Washington (United States) (AFP) – The US Supreme Court on Friday ruled Donald Trump’s sweeping global tariffs illegal — a stunning rebuke of the president’s signature economic policy that upended international trade. The conservative-majority high court ruled six-three in the judgment, saying that a 1977 law known as the International Emergency Economic Powers Act (IEEPA) Trump has relied on “does not authorize the President to impose tariffs.”
The ruling does not impact sector-specific duties Trump separately imposed on imports of steel, aluminum, and various other goods. Several government probes which could lead to more sectoral tariffs remain in the works. Still, this marks Trump’s biggest defeat at the Supreme Court since returning to the White House last year. While Trump has long relied on tariffs as a lever for diplomatic pressure and negotiations, he made unprecedented use of emergency economic powers in his second term to slap new duties on virtually all US trading partners.
These included “reciprocal” tariffs over trade practices that Washington deemed unfair, alongside separate sets of duties targeting major partners Mexico, Canada, and China over illicit drug flows and immigration. The court noted Friday that “had Congress intended to convey the distinct and extraordinary power to impose tariffs” with IEEPA, “it would have done so expressly, as it consistently has in other tariff statutes.” The Supreme Court’s three liberal justices joined three conservatives in Friday’s ruling, which upheld lower court decisions that tariffs Trump imposed under IEEPA were illegal. Conservative Justices Brett Kavanaugh, Clarence Thomas, and Samuel Alito dissented.
Chief Justice John Roberts, in delivering his opinion, said “IEEPA contains no reference to tariffs or duties.” A lower trade court ruled in May that Trump overstepped his authority with across-the-board levies and blocked most of them, but that outcome was put on hold as the government appealed. With the White House already bracing for a negative outcome, KPMG chief economist Diane Swonk warned that “tariffs ruled illegal can be rapidly reinstated via other levers.” “Financial markets rallied on the news, but that is premature,” she added.
– ‘Much-needed certainty’ – Nonetheless, business groups cheered the ruling, with the National Retail Federation saying this “provides much-needed certainty” for American firms and manufacturers. “We urge the lower court to ensure a seamless process to refund the tariffs to US importers,” the federation said. But the justices did not address the degree to which importers can receive refunds. This will likely be litigated. Kavanaugh warned that this process — as acknowledged during oral arguments — could be a “mess.”
EY-Parthenon chief economist Gregory Daco told AFP the loss of IEEPA tariff revenues for the US government could amount to around $140 billion. Delighted Democratic leaders pounced on the ruling, with Senate Minority Leader Chuck Schumer lauding the outcome as a “win for the wallets” of US consumers. But top Democrat on the Senate Banking Committee Elizabeth Warren cautioned there remains “no legal mechanism for consumers and many small businesses to recoup the money they have already paid.” The Budget Lab at Yale University estimates consumers face an average effective tariff rate of 9.1 percent with Friday’s decision, down from 16.9 percent. But it said this “remains the highest since 1946,” excluding 2025.
– Constrained ambition – The European Union said it was studying the court ruling and will remain in close contact with the Trump administration. Britain plans to work with the United States on how this affects a trade deal between both countries, while Canada said the decision affirms that Trump’s tariffs were “unjustified.” Striking down the emergency tariffs “would constrain the president’s ambitions to impose across-the-board tariffs on a whim,” said Erica York of tax policy nonprofit the Tax Foundation.
But it leaves him other statutes to use for tariffs, even if they tend to be more limited in scope — or require specific processes such as investigations — York told AFP. “The ruling dismantles the legal scaffolding, not the building itself,” said ING analysts Carsten Brzeski and Julian Geib of Trump’s trade restrictions.
© 2024 AFP
