The White House’s Plan A is winning its Supreme Court tariff case. It also has a Plan B.
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Trump touts tariffs. Now, the Supreme Court will decide whether they’re legal.
The Supreme Court will consider the question Wednesday. The case is important not only for the economic policy of the United States, but for the Constitution’s separation of powers. The administration, the courts ruled, authorized the tariffs by misreading an emergency economic powers law. The Trump administration is arguing that trade deficits, as well as fentanyl trafficking from China through Mexico and Canada, are national emergencies justifying its tariff declarations. The president is the first president to attempt to use the IEEPA to levy tariffs; Nixon used a predecessor statute to do the same thing in 1971.. A ruling against the administration would raise difficult practical questions about what to do with the billions in tariff revenue already collected.. Even critics of the tariffs agree with the Trump administration”s assessment – to an extent – that the tariffs are a good thing for the U.S. They are a bad idea for the world, they say. The tariffs are bad for America, they add. They’re bad for the economy.
He had already levied tariffs against China, Canada, and Mexico shortly after taking office in January. But are all these tariffs lawful? The Supreme Court will consider the question Wednesday.
The case concerns what the Trump administration regards as its greatest economic policy achievement to date, and what a bipartisan array of critics describes as a new effort by Mr. Trump to expand presidential power beyond the Constitution’s limits.
Why We Wrote This After lower courts struck down the legal argument for the Trump administration’s most sweeping tariffs, the Supreme Court now takes up the matter. The case is important not only for the economic policy of the United States, but for the Constitution’s separation of powers.
Mr. Trump brought his case to the justices after three lower federal courts struck down the tariffs. The administration, the courts ruled, authorized the tariffs by misreading an emergency economic powers law. Decades of precedent support their interpretation of the law, the administration counters.
If the high court rules in President Trump’s favor, “it potentially offers unprecedented amounts of authority to the president,” says Wendy Cutler, senior vice president at the Asia Society Policy Institute and a former acting deputy U.S. trade representative.
According to Mr. Trump, this power is critical to America’s economic competitiveness on the world stage.
The case is “one of the most important … in the history of our Country,” he wrote on social media last month. “If we don’t win,” he said at the White House in October, “we will be a weakened, troubled, financial mess for many, many years to come.”
Evan Vucci/AP/File President Donald Trump departs after signing an executive order at an event to announce new widespread tariffs, outside the White House, April 2, 2025.
Treasury Secretary Scott Bessent has said a ruling against the administration would raise difficult practical questions about what to do with the billions in tariff revenue already collected. Even critics of the tariffs agree with the Trump administration’s assessment – to an extent.
“I’m not sure it’s [one of] the most important cases in American history, but it is one for the ages,” said Michael McConnell, a Stanford Law School professor who is representing small businesses challenging the tariffs, during a call with reporters last week.
“This is a major confrontation between the executive branch and Congress,” he added.
Origins of tariff authority
The Constitution delegates the tariff power to Congress, with Article I stating that the legislative branch has the power “to lay and collect Taxes, Duties, Imposts and Excises.”
But Congress has also passed several laws giving the president some authority to set tariffs. The law at issue in this case is the International Emergency Economic Powers Act (IEEPA). This law – which doesn’t mention the word “tariff” – says that in the face of an “unusual and extraordinary threat,” the president can declare a national emergency and invoke the IEEPA, which provides them new powers to “regulate … importation.”
The Trump administration is arguing that trade deficits, as well as fentanyl trafficking from China through Mexico and Canada, are national emergencies justifying its tariff declarations. Mr. Trump is the first president to attempt to use the IEEPA to levy tariffs.
The closest another president has come to unilaterally imposing tariffs came in 1971, when Richard Nixon cited a predecessor statute to the IEEPA in ordering a small and “temporary” 10% tariff on imports to the U.S. He ended the tariffs four months later after successful trade negotiations with the affected nations.
