraged the statute to launch 15 investigations into whether importing products like steel, copper, aluminum, lumber, semiconductors, cars, critical minerals and semiconductors endanger the U.S. While the law grants the president broad tariffing power, that authority is sector-specific, so Trump would not be able to impose blanket tariffs on specific countries, as he has been doing.
Section 301 of the Trade Act of 1974 is a familiar provision for Trump, who famously leveraged the law to tariff more than $300 billion in imports from China during his first term. It gives the U.S. Trade Representative (USTR) the authority to initiate investigations into trade practices that are unfair or discriminatory to the U.S., or have the potential to dampen the country’s commerce, and retaliate against such actions using tariffs.
The Trump administration launched an investigation into Brazil to determine whether its government’s actions and policies related to digital trade and electronic payments, intellectual property protections, ethanol market access, deforestation, along with perceived attacks on American social media companies, amounted to an unreasonable burden on U.S. commerce. However, Section 301 investigations are cumbersome and time-consuming.
Section 122 of the Trade Act is another possibility, giving the president power to impose temporary tariffs or quotas in the event of a balance-of-payments (BOP) emergency in which the U.S. can’t meet its global payment obligations and is in danger of draining its foreign reserves.
Trade imbalances are among the factors that can lead to a BOP crisis—the same rationale that Trump utilized to declare a national emergency under IEEPA. But under Section 122, the president would only be able to impose tariffs of up to 15 percent, and for a relatively short period of 150 days (without Congressional approval to extend them).
Finally, there’s Section 338 of the Tariff Act of 1930—the oldest and perhaps most nuclear of the options. It’s a provision couched in the Smoot-Hawley Tariff Act, which is widely fingered for deepening the financial ruin of the Great Depression. It’s also never been used.
The provision grants the president authority to levy duties of up to 50 percent on nations that are found to have discriminated against American commerce by putting U.S. products at a market disadvantage. That unilateral power comes with few strings—no drawn-out investigations—and it allows the Commander in Chief to ban imports altogether if a country doesn’t rectify its policies or practices.
Conservative Justice Samuel Alito brought up the measure at the hearing on Wednesday, asking the lawyer for the petitioners, Neal Katyal, why the administration wouldn’t simply shift tacks. “Why doesn’t the plain language of that provision, which does speak specifically about duties, provide a basis for all or virtually all of the tariffs at issue?” he asked.
The government has never made that argument, Katyal said, trying to steer the discussion back to the issue of the day: IEEPA.
But according to Kenner, Section 338 is one to watch. “I think we would be kidding ourselves if we don’t think that the White House is taking the Alito suggestion very seriously right now,” he said.
