Trump’s tariffs on trial at US Supreme Court

The “reciprocal” tariffs and fentanyl-trafficking tariffs under the International Emergency Economic Powers Act 1977 (IEEPA) were fast-tracked to the US Supreme Court after several small businesses and an Oregon-led coalition of US states independently challenged those measures. The three suits have since been consolidated.  

The reciprocal tariffs include the 10% global baseline and higher country-specific rates announced on 2 April 2025. The trafficking tariffs include customs duties on Canadian and Mexican products, Canadian energy, and Chinese products. Tariffs that rely on statutes other than IEEPA, such as Section 232 of the Trade Expansion Act 1962, are unaffected by the judicial challenges.

The question before the court is deceptively simple: does the US president’s power to “regulate importation” include the power to impose tariffs?

According to the US Congressional Research Service, IEEPA had been invoked 77 times as of 1 September 2025. During oral arguments today, there was general agreement that IEEPA itself had never been invoked to impose tariffs until Trump did so earlier this year. 

“Trump is, by far, the most comfortable using tariffs,” among recent US presidents, US Solicitor General D John Sauer said.

The relevant statutory text in IEEPA includes the phrase “regulate importation” in a longer list of powers.

[T]he President may . . . by means of instructions, licenses, or otherwise . . . investigate, block during the pendency of an investigation, regulate, direct and compel, nullify, void, prevent or prohibit, any acquisition, holding, withholding, use, transfer, withdrawal, transportation, importation or exportation of, or dealing in, or exercising any right, power, or privilege with respect to, or transactions involving, any property in which any foreign country or a national thereof has any interest by any person, or with respect to any property, subject to the jurisdiction of the United States.

That language came from an antecedent statute, the Trading with the Enemy Act 1917 (TWEA), which former US President Richard Nixon relied on to impose tariffs to address trade imbalances. On that basis, the Trump administration argued that the TWEA set a precedent for imposing customs duties in an emergency situation. Sauer explained that Nixon had imposed 10% across-the-board tariffs, which he used as leverage to get US trading partners at the negotiating table. 

Revenue-raising?

Sauer argued that the court should interpret the phrase “regulate importation” as a “sweeping Congressional authorisation” of “regulatory tariffs” with merely “incidental” revenue. He reasoned that because the measures regulate foreign affairs, the president has broad discretion to act unilaterally to impose tariffs. Sauer further argued that any revenue collected is incidental because the aim and “most effective use” of the tariffs is merely to change other countries’ behaviour, citing the recently announced trade deal with China as an example of the desired result.  

Revenue, of course, implicates taxing power. That is “a huge piece of what’s animating [the state coalition’s] argument,” according to Oregon Solicitor General Benjamin Gutman. Justice Amy Coney Barrett asked what makes something revenue-raising, and Gutman maintained that the effect determines that.   

Under Article I of the US Constitution, Congress has the exclusive power to tax. 

“It is implausible that IEEPA abdicated a core congressional authority, vital to its power of the purse,” one of the challengers, wine importer VOS Selections, asserted in its reply brief. 

Milbank partner Neal Katyal echoed that sentiment during oral arguments, which he opened with the assertion that “tariffs are taxes.” He also framed the IEEPA tariffs as embodying an “open-ended power to junk the tariff laws,” which are ordinarily limited by intelligible principles.

Justice Ketanji Brown Jackson pointed to “evidence [in the legislative history of IEEPA] that Congress was trying to do a specific thing, and that thing wasn’t to raise revenue.”

To be sure, there is money at stake – lots of it. The US Congressional Budget Office estimates that the IEEPA tariffs will reduce the federal government’s budget deficit by US$4 trillion over the next 10 years, but independent analysis by the Tax Foundation suggests that invalidating them would have a negligible fiscal impact. 

The financial impact for “American businesses . . . bearing the brunt” of the IEEPA tariffs is anything but negligible, according to two of the businesses challenging the customs duties, Learning Resources and hand2mind. They argued that “smaller businesses are being pummeled to the brink of bankruptcy” thanks to the “largest peacetime tax increase in American history.” 

Sauer said during oral argument that there’s no basis for the claim that Americans pay the IEEPA customs duties, pointing to the importer’s initial payment and subsequent allocation. 

Magic words

The Trump administration argued that the absence of “magic words” – tariffs, duties, customs, taxes, or imposts – explicitly delegating emergency tariff authority does not affect the president’s power to impose tariffs under IEEPA. The US Court of Appeals for the Federal Circuit had cited the absence of those words in the statute in its decision invalidating the IEEPA tariffs.

Katyal attempted to clarify that the context, not specific words, determines whether Congress has delegated its tariff power. 

Justices Barrett and Sonia Sotomayor emphasised the preceding phrase in the statute: “by means of instructions, licenses, or otherwise.” In response to questioning from Justice Brett Kavanaugh that, Sauer said that a licence fee is the economic and legal equivalent of a tariff. Sotomayor insisted, however, that the use of the noun licence can only be used to accomplish the verb “regulate.” Barrett seemed to agree and questioned whether the IEEPA tariffs might not be better structured as a licence.

On licences, Katyal conceded the economic equivalency, but attempted to distinguish “two flavours”: one that merely recoups the cost of government services and one that collects amounts in excess of that cost, thereby raising revenue. 

“Would it be a complete mess?”

Justice Barrett asked whether the reimbursement process would “be a complete mess” if the court were to invalidate the IEEPA tariffs. 

Katyal said that “serious economic dislocation” isn’t a reason not to do something and suggested ways that the court might mitigate the impact, like issuing a stay or limiting its decision to prospective relief. He explained that the parties had agreed that the private plaintiffs would get refunds if they won, but everyone else would have to seek refunds under 19 USC §1514.

The Trump administration argued in its brief that revocation of IEEPA tariff authority would have “catastrophic consequences,” as the US would immediately “go from strength to failure” if “forced to pay back” amounts collected pursuant to that authority or promised under bilateral trade deals. Trump, for his part, has described the stakes as a matter of life or death.