The Trump administration says it is following a similar playbook, citing trade deals with the European Union, Japan, and Britain agreed upon after imposing tariffs. Unlike under President Nixon, however, many of those framework deals include a Trump tariff remaining in place.
Mr. Nixon “applied these tariffs for a short period of time,” says Ms. Cutler. “Under the Trump administration’s view, once you declare an emergency you can keep them for as long as you want.”
Alex Brandon/AP/File Bags of fentanyl tablets are displayed as Homeland Security Secretary Kristi Noem (center) tours the San Ysidro Port of Entry in San Diego, March 16, 2025. The Trump administration cited the flow of fentanyl into the United States as one reason to impose tariffs on Canada, China, and Mexico.
The Constitution and Congress’s role
The confrontation boils down to America’s earliest democratic principles. Taxation without representation sparked the Revolutionary War, and the Constitution sought to address it by giving Congress the exclusive power to levy taxes. By unilaterally imposing tariffs –effectively a tax on American businesses that import goods, according to the nonpartisan Tax Foundation) – critics say Mr. Trump is ignoring these foundational principles.
More specifically, the Trump administration has been doing an end-run around the Constitution by misinterpreting the IEEPA, critics from legal groups across the ideological spectrum claim.
The IEEPA, they argue, is effectively a wartime law. When the country faces an “unusual and extraordinary threat,” the act gives the president a range of new powers to address the emergency, including the power to “regulate … importation.”
That is not a power to set tariffs, critics argue. Furthermore, they claim, an emergency the Trump administration is citing is no emergency at all. The executive order imposing the “Liberation Day” tariffs, for example, includes the phrase “large and persistent…trade deficits.”
“Use of the IEEPA is limited to extraordinary emergencies, [and] a trade deficit is not unusual or even an emergency,” said Jeffrey Schwab, director of litigation at the Liberty Justice Center, a legal group that represents a group of small businesses challenging the tariffs.
The center is one of a number of strange bedfellows fighting Mr. Trump’s tariffs. When it last appeared before the justices, the organization won a landmark case restricting union organizing rights around the country – a decision celebrated by conservative America. In the tariffs case, the organization now finds itself allied with left-leaning organizations including the Brennan Center for Justice and the Democracy Forward Foundation.
Also on their side is the Pacific Legal Foundation, a public interest law firm that typically represents conservative causes. One of the group’s recent Supreme Court victories struck down a Biden administration loan-forgiveness program.
In the tariffs case “the issues are effectively the same,” says Oliver Dunford, a senior attorney at the firm.
“Here, the president is effectively making new policy,” he adds. “And if we want to address [a policy issue], Congress has to be involved.”
As for the bipartisan opposition, Mr. Dunford hopes it’s a “good omen that … in the future, there will be more bipartisan opposition to presidents when they exceed their authority.”
How the White House defends tariffs
The Trump administration, meanwhile, claims that the trade deficits have created “an ongoing economic emergency of historic proportions.” Using tariffs to pressure China, Mexico, and Canada to limit fentanyl trafficking into the U.S., meanwhile, is a valid use of the IEEPA, the administration argues.
One of the administration’s prominent claims is that the tariffs fall squarely within the presidents’ authority over foreign policy and national security matters.
The IEEPA “is a particularly broad delegation in the domains of foreign policy and national security,” the administration wrote in its petition to the court.
If the Supreme Court strikes down the tariffs, the administration added, it “would reflect an intolerable judicial intrusion into the President’s responsibility to manage foreign relations and trade.”
Trump administration officials have also raised what could be a persuasive “remedies” argument – one focused on what the administration would have to do should it lose.
In a declaration submitted to the court, Mr. Bessent wrote that billions of dollars in tariffs have already been collected. If the tariffs are suddenly eliminated, he added, “unwinding them could cause significant disruption.”
Given the time-sensitive nature of the case, most courtwatchers believe the justices will deliver an opinion months before the term ends in June.
