Due to a 6-3 vote in Learning Resources Inc. V. Trump, the Supreme Court ruled that the president’s ability to impose tariffs under the International Emergency Economic Powers Act (IEEPA) was unconstitutional on February 20.
According to the Library of Congress, the IEEPA, enacted in 1977, was a federal law that enabled the president to freeze assets, regulate commerce, or prohibit transactions with foreign nations—or entities—following a declared national emergency.
Learning Inc. v. Trump revolved around the effects of trafficking and reciprocal tariffs on outsourced manufacturing, which put their business at “risk.”
Chief Justice John Roberts said that, because the IEEPA lists the actions the president can take with such specificity (omitting any mention of tariffs or revenue), interpreting the statute to allow taxation renders it unconstitutional.
Yet, the decision’s reach is limited.
“It will not affect in any way the tariffs currently in place or tariffs being investigated under other major trade statutes,” senior fellow at the Council on Foreign Relations Jennifer Hillman said.
According to the Yale Budget Lab, had the IEEPA tariffs remained in effect, the average consumer would face an effective tariff rate of 16.9%, rather than the 9.1% they will face without the IEEPA tariffs.
As of now, the Trump Administration has shifted its agenda towards the use of Section 122 of the Trade Act of 1974.
“[The section] allows temporary across-the-board tariffs when the United States has ‘large and serious balance-of-payment deficits,’” The Peterson Institute for International Economics said. “In general, the Section 122 regime has a nondiscriminatory nature. It authorizes across-the-board tariffs, not tariffs that differ for each trading partner based on the whims of the moment.”
The Trump Administration may find it difficult to use tariffs to engage in bilateral decision-making.
The decision’s impacts on the various trade agreements, understandings, and frameworks have yet to take effect.
“So far, it appears that U.S. trading partners are taking a ‘wait and see’ attitude to whether or when they might renegotiate some of the terms of their agreements, given the more limited tariff threats that Trump can credibly make right now,” senior fellow for international political economy Jennifer Hillman said. “However, in light of indications that the administration will initiate a series of Section 301 investigations against a number of trading partners.”
The 6-3 decision has sparked discussion over tariff refunds, with many small businesses worrying about filing individual lawsuits to refund paid import taxes.
“U.S. customs officials say they’re working on a system to deliver tariff refunds, and they hope it’ll be up and running within 45 days,” NPR said. “the [US Customs and Border Protection] computer system is not equipped to immediately process the crush of refunds, but that it’s working on a streamlined process that would not require importers to file individual lawsuits.”
