WASHINGTON — Friday’s Supreme Court decision blocking President Donald Trump’s extensive import taxes represents a major legal setback, stripping away his ability to impose new trade levies without proper authorization.
However, the high court’s decision is expected to do little to reduce the trade policy confusion that has left businesses in limbo for months. Trade attorney Ryan Majerus, a partner at King & Spalding and former U.S. trade official, noted that “It’s only gotten more complicated for everybody.”
Several critical issues remain unresolved: How will Trump utilize alternative legislation to rebuild the tariff structure the Court dismantled? Will these new attempts survive court challenges? What impact will this have on trade agreements Trump negotiated using his now-invalidated tariffs as bargaining chips? Can companies recoup the tariff payments they made, and through what process?
Trump’s erratic response has added to the confusion. Despite having weeks to prepare for a potential adverse ruling, his reaction remained disorganized: Friday brought announcements of 10% import levies through different legal channels, which he increased to 15% by Saturday.
While reduced tariffs from the Court’s ruling might typically boost economic activity, economist Mike Skordeles from Truist bank explained that “any benefit you would get from that is more than offset to a modest negative from the uncertainty front.”
The comprehensive tariffs Trump implemented using the 1977 International Emergency Economic Powers Act (IEEPA) to address trade imbalances are permanently eliminated. Nevertheless, the president retains access to other statutes that could reconstruct much of his protective trade barrier.
Treasury Secretary Scott Bessent stated during a Fox News appearance Sunday that “Tariff revenues will be unchanged this year and will be unchanged in the future.”
Following Friday’s Supreme Court loss, Trump immediately turned to an emergency measure: Section 122 of the Trade Act of 1974 permits presidential tariff implementation up to 15% for 150 days maximum. However, any extension requires Congressional approval, which seems unlikely given the approaching November midterm elections and reluctance to approve tax increases.
This provision has never been utilized previously, and legal experts question whether it can substitute for IEEPA tariffs in addressing trade deficits.
National Taxpayers Union’s Bryan Riley contends that Section 122 was designed to address “fundamental international payments problems,” not trade imbalances.
The law emerged from 1960s and 1970s financial crises when the dollar was gold-backed and other nations were exchanging dollars for gold at fixed rates, creating currency pressure. Since the U.S. abandoned the gold standard, Riley argues Section 122 has become “effectively rendered obsolete.”
Trade lawyer Dave Townsend from Dorsey & Whitney warned that “Given the amount of money at issue for U.S. businesses, it is not hard to imagine a new wave of litigation attacking Section 122, and again seeking refunds of Section 122 duties collected.”
A more robust option is Section 301 of the 1974 trade act, which provides tools to target nations accused of “unjustifiable,” “unreasonable” or “discriminatory” trade practices. U.S. Trade Representative Jamieson Greer announced Friday that the administration was initiating multiple 301 investigations following the Court defeat.
Trump previously used Section 301 during his first presidency to impose broad Chinese import tariffs over Beijing’s aggressive technology competition tactics. These levies survived legal challenges and were maintained under the Biden administration.
“We’re eight years in, and those China tariffs are still here,” Majerus observed. “They’re sticky tariffs.”
The Court’s ruling also creates questions about the one-sided trade agreements Trump secured using IEEPA tariff threats to extract concessions from partners including the European Union and Japan.
Will these nations attempt to withdraw from their commitments now that the IEEPA threat no longer exists?
The EU’s trade agreement with Trump has been suspended amid confusion following the Supreme Court decision and Trump’s response with the 15% global Section 122 tariff.
European legislators postponed their ratification vote Monday to seek clarification. They worry Trump’s new import tax will combine with existing “most favored nation” tariffs under World Trade Organization rules, pushing U.S. tariffs on EU goods beyond the 15% Europeans agreed to previously.
Commission spokesman Olof Gill stated that “A deal is a deal. So now we are simply saying to the US, it is up to you to clearly show to us what path you are taking to honor the agreement.”
The United Kingdom, which negotiated 10% tariffs on its U.S. exports last year, faces similar uncertainty about whether rates will actually reach 15%.
Despite these concerns, trade experts generally anticipate that U.S. partners will honor their Trump-era agreements. The United States could impose substantial Section 301 tariffs, which have no limits, for agreement violations.
“They’re going to pretty leery of rocking the boat on their deals,” Majerus explained. “Violations of trade agreements can be a basis for taking 301 action. So you could see Section 301 become an enforcement mechanism” for American interests.
Trade Representative Greer affirmed in his statement that “We are confident that all trade agreements negotiated by President Trump will remain in effect.”
The Supreme Court avoided addressing the fate of $133 billion collected through IEEPA tariffs as of mid-December. The complex refund process for importers — though likely not consumers — was left to lower courts and Customs and Border Protection. With hundreds of companies already seeking refunds, the overwhelmed system could require months or years to process payments.
“The whole thing’s going to be a mess,” Majerus predicted.
Investment bank Macquarie strategists Thierry Wizman and Gareth Berry suggested Congress might direct Customs toward an “easy ‘one-click’ approach to refunds.” Without such direction, they cautioned the Trump administration could “make the refund process as burdensome as possible, requiring every importer to file stacks of paperwork, if not file a lawsuit, to get its money back. That would be costly for businesses.”