Some experts also believe that a loss for the Trump administration wouldn’t mean the end of its tariff regime. The justices could uphold some tariffs but not others, and, if some tariffs are struck down, the administration could use other statutes to reimpose them. The administration has also set tariffs under different statutes, such as tariffs on steel and aluminum, that have not been legally challenged.
“If [the tariffs are] struck down, it would be a blow to the president’s trade agenda, but there may be a Plan B,” says Ms. Cutler. “We’ll still be in a world where tariffs are a core part of the administration’s trade agenda.”
The White House’s Plan A is winning its Supreme Court tariff case. It also has a Plan B.
Aides have spent weeks strategizing how to reconstitute the president’s global tariff regime. They’re ready to fall back on a patchwork of other trade statutes to keep pressure on U.S. trading partners. The contingency planning underscores how much is at stake for Trump, who has used the International Emergency Economic Powers Act to impose tariffs. Even a partial loss at the Supreme Court would make it much harder for the president to use tariffs as an all-purpose tool for extracting concessions on a number of issues, a former White House official says. But White House aides are telegraphing confidence, convinced the justices won’t strip Trump of his favorite negotiating tool, and certain that even if they do, he has plenty of backup plans.“Frankly, there’s a little bit of bravado, like, they’re not going to knock these down,” one person close to the White House said. “They seem very confident that they’re going to win. I don’t see why they’re confident at all.”
But just in case, aides have a plan B.
Aides have spent weeks strategizing how to reconstitute the president’s global tariff regime if the court rules that he exceeded his authority. They’re ready to fall back on a patchwork of other trade statutes to keep pressure on U.S. trading partners and preserve billions in tariff revenue, according to six current and former White House officials and others familiar with the administration’s thinking, some of whom were granted anonymity to share details of private conversations.
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“They’re aware there are a number of different statutes they can use to recoup the tariff authority,” said Everett Eissenstat, former deputy director of the White House’s National Economic Council during Trump’s first term. “There’s a lot of tools there that they could go to to make up that tariff revenue.”
The contingency planning underscores how much is at stake for Trump, who has used the International Emergency Economic Powers Act, a 1977 law designed for national emergencies, to impose tariffs on nearly every U.S. trading partner — the foundation of his second-term economic agenda. The justices will weigh whether the law gives the president broad power to impose economic restrictions — or whether Trump has stretched it beyond what Congress intended.
If the court curtails that power, it could upend not only the White House’s “America First” trade strategy but also the global negotiations Trump has leveraged it to shape.
“This is all about foreign policy. This isn’t 1789 where you can clearly delineate between trade policy, economic policy, national security policy and defense policy. These things are all completely interconnected,” said Alex Gray, who served as National Security Council chief of staff and deputy assistant to the president during the first Trump administration. “To diminish the tools he has to do that is really dangerous.”
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Behind the scenes, trade and legal advisers have modeled what a partial loss might look like — where the court upholds the use of the 1977 law in some circumstances but not others — and what other legal means might be available to achieve similar ends.
However, those alternatives are slower, narrower and, in some cases, similarly vulnerable to legal challenge, leaving even White House allies to acknowledge the administration’s tariff strategy is on shakier ground than it is willing to publicly concede. Even a partial loss at the Supreme Court would make it much harder for the president to use tariffs as an all-purpose tool for extracting concessions on a number of issues, from muscling foreign companies to make investments in the U.S. to pressuring countries into reaching peace agreements.
“There’s no other legal authority that will work as quickly or give the president the flexibility he wanted,” said one supporter of Trump’s tariff policies, who was part of a group that filed an amicus brief in support of his tariffs. “They seem very confident that they’re going to win. I don’t see why they’re confident at all. Two different courts that have ruled extremely harshly on this.”
Still, White House aides are telegraphing confidence, convinced the justices won’t strip Trump of his favorite negotiating tool, and certain that even if they do, he has plenty of backup plans.
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“Frankly, there’s a little bit of bravado, like, they’re not going to knock these down,” one person close to the White House said.
