25 Feb Trump Tariff Decision
In a fractured 6-3 decision authored by Chief Justice Roberts, the Supreme Court held that the President does not have the power to impose tariffs under the International Emergency Economic Powers Act (IEEPA). Six Justices agreed that the statute’s text does not authorize the President’s tariffs, but only three (the Chief Justice and Justices Gorsuch and Barrett) would have also concluded that the major questions doctrine would also invalidate the tariffs.
IEEPA was enacted in 1977 and provides the President with economic tools to address “unusual and extraordinary threats” to American national security, foreign policy, or the economy and the threat must originate primarily “outside the United States.” In order to utilize IEEPA’s tools, the President must declare a national emergency. At that point, IEEPA authorizes the President “by means of instructions, licenses, or otherwise,” to take the following actions to “deal with” the threat:
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.”
§1701(a), 1702(a)(1)(B) (emphasis added).
This case ultimately hinges on the term “regulate” in the statute.
Shortly after assuming the presidency, President Trump invoked his authority under IEEPA to respond to two emergencies: the influx of illegal drugs from Mexico, Canada, and China, and large and persistent trade deficits. He declared national emergencies as to both and then imposed tariffs based on those threats. The petitioners / plaintiffs in this case, Learning Resources, are small businesses that allege that IEEPA does not authorize the tariffs.
The President asserted the ability to impose tariffs on “imports from any country, of any product, at any rate, for any amount of time” based on IEEPA’s language that he has the power to “regulate” imports. The Court rejected that argument, concluding those words “cannot bear such weight.” All six Justices in the majority agreed that the text of the statute did not support the President’s sweeping arguments. However, the majority fractured over the question of the major questions doctrine as three Justices would have found the m doctrine bars the tariffs. That argument ultimately did not carry enough votes in this case, but the issue of the major questions doctrine was vigorously debated in the concurrences and dissents issued by the Justices, which may prove relevant in future cases.
Turning back to the majority, the Court explained that the power to impose tariffs is “very clearly a branch of the taxing power,” which is reserved to Article I, the Legislative Branch. Indeed, the Court pointed out that the President concedes he has no “inherent authority to impose tariffs during peacetime.” The President instead argued that Congress had delegated its power to set tariff policy in IEEPA based on the words “regulate” and “importation.”
The majority concluded that the power to tariff is conspicuously missing from the list of powers authorized in IEEPA. The Court explained “[i]t stands to reason that had Congress intended to convey the distinct and extraordinary power to impose tariffs, it would have done so expressly—as it consistently has in other tariff statutes.”
And the Court rejected the argument that the term “regulate” fills that void. Black’s Law Dictionary defines the term “regulate” to mean to “fix, establish, or control; to adjust by rule, method, or established mode; to direct by rule or restriction; to subject to governing principles or laws.” But, per the Court, the term regulate does not mean the power to tax and the Court was skeptical that Congress would have hidden its “birth-right power to tax within the quotidian power to ‘regulate.’” The Court also found that a contrary reading of the statute would render it unconstitutional as the Constitution specifically forbids taxing exports and IEEPA authorizes the “regulation” of imports and exports.
The Court also rejected the dissent’s and government’s arguments that because IEEPA authorizes the prohibition of all imports, which is more extreme than a tariff, the tariff must be encompassed by the term regulate. The Court explained because tariffs are taxes they are of a different kind, not degree, and they “fall outside the spectrum entirely.”
Major Questions Doctrine Analysis
As noted above, three Justices would have found the President’s arguments failed because of the major questions doctrine. Under the doctrine, the Court has declined to read in Congress’ delegation of authority on questions of major political or economic significance without a clear statement from Congress. And in this case, the three Justices called the President’s asserted claims of authority over the economy “extravagant” and the economic and political consequences of the tariffs “astonishing.” If the President’s arguments were credited, “it would represent[] a ‘transformative expansion’” of the President’s authority over tariff policy ….[and] over the broader economy as well.” These Justices explained that as in other major questions doctrine cases, “a reasonable interpreter would [not] expect” Congress to “pawn[]” such a “big-time policy call[] . . . off to another branch.”
The government argued the major questions doctrine should not apply to emergencies or foreign affairs (the latter position was adopted by the principal dissent). The three Justices here noted they had already rejected an emergency powers exception in Biden v. Nebraska, the student loan forgiveness case, explaining that “emergency powers after all, tend to kindle emergencies.”
In terms of the proposed foreign affairs exception, the Justices noted that while “Congress certainly may intend to ‘give the President substantial authority and flexibility’ in many foreign affairs or national security contexts, flipping the “presumption…makes little sense when it comes to tariffs.” That is because Congress and the President do not enjoy concurrent constitutional authority to impose tariffs during peacetime and the “Framers gave that power to ‘Congress alone.’” Ultimately, the three Justices concluded there was no “major questions exception to the major questions doctrine.” And because the President could not point to clear congressional authorization to “justify his extraordinary assertion of the power to impose tariff”, the major questions doctrine bars his actions here.
While the other three Justices in the majority (Justices Sotomayor, Kagan, and Jackson) did not join this portion of the decision, it would seem that these six Justices would at least agree that there is no foreign affairs exception to the major questions doctrine (because the three who did not join wrote separately to explain that they continue to believe the major questions doctrine is not an appropriate statutory interpretive tool.)
Justice Kavanaugh’s principal dissent
Justice Kavanaugh, joined by Justices Thomas and Alito would have concluded the statutory text, history, and the Court’s precedent support the conclusion that IEEPA’s delegation of the ability to “regulate…importation” includes the ability to impose tariffs. The dissent pointed out that under IEEPA, the President could block all imports from China, but under the majority’s conclusion, cannot order “even a $1 tariff on goods imported from China.”
The dissent also noted that there are many other statutes that authorize the President to impose tariffs and thus, the decision, per the dissent, may have little practical import. The dissent explained that these other statutes impose “a few additional procedural steps” but that they may justify “most (if not all) of the tariffs at issue in this case.”
The dissent also pointed out that the practical import of the decision may be significant as it may require the United States to refund billions in dollars to importers who paid the tariffs and could also generate uncertainty around trade agreements that the U.S. entered into.
Significance to local governments:
The economic impacts of tariffs can filter down to all local governments, particularly as it relates to budget uncertainty. There were reports that the tariffs were squeezing state budgets, particularly in port, manufacturing, and trade-heavy jurisdictions. And when state budgets are impacted, we often see less funding for local governments. Moreover, any stagnation in the economy will be felt by local economies.
That said, the impacts of the tariffs were more acutely felt by some jurisdictions more than others. Port jurisdictions may feel the impact through a reduction in cargo volume, which can impact local tax revenue. Manufacturing economies rely on the use of imported materials and parts (such as in the automotive and metals industries) so these jurisdictions faced heightened economic uncertainty as a result of the tariffs.
This ruling will reduce the amount of tariffs currently being imposed, which may help provide some temporary economic relief and predictability in the economy. However, there are reports that President Trump is prepared to use other statutory powers to impose similar levels of tariffs. The legality of the use of those statutes was not at issue in this case (and the dissent indicates that the President can largely achieve the same tariffs through these other statutes). If that happens, the economic uncertainty local governments have faced in the last year as a result of the tariffs may continue.
This ruling also does not answer the question of refunds – if the tariffs were illegally imposed, can the companies that paid them obtain refunds? We are likely to see legal challenges around that question.
To read the decision, click here.