Last week, the U.S. Court of Appeals for the Federal Circuit ruled against the Trump administration with its 7-4 decision declaring the tariffs imposed by President Trump in his second presidency illegal. It was the latest setback in a federal court against the Trump tariffs after some courts ruled the tariffs illegal earlier this year.
Could this be the beginning of the end for this year’s Trump tariff spree?
With the court’s decision, many are wondering if the court rulings could signal the end of the Trump tariffs in their current form. There have been dozens of different legal rulings against the Trump administration during his second presidency so far, but these have not fundamentally altered U.S. government policy.
Because the rulings against the Trump administration on tariffs and economic policy specifically deal with whether the tariffs are illegal because of how they were imposed, there is absolutely a chance that ultimately, tariff policy will have to be revamped and possibly narrowed.
At the end of the day, one of the biggest issues at hand is who has the authority to impose tariffs on U.S. trading partners. Constitutionally, the “power of the purse” is held by the U.S. Congress, and it sets budgets and fiscal policy. The Presidency, through the Executive Branch of the U.S. government, then executes that spending/fiscal policy. In the area of tariffs, it is Congress that traditionally has imposed tariffs. For example, the infamous Smoot-Hawley Tariffs of the 1930s (which arguably led to the Great Depression), were imposed by Congress.
This time, however, the tariffs were enacted without Congress. Many congresspeople, both Republicans and Democrats, have publicly come out against a blanket tariff policy, arguing that there are better ways to manage trade deficits and relationships. As a result, Congress has not passed any legislation to codify the tariffs into law, and has shown little appetite to do so.
What comes next for the courts regarding tariffs?
As expected, President Trump has asked the U.S. Supreme Court to overturn the appeals court’s decision. The Supreme Court has the power to do so. However, it also has the option of refusing to take up the case, in which case the lower court’s ruling will stand. Political observers expect the high court to hear the case, for what it’s worth.
Trump has asked the Supreme Court to proceed on an expedited schedule, using national security and policy uncertainty grounds as a rationale for the court to act quickly.
There is the possibility that the Supreme Court hears the case, and rules against the Trump administration, based on the constitutional questions raised above. If that happens, global trade will be affected nearly overnight, and the U.S. government will have to make changes to its tariff policy.
U.S. government lawyers are likely to argue the case in favor of the Trump administration by invoking the International Economic Emergency Powers Act, passed in 1977 by Congress, and are expected to say that President Trump has the authority to impose tariffs based on that law. That law has not been used before to impose tariffs on foreign trading partners.
What are the consequences of lasting court rulings?
If the lower court rulings are upheld by higher courts such as the U.S. Supreme Court, then the U.S. government may have to pay back billions of duties collected under the latest rounds of tariffs since the beginning of Trump’s second presidency.
Additionally, trade negotiations with many countries will be affected. Deals with governments such as Japan, Mexico, Canada, and others, where the U.S. has stuck individual trade deals, will be affected and possibly have to be modified. And that’s only the beginning. There may be more open backlash in the areas of trade and the economy among foreign leaders toward the U.S.
Even if the Supreme Court ultimately rules against Trump on the case being petitioned, 25 percent tariffs on automobiles, as well as 50 percent tariffs on steel and aluminum, will not be affected by the ruling, as these tariffs are covered by different laws on foreign trade competition and fairness.