A White House official, granted anonymity to discuss internal deliberations, said the administration sees it as “a pretty clear case.”
“We’re using a law that Congress passed, in which they gave the executive branch the authority to use tariffs to address national emergencies,” the official said.
Aides concede that other tariff authorities are not a “one-for-one replacement” for the emergency law, though they confirmed they are pursuing them.
In fact, the White House has already laid some of the policy groundwork under those authorities, such as the 1970s-vintage Section 301, which the U.S. used against China in Trump’s first term, or the Cold War-era Section 232, which allows tariffs on national-security grounds.
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The administration has launched more than a dozen 232 investigations into whether the import of goods like lumber, semiconductors, pharmaceuticals and critical minerals from other countries impairs national security. Since January, Trump has used that authority to impose new tariffs on copper, aluminum, steel and autos.
It has also opened a 301 investigation into Brazil’s trade practices, including digital services, ethanol tariffs and intellectual property protection. It’s a model officials say could be replicated against other countries if the court curtails IEEPA — and could be used to pressure countries into reaffirming the trade deals that they’ve already negotiated with the United States, or to accept the rates that Trump has unilaterally assigned them.
But those tools come with challenges: Section 301 investigations can take months to complete, slowing Trump’s ability to impose tariffs unilaterally or tie them to unrelated goals like ending the war between Russia and Ukraine or stem the flow of fentanyl across the U.S. border.
Section 232 offers broad discretion to impose tariffs on national-security grounds, but because the levies are sector-based, they are typically applied across a product category, limiting Trump’s ability to pressure individual countries.
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And imposing new duties on global industries like semiconductors or pharmaceuticals, as Trump has threatened, could upend recent agreements the administration has reached with trading partners, especially China, which negotiated a trade truce last week .
“This detente may have weakened the president’s resolve to go forward with the 232s. We’re worse off than we were,” a second person close to the administration said.
The U.S. has already promised to delay fees on Chinese vessels arriving at U.S. ports following the conclusion of a Section 301 investigation on China’s shipbuilding practices as a result of the Thursday meeting between Trump and Chinese leader Xi Jinping. The U.S. also agreed to delay an investigation into China’s adherence to its trade deal from Trump’s first term.
Section 122, meanwhile, allows only short-term tariffs of up to 15 percent and for no more than 150 days unless Congress acts to extend them — a narrow clause meant to address trade deficit emergencies. The authority could potentially serve as a bridge between an adverse court ruling and new duties Trump wants to put in place using other authorities.
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Then there’s Section 338 — a rarely used provision that’s been on the books for nearly a century. In theory, it could let Trump swiftly impose tariffs of up to 50 percent on any country, if he can explain how they are engaging in “unreasonable” or “discriminatory” actions that hurt U.S. commerce. Section 338 does not require a formal investigation before a president can impose tariffs, but would likely face similar legal challenges.
Major trading partners are betting that Trump will find a way to reimpose tariffs, somehow. Two European diplomats, granted anonymity to discuss trade strategy, said the countries believe that the Supreme Court won’t strike down the global tariffs and, if it does, it won’t do much to shift the dynamic.
“Our working assumption is that the court rulings won’t change anything,” a European official said, adding that they are still hoping the law is overturned.
Some are convinced the only way to address the tariffs permanently is for the president to appeal to Congress, arguing that only lawmakers can decide how much unilateral power any White House should permanently wield over global commerce.
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That would be an uphill battle. At least four Republicans are openly opposed to the global tariffs — bucking Trump in a series of symbolic votes last week . And it’s unclear whether there’s appetite for a vote on Trump’s tariffs in the House, which has been shielded from weighing in on the tariffs until the end of January, after Republican leadership blocked votes on Trump’s national emergencies.
“At the end of the day, all this comes back to Congress,” Eissenstat said. “Maybe Congress will step up its role post hearing, post ruling. We’ll see.”
