WASHINGTON — The Supreme Court on Friday struck down a key legal justification for tariffs imposed by the Trump administration, ruling that the International Emergency Economic Powers Act (IEEPA) does not authorize the President to impose tariffs as a response to broad economic concerns. The decision is expected to trigger a wave of refund requests from businesses and significantly alter the landscape of U.S. Trade policy.
The 6-3 ruling, with Justices Clarence Thomas, Samuel Alito, and Brett Kavanaugh dissenting, found that President Trump lacked the peacetime authority to utilize IEEPA to levy tariffs based on claims of trade imbalances and national security concerns related to the flow of goods like fentanyl. Chief Justice John Roberts, writing for the majority, stated that Congress must provide “clear congressional authorization” for such actions, which it did not do in this case.
The decision immediately raises questions about the legality of billions of dollars in tariffs already collected. The Court acknowledged that “The United States may be required to refund billions of dollars to importers who paid the IEEPA tariffs,” but did not rule directly on the issue of refunds, describing the process as likely to be a “mess.”
Analysts at the Committee for a Responsible Federal Budget (CRFB) estimate that the ruling will reduce net revenues by $1.9 trillion through Fiscal Year 2036 and increase the national debt by $2.4 trillion over the same period, assuming all IEEPA tariffs are refunded. If refunds are not issued, the debt increase could reach $2.2 trillion. These estimates are slightly higher than those from the Yale Budget Lab, which projects a $1.5 trillion revenue decrease through 2035, and the Tax Foundation, which estimates IEEPA tariffs would have increased federal revenue by $1.5 trillion. CRFB attributes the difference to its modeling and use of data from U.S. Customs and Border Protection (CBP).
The ruling comes as the Biden administration is already grappling with significant fiscal challenges. The CRFB analysis suggests that, absent corrective action, the national debt could rise to 125% of Gross Domestic Product (GDP) by 2036, compared to a projected 120% under the Congressional Budget Office’s (CBO) baseline. Deficits could climb to 7.2% of GDP by 2036, up from 6.7% under CBO’s previous projections.
Beth Benike, co-founder of Busy Baby, a Minnesota-based manufacturer of mealtime accessories, told CBS News that uncertainty surrounding the tariffs had forced her to halt imports from China, where her products are made. She had been waiting for the Supreme Court decision before shipping inventory held by her manufacturer, as the ruling determined a potential $48,000 difference in tariff costs.
However, not all businesses opposed the tariffs. Drew Greenblatt, owner of Maryland manufacturer Marlin Steel, previously stated his support for higher levies, arguing they created a “level playing field” for U.S. Companies competing with overseas steelmakers.
In response to the ruling, the President has indicated an intention to impose a 10% global tariff using authority provided by Section 122 of the Trade Act of 1974. The fiscal implications of this novel tariff structure will be assessed once further details are announced. The administration could also potentially utilize other trade authorities, including Sections 201 and 301 of the Trade Act of 1974, Section 232 of the Trade Expansion Act of 1962, or Section 338 of the Tariff Act of 1930, to replicate the effects of the IEEPA tariffs. Congress also retains the option of enacting tariffs legislatively or finding alternative revenue sources.
