The US Supreme Court is scheduled to hear arguments on Wednesday regarding the legality of tariffs implemented by the Trump administration. The case involves challenges from small businesses and several states who argue that most of these tariffs are unlawful. A ruling against the administration could necessitate refunds of billions of dollars collected through these import taxes and alter the administration's trade approach. The final decision from the justices is anticipated within months.
Supreme Court to Address Tariff Legality
The Trump administration will appear before the US Supreme Court on Wednesday to defend its imposition of tariffs. Opponents, including small businesses and a group of states, contend that most of these tariffs are illegal and should be invalidated. Should the court concur with the challengers, the administration's trade strategy, including global tariffs announced in April, would be affected. The government would also likely be required to refund some of the billions of dollars accumulated from these import taxes. A decision is expected to be delivered after months of review, potentially by January, though it could extend until June.
President Trump has characterized the dispute as critical, stating that an unfavorable ruling would restrict his ability in trade negotiations and pose a threat to national security. He has publicly suggested he might attend the court arguments in person. "If we don't win that case, we will be a weakened, troubled, financial mess for many, many years to come," he stated.
Businesses in the US and internationally have reported experiencing significant costs and disruptions due to the changing tariff policies. Learning Resources, a US-based toy seller, expects to incur $14 million (£10.66 million) in tariffs this year, a seven-fold increase from 2024. CEO Rick Woldenberg reported that the company has had to relocate the manufacturing of hundreds of items since January, describing the situation as "unbelievable disruption."
Bill Harris, co-founder of Cooperative Coffees, a Georgia-based co-op that imports coffee, reported paying approximately $1.3 million (£975,000) in tariffs since April. He expressed hope for a favorable ruling but also noted that businesses are preparing for the tariffs to remain in effect.
Examination of Presidential Authority
The Supreme Court's decision will address the scope of presidential power. Legal analysts suggest the outcome is difficult to forecast, but a ruling in favor of the Trump administration could expand the authority of the President and future White House occupants.
The case specifically challenges tariffs imposed by the Trump administration using the 1977 International Emergency Economic Powers Act (IEEPA). The White House has utilized this act due to its provisions for swift action. By declaring an emergency under IEEPA, the President can issue immediate orders without following longer, established procedures.
In February, President Trump first invoked IEEPA to impose taxes on goods from China, Mexico, and Canada, citing drug trafficking from those countries as an emergency. In April, he again used the act to levy tariffs ranging from 10% to 50% on goods from most countries globally, stating that the US trade deficit constituted an "extraordinary and unusual threat." These tariffs were implemented intermittently over the summer as the US engaged in negotiations to secure trade agreements.
Opponents of the tariffs argue that while IEEPA permits the President to regulate trade, it does not specifically mention "tariffs." They contend that, under the US Constitution, only Congress has the authority to establish taxes. Challengers also dispute whether the issues cited by the White House, particularly the trade deficit, qualify as emergencies under the act.
Members of Congress from both parties have affirmed their view that the Constitution assigns responsibility for creating tariffs, duties, and taxes to the legislative branch. Over 200 Democrats from both chambers and one Republican, Senator Lisa Murkowski, submitted a brief to the Supreme Court arguing that IEEPA does not grant the President power to use tariffs as a bargaining tool in trade discussions. Last week, the Senate passed three bipartisan resolutions rejecting the tariffs, including one aimed at ending the national emergency declared by the President, although these resolutions are not expected to pass in the House. Business groups have indicated that they hope this legislative rebuke will convey a message to the justices.
Business Impact and Potential Refunds
Three lower courts have previously ruled against the Trump administration on this issue. The Supreme Court is expected to issue its decision by January, though it has until June. The ruling will have implications for an estimated $90 billion worth of import taxes already collected, representing approximately half of the US tariff revenue through September this year, according to Wells Fargo analysts. Trump administration officials have cautioned that this sum could increase to $1 trillion if the court's decision is delayed until June.
Rick Harris of Cooperative Coffees stated that his business would "absolutely" seek to recoup its payments if the government is compelled to issue refunds. However, he noted that such refunds would not fully compensate for the operational disruptions his company has faced, which include securing an additional line of credit, increasing prices, and managing with reduced profits. Mr. Harris, who is also Chief Financial Officer of Cafe Campesino, described the situation as "an energy drain like I've never seen," dominating discussions and causing significant stress.
Future Implications
The White House has indicated that if it loses the case, it would seek to impose levies through other legal mechanisms, such as a law that permits the President to enact tariffs of up to 15% for 150 days. Trade lawyer Ted Murphy of Sidley Austin noted that these alternative methods require steps like issuing formal notices, which involve more time and deliberation, potentially offering some relief to businesses. He emphasized that the case's significance for businesses extends beyond monetary concerns, focusing on the future of expedited tariff announcements.
The court's ruling is uncertain. In recent years, the Supreme Court has invalidated significant policies, such as Biden-era student loan forgiveness, on grounds of White House overreach. However, the nine justices, six of whom were appointed by Republicans (including three by President Trump), have demonstrated deference to the President in other recent disputes and historically have granted leeway to the White House on matters of national security.
Greta Peisch, a partner at Wiley and former trade lawyer in the Biden administration, remarked that "arguments are available for the Supreme Court to go in all different directions." Adam White, a senior fellow at the American Enterprise Institute, expressed an expectation that the court would strike down the tariffs but avoid ruling on the definition of a national emergency.
The ongoing case has already introduced complexities into the White House's trade agreements, including a deal reached with the European Union in July. The European Parliament is currently reviewing this agreement, which sets US tariffs on European goods at 15% in exchange for commitments such as increased access for US agricultural products. John Clarke, former director for international trade at the European Commission, stated that the European Parliament is not expected to act on the agreement until the Supreme Court's decision is released. Swiss chocolatier Daniel Bloch of Chocolats Camille Bloch has expressed skepticism that the Supreme Court will resolve the tariff issues affecting his business.