Trump tariffs live updates: Bessent says US will switch to other authorities if Supreme Court tries to stop Trump tariffs
The White House released a fact sheet this weekend with more details about the trade agreement ironed out between Trump and China’s President Xi Jinping. Trump said on Sunday that the most advanced Nvidia (NVDA) chips will be reserved for US companies and kept out of China and other countries. The US tariff on goods related to the production of fentanyl will drop from 20% to 10% with a promise China would work “very hard to stop the flow” The US Senate passed several resolutions that would end several of Trump’s country-specific tariffs, in a rare rebuke of the president from several members of his own party. Trump also said he planned to skip the Supreme Court hearing this week over the legality of his global tariffs.
Bessent stated that the administration will simply switch to other tariff authorities, including Section 122 of the Trade Act of 1974, which allows broad tariffs for 150 days to calm trade imbalances.
Trump said on Sunday that the most advanced Nvidia (NVDA) chips will be reserved for US companies and kept out of China and other countries.
In comments to reporters aboard Air Force One, Trump said only US customers will have access to high-quality Nvidia Blackwell chips.
“The most advanced, we will not let anybody have them other than the United States,” Trump said.
The White House released a fact sheet this weekend with more details about the trade agreement ironed out between Trump and China’s President Xi Jinping in South Korea last week,
China will suspend additional export controls on rare earth metals and end investigations into US chip companies, according to the release. Meanwhile, the US will pause some of Trump’s “reciprocal tariffs” on China for another year and will halt plans to slap a 100% tariff on Chinese exports to the US that was set to take effect this month.
The agreement struck between Trump and Xi came after months of chaos and confusion, putting on ice a trade war between the world’s two largest economies.
Here are some other key details we know about the thaw:
The US tariff on goods related to the production of fentanyl will drop from 20% to 10% with a promise China would work “very hard to stop the flow.” That means overall tariffs on Chinese goods will be cut to 47% from 57%.
Trump said China would purchase more US energy as part of a wider trade truce, and hinted at an unspecified transaction involving Alaskan oil and gas.
China will resume buying “tremendous amounts” of US soybeans “starting immediately,” Trump said.
Read more: What Trump’s tariffs mean for the economy and your wallet
Here’s what else to know on Trump’s tariffs:
Trump said the US and South Korea had reached a deal after months of negotiating on a framework agreement. Also, Trump and Japan’s first female leader, Sanae Takaichi, signed deals relating to trade and rare earths.
A spat over an ad featuring the late Ronald Reagan has grown into an international incident, with Trump threatening to raise tariffs on Canada by an additional 10%.
The US Senate passed several resolutions that would end several of Trump’s country-specific tariffs, in a rare rebuke of the president from several members of his own party.
The US Supreme Court is set to hear a challenge to Trump’s most sweeping tariffs — the “reciprocal” country-by-country duties that you can see in the graphic above. A ruling against the tariffs — which would be in line with lower-court decisions — could have significant ramifications for Trump’s tariff strategy. Trump also said he planned to skip the Supreme Court hearing this week over the legality of his global tariffs. “I don’t want to call a lot of attention to me,” Trump told reporters Sunday. “It’s not about me, it’s about our country.”
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Trump tariffs: the Supreme Court case that could change global trade as we know it
Yahoo is using AI to generate takeaways from this article. This means the info may not always match what’s in the article. Reporting mistakes helps us improve the experience. Generate Key Takeaways: The US Supreme Court will soon rule on the validity of President Donald Trump’s tariffs. The dispute centres on two lawsuits filed by seven small businesses and 12 US states, led by Oregon. The coalition, including Arizona, Colorado, Maine, Minnesota, Nevada, New Mexico, New York and Vermont, challenges Trump’s authority to impose tariffs on all imported goods using emergency powers. The 80-minute session will begin at 10am US Eastern time. The arguments, which exceed the court’s usual 60-minute format, will be split: 40 minutes for the government, 20 each for the private and state petitioners, plus 10-minute rebuttals per side. Trump backed away from earlier hints that he might attend the Supreme Court arguments in person, saying he would stay away to avoid becoming a distraction. The case could reshape presidential powers, American trade policy, global commerce worth billions of dollars and international relations for decades.
