In a 6-3 decision Friday, the Supreme Court declared that President Donald Trump did not have the authority to impose far-reaching tariffs under the International Emergency Economic Power Act (IEEPA), which is reserved for national emergencies.
The ruling strikes down a cornerstone of the administration’s trade policy, which had seen duties on some foreign goods soar as high as 145%.
Writing for the majority, Chief Justice John Roberts rejected the administration’s argument that the power to regulate "importation" in a national emergency includes the power to tax foreign goods.
"Based on two words separated by 16 others in Section 1702(a)(1)(B) of IEEPA -- ‘regulate’ and ‘importation’ -- the President asserts the independent power to impose tariffs on imports from any country, of any product, at any rate, for any amount of time," Roberts wrote. "Those words cannot bear such weight."
The court ruling's key components, and possible impacts:
- Unlawful use of emergency power: The IEEPA does not grant the President authority to unilaterally impose tariffs.
- Strike down of 145% duties: The ruling invalidates a core administration policy that saw duties on some foreign goods soar as high as 145%.
- Major potential economic consequences: The decision leaves the administration’s trade framework in "tatters" and creates immediate legal questions regarding the refund of billions of dollars in already-collected duties.
- Winners, losers: While broadly seen as a "win" for consumers and small businesses, domestic manufacturers may lose the competitive advantage tariffs provided.
How we got here
Shortly after taking office, President Trump declared national emergencies regarding two "unusual and extraordinary" threats: the influx of illegal drugs from Canada, Mexico, and China, and "large and persistent" trade deficits.
Invoking IEEPA, he imposed a 25% duty on most Canadian and Mexican imports and a 10% duty on most Chinese imports; a minimum 10% duty on all imports from all trading partners to address trade deficits; and, following these initial orders, issued several adjustments, eventually bringing the total effective tariff rate on most Chinese goods to 145%.
Small businesses and several states filed suit, arguing that IEEPA’s grant of authority to regulate importation did not include the power to impose unbounded tariffs.
“Nothing in IEEPA’s text, nor anything in its context, enables the President to unilaterally impose tariffs,” wrote Justice Elena Kagan in the Supreme Court opinion, joined by Justices Sotomayor and Jackson.
The court noted that IEEPA’s list of nine authorized actions (e.g., "investigate," "block," "regulate") does not mention tariffs or duties. Historically, when Congress delegates tariff powers, it does so explicitly and with strict limits. Article I, Section 8, vests the power to "lay and collect Taxes, Duties, Imposts and Excises" exclusively in Congress.
Chief Justice Roberts said in his opinion that while Congress has frequently delegated tariff authority, it has traditionally done so with "strict limits" and explicit language -- requirements the administration sought to bypass by invoking emergency powers.
The court's dissenting opinion was written by Justice Brett Kavanaugh, who was joined by Justices Thomas and Alito. Kavanaugh argued the majority had essentially created a "magic-words test" that ignores the practical reality of national emergencies.
“In my view, the statutory text, history, and precedent constitute ‘clear congressional authorization’ for the President to impose tariffs as a means to ‘regulate... importation,’” Kavanaugh wrote. He cautioned that the ruling creates "nonsensical textual and practical anomalies," noting that the Court allows the President to completely block trade through an embargo but now forbids the "less extreme, more flexible" tool of a tariff.
Potential freight impact: Surge possible
Jason Miller -- associate professor of supply chain management at Michigan State University and interim chair of the Department of Supply Chain Management -- warned, "This isn't over."
Miller predicted President Trump would move to use another part of tariff law to impose a 15% tariff for a maximum of 150 days, unless Congress approves the duty for longer. "I see no chance that happens," he added.
It didn't take long for Miller's prediction to come true, of a fashion, as President Trump referenced a variety of options in his post-ruling press conference after this story first published Friday morning. "Other alternatives will be used to replace those [tariffs] that the court incorrectly rejected," he said of levies deemed unlawful.
The president added that the "Section 232" authorities currently allowing levies on steel and aluminum imports, among others, would be expanded to preserve other tariffs to keep them in place.
On the White House Facebook profile in the aftemath, the president pledged an executive order to apply a "10% GLOBAL TARIFF" under Section 122, "over and above our normal TARIFFS already being charged."
Section 122 tariffs Miller believed would be challenged in court almost immediately if exercised, he said, and were the court to keep those tariffs from taking effect, "we will see a massive surge of imports into the USA in the short term."
Maybe even in a matter of days if that happened or even with today's ruling, he added. "I wouldn't be surprised if we see a flood of goods out of bonded warehouses and foreign trade zones into the 'consumption channel' over the next few days. Great news for spot market rates, which had seemed to be plateauing."
Miller noted consumer, small-business benefit with the most recent court ruling isn't universal by any means, though. And after learning of the President's intent to impose 10% global levies said near-term freight growth in the spot market was unlikely, generally.
"Some manufacturers that were seeing higher business may have just lost out, as buyers will shift back to sourcing from elsewhere," he said, adding he wouldn't be surprised if the White House doesn't get pretty creative to exercise other tariff options.
After President Trump's press conference and announcement of the 10% levies, Miller put things this way: "I believe importers would have from now until Sunday to get stuff out of bonded warehouses, so we may have some busy truckers this weekend. ... Replace Coors beer with imports and we have modern day Smokey and the Bandit."
[Related: Trump's tariffs aimed at Mexico, Canada, China spark retaliatory effort]
