The U.S. Supreme Court heard oral arguments this morning in a suit by a group of small businesses challenging the legality of President Donald Trump's tariffs. The justices appeared skeptical of Trump's authority to impose tariffs under emergency legislation dating back nearly half a century.
Trump has imposed sweeping tariffs on nearly all U.S. trading partners without congressional approval. He's claiming the power to do so under a law known as the International Emergency Economic Powers Act of 1977 (IEEPA).
"It was really intended for emergency situations like wars," said Dallas-based trade lawyer Michelle Schulz, who monitored the oral arguments. "The vast majority of the justices asked very difficult questions to the defendants, and it seems that the government attorney did his best, but I think there was a lot of skepticism as to whether these tariffs are lawful.
Schulz expects that, even if the high court rules that Trump's use of the emergency powers is unlawful, he will turn to other legal avenues in order to keep imposing tariffs.
"We have seen the groundwork already laid for the president to use other statutes, and he has used the two statutes that probably will come into place," Schulz said. "They’re called Section 232 and Section 301, and basically, those are the statutes that allowed the president to impose new tariffs on pharmaceuticals, furniture, copper, aluminum, and steel."
The nonprofit Tax Foundation has measured the ongoing effect of the tariffs. Senior economist Alex Durante estimates that the tariffs already imposed will raise $2.4 trillion in revenue over the next ten years, but that they will reduce U.S. gross domestic product by 0.6%. And that's before the effects of foreign retaliation are figured in.
"This is a large tax increase," he said.
Durante agreed that the Supreme Court will likely find Trump exceeded his authority under the IEEPA. But he, too, expects Trump will find other means to impose tariffs nevertheless.
"The tariffs themselves being not a great policy does not necessarily hinge on how they are [or] how they impact the final retail price," Durante said. "Even if the firms absorb the tariffs, that is still bad for the economy. That actually means lower investment going forward. It means fewer workers get hired. And, you know, workers themselves are ultimately consumers."
If the high court does rule against the Trump administration, that could set up a fresh logistical challenge.
"If the tariffs are struck down, all of that revenue that’s been collected would have to be refunded to those who paid it,” Durante said. “In a lot of those cases, that’s actually going to be the importing firm or the wholesaler. In other cases, it could be the consumer itself."
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