Yahoo is using AI to generate takeaways from this article. This means the info may not always match what’s in the article. Reporting mistakes helps us improve the experience.
Yahoo is using AI to generate takeaways from this article. This means the info may not always match what’s in the article. Reporting mistakes helps us improve the experience. Generate Key Takeaways
The nine justices of the US Supreme Court will soon rule on the validity of President Donald Trump’s tariffs, a showdown that could blunt what he claims is his favourite economic and diplomatic tool.
On Wednesday, they will hear oral arguments in a landmark case that could reshape presidential powers, American trade policy, global commerce worth billions of dollars and international relations for decades.
The dispute centres on two lawsuits filed by seven small businesses and 12 US states, led by Oregon. The coalition, including Arizona, Colorado, Connecticut, Delaware, Illinois, Maine, Minnesota, Nevada, New Mexico, New York and Vermont, challenges Trump’s authority to impose tariffs on all imported goods using emergency powers.
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The 80-minute session will begin at 10am US Eastern time. The arguments, which exceed the court’s usual 60-minute format, will be split: 40 minutes for the government, 20 each for the private and state petitioners, plus 10-minute rebuttals per side, underscoring the high stakes.
Trump on Sunday backed away from earlier hints that he might attend the Supreme Court arguments in person, saying he would stay away to avoid becoming a distraction.
“I will not be going to the Court on Wednesday, in that I do not want to distract from the importance of this decision,” Trump wrote on social media.
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“It will be, in my opinion, one of the most important and consequential decisions ever made by the United States Supreme Court.”
The “America first” leader pointed to his recent deal with China as proof that his tariff strategy works, saying the “recent successful negotiation with China, and many others, put us in a strong position only because we had tariffs with which to negotiate fair and sustainable deals”.
He added that “if a President was not able to quickly and nimbly use the power of tariffs, we would be defenceless”, underscoring his argument that tariffs remain a crucial tool in US trade talks with Beijing.
Neal Katyal, former acting lawyer general under Obama and partner at Milbank LLP, a New York-based international law firm, will represent the private business petitioners, joined by conservative heavyweight Michael McConnell for the states.
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Trump’s Solicitor General, Jonathan Sauer, will defend the administration solo for the federal parties.
The petitioners argue that the “America first” president overstepped Congress by declaring a national emergency under the 1977 International Emergency Economic Powers Act (IEEPA) to impose sweeping “reciprocal tariffs” in April.
Importers also contend that the tariffs threatened their businesses, as ongoing trade wars had already shrunk markets and forced many doors to close.
The administration asserts that the IEEPA empowers the president to deal “with any unusual and extraordinary threat” by, among other measures, “regulat[ing] … importation after importation”, granting wide-ranging tools, including tariffs, to counter foreign-sourced dangers.
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Trump has long defended tariffs as a tool to cut government debt, punish rivals like China, revive US manufacturing and even nudge warring nations towards peace.
The administration warned in briefs to the justices ahead of Wednesday’s hearing that it would bring “catastrophic consequences for our national security, foreign policy and the economy” if they ruled against the tariffs.
Trump’s global tariffs are projected to bring in US$4 trillion for the US government over the next decade. The duties, his team argues, have pushed countries to the negotiating table and spurred companies to move more manufacturing back home.
But so far, lower courts have largely sided against Trump. In August, a seven-justice majority of the US Court of Appeals for the Federal Circuit ruled that while the IEEPA gives broad emergency powers, these tariffs exceed them. In May, the International Trade Court in New York struck down his Liberation Day and fentanyl-related tariffs on China and Canada.
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The Supreme Court, whose decision is expected in the first half of 2026, will apply the “major questions doctrine”, which requires Congress to use clear and explicit language when giving the executive branch authority for sweeping economic actions.
