The now famous tariffs case, known as the Learning Resources case (named after the plaintiffs), is now in the books. The tumultuous second term of President Donald Trump anchored its economic renewal strategy on an unprecedented tariff strategy that was bound to find its way to the US Supreme Court – and it did. Although, it didn’t turn out well for President Trump.
A tariff-centric policy
There were numerous personal, political and ideological reasons for the President to pursue this tariffs-centric economic policy. Personally, President Trump has been hostile towards trade deficits and countries like Japan and China that carried large trade surpluses since the 1980’s. He has seen these imbalances as the reason behind the collateral damage that globalization has created across the American economic landscape, especially its industrial base.
Numerous economists have challenged President Trump’s interpretation of tariffs as a viable punitive strategy to reverse the imbalance and more controversially reverse America’s de-industrialization. This personal view of globalization and the power of tariffs acquired political significance as the discontent with globalization surprisingly catapulted him into the Presidency in 2016.
The disorientation of the pandemic and the inflation that it triggered created a cacophony of economic anxieties and candidate Trump’s falling back on his populist ideas fueled by this penchant for tariffs separated him from his rival Vice President Harris in 2024. Once in power, the personal and political reasons merged into a more potent ideological goal - consolidation of power under the executive. The “Unitary Executive Theory” has given wind to the sails of the administration’s efforts to create an all-powerful executive. The Supreme Court took the wind out of these sails today.
This case will be remembered more for the political history it makes than the legal one. Yet, crucial to quickly review the legal case at hand to better understand the broader consequences of this verdict. As stated above, the Trump administration was keen on rebalancing America’s trade relationships through a customized tariff regime. Tariffs have traditionally been seen as a tax and thus broad tariff changes must go through the US Congress, the legislative branch. Knowing that the Republicans have a very slim majority in the House of Representatives (the lower House) and a filibuster prone majority in the US Senate (need 60/100 votes to bring legislation to the floor; Republicans have 53 seats) the chances of getting a flexible tariff regime through Congress would be painful, if possible at all. Thus, the administration decided to use a 1977 statute, International Emergency Economic Powers Act (IEEPA), as the legal basis to architect its tariff strategy.
IEEPA and the legal basis for tariffs
Ironically, IEEPA was designed to reign in executive use of prior statutes to impose tariffs. In a nutshell, IEEPA gave President’s power to regulate international commerce in national emergencies. Please note the terms “regulate” and “emergency”. The statute does not mention tariff authority beyond the term regulate. The solicitor general, D. John Sauer, claimed that the term regulate encompasses the authority to impose tariffs.
For the sake of completeness, the emergencies cited to invoke this statute were the influx of drugs from Mexico and Canada that have caused massive overdose related deaths and vast addiction problems, and the Unfair Trade Practices by other countries (recall personal views of trade deficits). Thus, the government’s argument was that we have a two-headed emergency, and the President has regulatory authority to act. The additional claim was that the US Congress had deliberately avoided being specific in order for the President to have a wide range of options in matters for foreign policy and defence when Congress left the wording to just include the term “regulate”.
The Major Questions doctrine and the 6-3 verdict
Important to add that the solicitor general anticipated a certain line of questioning from the Republican appointed judges (6 out of 9) beyond the authority to tax being limited to the legislative branch - the Major Questions doctrine (MQD). This is a more recent doctrine that has grown in Chief Justice Roberts court and the thrust of it is that if a federal agency takes “sweeping” action without the precise consent of Congress then the Supreme Court will strike it down. This is a controversial doctrine as critics claim it to be too subjective and charge the Supreme Court to be interfering with the lawmaking process. Critics argue that there are times Congress does give the executive latitude, but the Supreme Court intervenes and effectively challenges that latitude.
This doctrine was on display in numerous Biden administration cases being decided against the Biden administration for them overstepping their seemingly unauthorized actions. In the tariffs case, the solicitor general anticipating this line of questioning proactively claimed that the major questions doctrine does not apply as the term regulate obviously covers the authority to impose tariffs. Not only did they not see any ambiguity, but they also claimed the authority to impose tariffs was obvious when the word regulate was included in the statute.
The government’s legal strategy showed early cracks as the Justices started their questioning. The six judges that ultimately denied the government their tariff authority called out the government on its claim that the tariffs were not a tax and that IEEPA gave them the authority to impose them. The separation of powers, that legislature alone can impose taxes, was the throughline across 3 republican (Roberts, Barrett, Gorsuch) and 3 democrat appointed judges (Kagan, Sotomayor, Jackson). While the 3 democrat-appointed judges did not bring up the Major Questions doctrine, the 3-republican ones who voted to strike down the tariffs, did. This is an important point from a legal precedent standpoint and the republican-democratic split when it comes to jurisprudence in the context of this evolving doctrine. Quite possible that future nominees to the Supreme Court should expect their views on this doctrine.
Ultimately, the 6-3 verdict ended up being a simple interpretation of IEEPA and the basic constitutional construct of only Congress having the authority to impose taxes: the tax being tariffs in this case. One more point to be made here is that the administration’s claims that tariffs are paid by foreign countries was quite thoroughly debunked; Americans paid the taxes that the government collected. The 3 republican-appointed judges out of the 6-3 majority cited the Major Questions doctrine to reinforce their decision. All opinions basically sent the question of tariffs back to the US Congress and told the executive branch to go through the legislative branch if they want to continue this policy.
The question of refunds
With the legal battle in the rearview, attention is now turning to a major question for businesses who bore the cost of tariffs and in most cases passed part or all of those costs to consumers. Do the businesses get a refund on the tariffs they should have never paid? That refund would total more than $250 billion.
The Supreme Court did not provide any guidance on any refunds and thus leaving businesses and the government on its own to navigate this situation. The Trump administration is in no hurry, legal or otherwise, to process any refunds. To drive home the point, Illinois’s Democratic Governor, JB Pritzker, has sent the Trump administration an invoice for $8.6 billion to recover the tariffs paid by the people of Illinois. We should expect a flurry of such attempts whether they are political or financial.
Today’s verdict leaves the Trump presidency in a state of disorientation as the policy compass it had so relied on turned out to be uncalibrated and pointing it in the wrong direction. Time will tell if the administration can regroup from this. Time is running out before a crucial midterm election in November that could cost the Republicans the legislative branch and thus further limit what the President can do. A legal case in the books but the jury on the political outcomes is still out.
