The conservative-majority U.S. Supreme Court has decided to overturn the so-called “reciprocal” tariffs that President Donald Trump indiscriminately imposed on more than a 100 countries. The 170-page ruling threatens the U.S. government with the obligation to return tens of billions of dollars in unconstitutionally collected taxes. It is not entirely clear how this refund could be made, nor the final scope of the ruling, but there is no doubt it is of enormous significance.
The Supreme Court’s decision does not affect all trade tariffs imposed by the Trump administration. It addresses only the so-called reciprocal tariffs, most of which target trading partners, and others aimed at China, Canada, and Mexico. These are the tariffs Trump enacted by invoking the 1977 International Emergency Economic Powers Act (IEEPA). There are other specific trade tariffs, such as those on aluminum and automobiles, that are not affected by this decision. The court considers that Trump is making widespread use of the emergency powers considered under the law and is therefore abusing it.
The majority opinion is signed by Chief Justice John Roberts and has the expected support of liberals Ketanji Brown Jackson, Elena Kagan, and Sonia Sotomayor, as well as conservative justices Neil Gorsuch and Amy Coney Barrett. Gorsuch, appointed by Trump during his first term, already expressed skepticism about the Republican’s tariffs during the oral hearing in November. This result (6-3) is common in the current Supreme Court, with a conservative supermajority that hasn’t been seen since the 1930s, but it usually serves to leave the three liberal judges in the minority.
The Supreme Court has shown a strong tendency to agree with Trump in his sustained strategy of expanding executive power, which this ruling contradicts. The news comes four days before the State of the Union address, the first to be given by the U.S. president since his return to power. Friday’s setback will undoubtedly influence the drafting of that text, after weeks in which the Republican has directly and indirectly pressured the Supreme Court justices to rule in his favor.
There are two dissenting opinions: that of Clarence Thomas, the most senior and most right-wing of the judges, and that of Brett Kavanaugh, one of the three justices appointed by Trump in his first term.
In the latter, 63-page document, Kavanaugh anticipates that this ruling will spell “disaster” for the U.S. economy. “The interim effects of the Court’s decision could be substantial. The United States may be required to refund billions of dollars to importers who paid the IEEPA tariffs, even though some importers may have already passed on costs to consumers or others,“ Kavanaugh writes. ”As was acknowledged at oral argument, the refund process is likely to be a ‘mess.’”
U.S. Trade Representative Jamieson Greer said a few weeks ago that if the Supreme Court rules against the tariffs, the administration would “start the next day” to reinstate them “to respond to the problems the president has identified.”
Previous skepticism
The decision, which deals a fatal blow to Trump’s economic agenda, comes three months after the Supreme Court hearing to examine the legality of the trade tariffs. The judges heard arguments from both sides on the president’s authority to invoke the IEEPA in designing his tariff policy. During that hearing, which lasted more than two hours, the justices’ skepticism about its legality came to light.
The IEEPA was passed nearly half a century ago by Jimmy Carter to limit presidential power in foreign economic matters after Richard Nixon’s attempts to bypass executive limits.
The White House had already contemplated the possibility of a Supreme Court setback and said it would resort to other legal means to maintain the tariffs. The government had considered at least five alternative ways to maintain or reapprove the tariffs.
Although the ruling does not expressly mention it, the Supreme Court decision poses a huge threat to the Trump administration due to the taxes that were improperly collected. Economists at Penn-Wharton Budget Model estimate that the White House could face refunds of $175 billion, according to calculations made for Reuters.
The ruling resolves two lawsuits filed by an Illinois toy company and a New York family-owned wine and spirits importer, representing several hundred small and medium-sized businesses grouped around the We Pay the Tariffs platform, in addition to those filed by a handful of Democratic lawmakers.
The lawsuits reached the Supreme Court after lower courts ruled that the IEEPA does not grant the president unlimited powers and does not give him the authority to impose tariffs indiscriminately.
The plaintiffs argue that the law passed by Carter in 1977, which Trump has relied on to justify his tariffs, does not mention the terms “tariffs,” “customs duties,” “taxes,” or “levies.” That was precisely one of the arguments made by attorney Neal K. Katyal, who represented the companies during his intervention at the Supreme Court hearing. The other is that the IEEPA has been used numerous times over the past 50 years to “impose sanctions, but never,” the lawyer proclaimed, “not once, to dictate tariff policy.” Katyal recalled that the power to impose taxes was granted to Congress by the “founding fathers.”
The hearing offered some clues as to where the judges might be headed. Most of the justices, including conservatives who have generally favored Trump with their decisions, expressed doubts about the president’s authority to approve tariffs under emergency law.
Since April 2, the day Trump proclaimed as “Liberation Day,” the United States has imposed indiscriminate tariffs on more than 100 countries. These are import taxes ranging from 15%, which has been set for most blocs, to 50% for India and Brazil. The Trump administration has also established special rates for countries, for general sectors, but also for specific products based on its interests, which are not necessarily commercial, such as tariffs on steel and aluminum, the automotive sector, and even bathroom vanities.
“The 2025 tariffs will have the greatest impact on clothing, products with high metal content, such as electrical equipment and computers, and motor vehicles. If the IEEPA tariffs are invalidated, the burden on clothing and related products would be greatly alleviated,” notes the Yale University Budget Lab.
The White House has invoked the IEEPA to impose five types of tariffs: reciprocal tariffs, tariffs related to fentanyl, tariffs linked to Russian oil imports, tariffs applied to Indian and Brazilian products, and tariffs on trade agreements negotiated by other countries under the law.
This think tank, which has been tracking Trump’s trade policy over the past year, argues that the average U.S. tariff rate has fluctuated wildly this year. It rose from 2.4% in early January to a rate of nearly 28% in late April following Trump’s declaration of a trade war. It then fell to 16.8% when he negotiated with the European Union and to 14.4% after the latest changes, which include tariff reductions for Switzerland and a wide range of food products such as coffee, red meat, and common fruits and vegetables produced in some Latin American countries. In any case, the current tariff rate is around 15%, the highest since 1935.
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