On a 6-3 vote, the Supreme Court ruled this morning that the International Emergency Economic Powers Act does not empower the President to impose tariffs. As a result, President Trump’s “drug trafficking” and “reciprocal” tariffs have been struck down.
Today’s decision is not a surprise. I have written about these cases several times, including here. I wrote in that post:
I have not done a deep analysis of the legal issues, but reading the decisions, it seemed to me that the judges in the majority, those who have found Trump’s tariffs to be unauthorized, have had the better of the argument. There is no question about the fact that Article I of the Constitution gives control over tariffs to Congress. The question is whether the various statutes that have been enacted are broad enough to support the current tariff regime.
The majority relied in part on the “major questions doctrine,” a sound rule of statutory interpretation that says that “‘both separation of powers principles and a practical understanding of legislative intent’ suggest Congress would not have delegated ‘highly consequential power’ through ambiguous language.” The major questions doctrine has been a bulwark against politically-inspired expansion of the administrative state through tortured statutory interpretation.
Justices Kavanaugh, Thomas and Alito dissented. Kavanaugh’s dissent is well-argued; the case was a close one. While the bulk of his opinion is devoted to technical and historical issues of statutory interpretation, he also addresses the practical consequences of the majority’s ruling. First, as to the President’s ability to impose tariffs going forward:
Although I firmly disagree with the Court’s holding today, the decision might not substantially constrain a President’s ability to order tariffs going forward. That is because numerous other federal statutes authorize the President to impose tariffs and might justify most (if not all) of the tariffs at issue in this case—albeit perhaps with a few additional procedural steps that IEEPA, as an emergency statute, does not require.
So debates over tariffs are by no means at an end. Kavanaugh also addresses a question that has worried many: what becomes of the billions of dollars that have already been collected under the “drug trafficking” and “reciprocal” tariffs?
In the meantime, however, 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. As was acknowledged at oral argument, the refund process is likely to be a “mess.” Tr. of Oral Arg. 153–155. In addition, according to the Government, the IEEPA tariffs have helped facilitate trade deals worth trillions of dollars—-including with foreign nations from China to the United Kingdom to Japan, and more. The Court’s decision could generate uncertainty regarding those trade arrangements.
In the post linked above, I expressed hope that any ruling invalidating the Trump tariffs would be prospective, so that money paid would not have to be refunded. That wasn’t in the cards. But as to trade deals that have been concluded, today’s decision shouldn’t have any impact–not from a legal perspective, anyway. At the same time, to the extent that other countries have made unenforceable commitments to invest in the U.S., because of concerns about tariffs, those commitments could evaporate.
Finally, I think it is worth noting that the financial markets did not react to today’s decision, either positively or negatively. If it were true that tariffs would devastate our economy, as liberals have claimed, today’s news should have caused the markets to skyrocket. Conversely, of course, if the tariffs were seen by sophisticated observers as a great boon to our economy, the markets should have tanked. The fact that neither happened suggests that the overall impact of tariffs, at least in the short term, was close to being a wash.
