Supreme Court tariff ruling leaves trade policy uncertainty for businesses

Summary

The U.S. Supreme Court’s ruling against President Donald Trump’s most sweeping tariffs removed one route for imposing new import taxes, but it did not end the broader uncertainty that trade lawyers say has paralyzed businesses. Ryan Majerus, a trade lawyer with King & Spalding and a former U.S. trade official, said the situation has “only gotten more complicated for everybody.”

The justices’ decision on Friday targeted tariffs Trump had justified under the 1977 International Emergency Economic Powers Act, according to the report. In the view of trade lawyers, the key practical change is that Trump can no longer use that emergency-powers justification as a basis for new import taxes “on a whim.”

Even with that limit, lawyers and economists said vexing questions remain about how the administration will rebuild its tariff framework and what legal challenges may follow. They also pointed to unresolved issues affecting the trade deals Trump negotiated last year, and to the question of whether importers can recover money they paid once courts decide the scope of refunds.

Majerus said the uncertainty is likely to persist because Trump has multiple potential statutory levers besides the law the court rejected. The report notes that some of those options would have to be defended against arguments that they cannot be used to pursue the same policy goals the court stopped.

One of the options Trump pursued immediately after Friday’s loss was a stop-gap authority under Section 122 of the Trade Act of 1974, which allows tariffs up to 15% for up to 150 days, the report said. The report also described criticism that Section 122 was designed for “fundamental international payments problems,” tying the provision to older financial crises when the U.S. dollar was linked to gold. Bryan Riley of the National Taxpayers Union argued in a commentary that Section 122 has been “effectively rendered obsolete,” and trade lawyer Dave Townsend said it was likely to face litigation that could seek refunds of duties collected under that approach.

At the same time, the administration has signaled it could use Section 301 of the same 1974 trade act as a more durable alternative. In a statement Friday, U.S. Trade Representative Jamieson Greer said the administration was launching a series of 301 investigations after the Supreme Court loss, the report said. Majerus said Trump’s approach in his first term provides a reference point, noting that “They’re sticky tariffs,” referring to the China tariffs Trump imposed earlier under Section 301 that were upheld in court and kept by the Biden administration.

The report also described confusion around Trump’s prior trade agreements, which were negotiated using tariff threats as leverage. It raised questions about whether countries could try to back out after the IEEPA tariff threat was removed, and it noted that the European Union’s deal with Trump was already on hold. European lawmakers delayed a vote on ratifying the pact to seek clarification, with concerns that a new U.S. import tax could stack on top of “most favored nation” tariffs under World Trade Organization rules.

In the report, EU commission spokesman Olof Gill said, “A deal is a deal,” adding that the EU was asking the United States to “clearly show to us what path you are taking to honor the agreement.” The report also described uncertainty for the United Kingdom, which had reached a deal last year for 10% tariffs on its exports to the United States, asking whether those could rise to 15%.

On the refund question, the report said the Supreme Court ruling did not address what would happen to the money collected under the invalidated IEEPA tariffs, which it said totaled $133 billion as of mid-December. Instead, it left “the messy issue of refunds” to lower courts and U.S. Customs and Border Protection, the agency that collects import taxes.

Majerus said refund processes are likely to be difficult, characterizing the situation as “going to be a mess.” The report said hundreds of companies were already lining up to seek refunds, and that payments could take months or years. The report also quoted strategists Thierry Wizman and Gareth Berry at Macquarie warning that, without congressional action to create an easy “one-click” approach, the administration could make refunds burdensome by requiring extensive paperwork or lawsuits to recover duties.

In the background, the report said Trump’s own public statements and implementation choices have added to the unpredictability. It described the president saying he would use other legal authority to impose 10% levies on imports from other countries on Friday, then saying Saturday that he was raising it to 15%, while the levies collected by U.S. Customs and Border Protection beginning at 12:01 a.m. Tuesday were still at 10%.

Normally, lower tariffs that result from the Supreme Court’s decision might have been expected to provide an economic lift, but Truist economist Mike Skordeles said any potential benefit would be offset by uncertainty. He said, “any benefit you would get from that is more than offset to a modest negative from the uncertainty front,” according to the report.