Critics say the IEEPA may fall short of this standard, as it never mentions “tariffs” or related terms like “duties”, “customs”, “taxes”, or “imposts”.
More than 40 briefs have been submitted to the US Supreme Court by constitutional experts, lawmakers, think tanks, and a coalition of over 700 small and medium businesses.
A brief submitted by 207 US lawmakers – including just one Republican, Alaska Senator Lisa Murkowski – this month told the High Court that “neither the word ‘duties’ nor the word ‘tariffs’ appears anywhere in the IEEPA”.
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“The Administration’s interpretation of the IEEPA would effectively nullify the guardrails outlined in every statute in which Congress expressly granted the President limited tariff authority – a result Congress did not intend,” the lawmakers said in the brief.
Last week, the Senate voted three times to block Trump from enforcing the sweeping tariffs he has imposed since taking office, with a few Republicans – senators Murkowski, Maine’s Susan Collins, and Kentucky’s Mitch McConnell and Rand Paul – joining the opposition.
The move was largely symbolic, as the measures have little chance of advancing in the House and none of being signed into law by Trump.
Alaska Senator Lisa Murkowski is the only Republican lawmaker involved in the lawsuit against the Trump administration. Photo: AP alt=Alaska Senator Lisa Murkowski is the only Republican lawmaker involved in the lawsuit against the Trump administration. Photo: AP>
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The timing of the case couldn’t be more precarious. Since April, Trump has signed reciprocal trade pacts with key Asian partners, including China, Japan, South Korea, Malaysia, Cambodia and Thailand, aimed at easing tensions, shoring up critical mineral supply chains and curbing fentanyl flows.
The China deal includes a one-year truce, after US tariffs on Chinese goods were reduced by 10 per cent. Meanwhile, negotiations with India are inching towards a landmark pact that could lift bilateral trade to US$500 billion by 2030, even as Trump threatens 250 per cent duties to extract concessions on defence and market access.
A ruling against the government could force billions in retroactive refunds, potentially over US$100 billion based on duties collected since February, triggering administrative chaos and market volatility as importers rush to claim reimbursements.
Still, experts say Trump may already have fallback plans.
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“The White House likely would cobble together a series of executive orders, proclamations and other executive actions to impose something similar to the current tariff rates,” predicted Dave Townsend of Dorsey & Whitney’s International Trade Group.
“It’s hard to guess what Plan B looks like without seeing the Supreme Court opinion. However, it likely would rely on a combination of IEEPA, Section 301, Section 232 and other authorities that explicitly permit the imposition of temporary tariffs,” Townsend added.
“The Supreme Court decision also might call into question the legal basis for the trade agreements that the administration has negotiated with other countries, including the arrangements announced with Cambodia, Japan, Malaysia, Thailand and Vietnam over the last week.”
This article originally appeared in the South China Morning Post (SCMP), the most authoritative voice reporting on China and Asia for more than a century. For more SCMP stories, please explore the SCMP app or visit the SCMP’s Facebook and Twitter pages. Copyright © 2025 South China Morning Post Publishers Ltd. All rights reserved.
Copyright (c) 2025. South China Morning Post Publishers Ltd. All rights reserved.
Why US top court’s curb on Trump’s tariff powers could deliver $500 mn refund, & possibly a fairer trade deal for India
The US Supreme Court is set to begin oral hearings starting Wednesday to decide if President Donald Trump overstepped his powers. The outcome of the case could have significant consequences for multiple ad hoc trade deals inked by the US since early this year. India, which is currently the hardest-hit country due to 50 per cent US tariffs, has been seeking relief measures. An adverse court order could mean a reset in trade dynamics, and an opportunity for India to negotiate a more balanced trade deal. The US has set reciprocal tariffs from 15 to 20 per cent for its closest allies and others in the ASEAN region. If the administration were to lose the case, however, the reciprocal tariffs would be declared invalid, and the Trump administration would have to initiate refunds to the tune of $100 billion to US importers. The case was first heard in the US District Court for the Northern District of Illinois, which in April rejected the government’s argument, and in June also held that IEEPA does not authorise the president to levy general tariffs.
