Trump's economic agenda faces potential setback as Supreme Court hears tariff challenge

WASHINGTON (TNND) — The fate of President Donald Trump’s economic agenda may hang in the balance of a Supreme Court case that will be argued Wednesday that will have consequences for executive authority and the central piece of his attempt to overhaul the American economy.

Trump has leveraged tariffs aggressively and in unprecedented ways, quickly ratcheting up America’s effective tariff rate to levels not seen in decades, as he tries to pressure allies and adversaries alike to agree to more favorable trade terms or give up other concessions that meet his administration’s foreign policy objectives.

But his frequently used tool could be curtailed after the Supreme Court hears arguments on whether he has gone beyond his legal authority to implement the import taxes on all kinds of goods and materials. Three sets of Trump’s tariffs could be wiped out if the high court rules against the administration: a baseline 10% rate on most other countries, higher tariffs on countries the administration views as bad actors in trade, and another on Canada, China and Mexico that the White House justifies as punishment for failing to prevent the flow of fentanyl into the U.S.

The administration has relied on the 1970s Emergency Economic Powers Act, or IEEPA, to implement the tariffs. Under the statute, the president has power “to regulate importation” during times of emergency.

The White House argues that authority includes tariffs, which they say are the most common way for a government to regulate imports. But the groups challenging them, made up of small- and medium-sized businesses, argues it does not include the words “tariffs” or “duties” and that they amount to a tax, which falls on Congress to implement.

It’s unclear exactly how the high court may rule on the case as it faces questions about a novel interpretation of the law that raises major issues on executive authority that it frequently sought to curtail during the Biden administration, but it will have a major impact on Trump’s economic and foreign policy agendas.

Trump, along with DOJ attorneys in court filings, have warned the result of the tariffs being overturned would have catastrophic consequences that risk sending the U.S. into another depression and devastate America’s finances and credibility.

“If a president was not able to quickly and nimbly use the power of tariffs, we would be defenseless, leading perhaps even to the ruination of our nation,” Trump wrote in a Sunday Truth Social post.

The government had already collected $90 billion in tariff revenue through August, according to an analysis by the nonpartisan Committee for a Responsible Federal Budget. In court filings, the administration said it expects to collect between $750 billion and $1 trillion in tariff revenue by June.

The velocity and frequency at which tariffs have been placed on a wide range of goods and countries has scrambled supply chains and forced companies to reevaluate how they do business. A rocky rollout and questions about how long they will last has also boosted uncertainty as companies try to figure out what’s coming next before they start making complicated and expensive decisions to reengineer their business.

Even if the Supreme Court strikes down Trump’s tariffs through IEEPA, Trump will still have other means to impose them. But those methods are more onerous and come with policymaking requirements like studies, mandatory reviews and limits to what rates can be applied.

Trump has already applied multiple tariffs on industries like automobiles, steel and aluminum under a national security authority called Section 232, which have been expanded recently in case the administration loses the case in front of the court.

“The bottom line is things are still going to be roiled. I don’t see that there’s going to be any major wholesale changes on corporate behavior in terms of making investments in facilities or people,” said Joe LiPuma, clinical associate professor at Boston University’s Questrom School of Business.

Much of the tariffs’ effects on the economy remain to be seen, but they have not been as destructive to inflation as initially feared, with the most recent reading at 3%. Companies have been willing to absorb at least part of the increased costs, found ways to get around paying them and boosted stockpiles of products before they went into effect to blunt their impact. But there are questions about how long that can last and if consumers will keep up their streak of opening their wallets.

Some economists are also concerned the increased tariffs are a driving force behind a slowing job market that has shown more signs of cracking with a series of major layoffs at big-name American companies. The ongoing government shutdown has blurred the picture of the economy by delaying the release of official figures on employment and other economic statistics.

Also at question because of the ruling will be the numerous trade deals the administration has already agreed to or is in the process of negotiating. Losing the ability to quickly implement tariffs could remake negotiations or prompt countries to pull out of them entirely.

Arguments in the case will begin at 10 a.m. Eastern on Wednesday. A decision isn’t due until next June, but the court could rule sooner due to the pressing implications it will have on U.S. policy and the economy.

“It does unsettle things,” LiPuma said. “We don’t know what’s going to happen, and that’s just going to add more uncertainty to the market. Everyone’s still going to be sitting and waiting for things to happen, and that’s not good.”