The outcome of the case could have significant consequences for multiple ad hoc trade deals inked by the US since early this year, as well as for India, which is currently the hardest-hit country due to 50 per cent US tariffs. India’s shipments to the US, its largest export destination, fell 12 per cent in September, and exporters have been seeking relief measures. Prime Minister Narendra Modi on Monday met exporters to discuss ‘export competitiveness’.
An adverse court order could mean a reset in trade dynamics, and an opportunity for India to negotiate a more balanced trade deal. Indian officials have said that the US is seeking market access for its products in exchange for a reduction in reciprocal tariffs, including on sensitive items such as genetically modified soya and corn. The US has set reciprocal tariffs from 15 to 20 per cent for its closest allies and others in the ASEAN region.
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If the administration were to lose the case, however, the reciprocal tariffs would be declared invalid, and the Trump administration would have to initiate refunds to the tune of $100 billion to US importers. According to an estimate by PwC, total tariff collections by the end of October stood at $108 billion, with China having the biggest share at $34 billion. In the case of India, the comparable figure stood at $487 million, according to PwC estimates.
“If the Supreme Court strikes down the Trump administration’s IEEPA tariff scheme entirely, the decision could declare the challenged tariffs invalid, requiring US Customs and Border Protection (CBP) to cease collection and unwind the existing tariff structure. At the same time, importers could face the complex question of how to obtain refunds, as invalidation of the IEEPA tariffs may open the door to potential reimbursement of tariffs paid,” PwC said in a report.
The invalidation of IEEPA, as expected, would also reduce volatility in trade relations, as the US—without these IEEPA-based tariffs—could see this and future administrations return to other statutory tools such as Section 232 and Section 301, which have more defined limits.
Lower courts ruled against Trump
Court documents show that parties arguing against the tariffs include over a dozen small businesses. The number of parties arguing against the tariffs far outnumbers the parties defending the same.
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Three lower courts have already ruled against the Trump administration. The case was first heard in the US District Court for the Northern District of Illinois, which in April rejected the government’s argument. The US Court of International Trade (CIT) in June also held that IEEPA does not authorise the president to levy general tariffs. The US Court of Appeals for the Federal Circuit in August ruled that Congress had never delegated such sweeping authority to the executive branch.
“If the Supreme Court strikes down Trump’s use of emergency powers, forcing the withdrawal of his ‘Liberation Day’ tariffs, the ruling would reverberate far beyond US borders. The decision would unravel the foundation of several recently negotiated trade arrangements with key partners such as the EU, Japan, South Korea and the UK—all of which were struck under the shadow of those tariffs and premised on reciprocal concessions. It would also disrupt ongoing talks with India, where tariff leverage has shaped Washington’s negotiating position,” Delhi-based think tank GTRI said in a report.
Trump’s Plan B
With the legal powers under IEEPA in question, the Trump administration has dramatically increased the use of Section 232 tariffs. Tariffs under Section 232 have raised levies on aluminium, cars and car parts, copper, furniture, lumber, steel and timber, and fresh investigations have already been launched into ten other types of products.
Key investigations include the Trump administration’s review of imports of robotics and industrial machinery. The United States is a net importer of these goods, importing $25 billion more than it exported last year, and the US has no major company mass-producing industrial robots and few domestic component suppliers, the Council on Foreign Relations said.
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While tariffs under Section 232 would be far less sweeping than reciprocal tariffs that Trump managed under IEEPA, the former provides much stronger legal cover, as the US Supreme Court has on multiple occasions refused to entertain challenges due to the “national security” element in the statute.
However, Indian officials have said that Section 232 tariffs have not been a priority during negotiations, as the US tariffs under the statute are imposed equally on all countries and do not hurt competitiveness.