Opinion Trump’s tariffs are in the dock

Apart from being counter-productive for world economies, including the US, it is now becoming clear that President Donald Trump’s tariffs regime, his central policy agenda, is in legal trouble. Last Wednesday, the Trump Administration reached out to the US Supreme Court to seek an expedited ruling on the legal validity of sweeping tariffs. The move came soon after the US Court of Appeals for the Federal Circuit ruled seven to four against Trump’s use of tariffs against as many as 90 countries by invoking the International Emergency Economic Powers Act (IEEPA). The US Constitution gives the US Congress the exclusive right to levy taxes; and tariffs are taxes. In 1977, the US Congress legislated the IEEPA to enable the US President to impose sanctions in case of an emergency. The Court of Appeals ruled that they could “discern no clear congressional authorisation” for Trump’s use of tariffs. The August 29 ruling — which agrees with the decision of the Court of International Trade in late May that blocked the bulk of Trump’s tariffs as it found that the President had overstepped his authority — essentially undermines not just all newly agreed upon trade deals under Trump but also the ongoing ones. Given the high stakes, the US Solicitor General has urged the Supreme Court to decide by September 10 whether it will hear the case on an urgent basis. If – as and when it hears this case – the Supreme Court agrees with the clutch of small businesses and 12 US states that have sued the Trump Administration over tariffs, the bulk of these tariffs could turn out to be null and void.

Given the centrality of tariffs in Trump’s agenda — he has justified their use as a solution, for achieving peace between Russia and Ukraine to boosting domestic manufacturing in the US — an adverse verdict will be strike three not just for these tariffs but also the political standing of his presidency. Treasury Secretary Scott Bessent claimed in his affidavit to the Supreme Court, that even a delay in the apex court ruling on the matter could lead to “catastrophic” economic consequences since everything — from tariffs already collected to newly-inked trade agreements and the proposed international purchases – would have to be unwound. Of course, there is another possibility here: The apex court could side with the dissenters (which include two judges each appointed from either parties) in the aforementioned verdict. The dissenters were of the view that the IEEPA embodied “an eyes-open congressional grant of broad emergency authority in…foreign-affairs realm, which unsurprisingly extends beyond authorities available under nonemergency laws”. In this context, the fact also is that the US has witnessed a hollowing out of manufacturing and the country is by all accounts on an unsustainable path of trade deficits.

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However, if the apex court overturns the existing ruling, it might lead to a constitutional crisis between the legislative (US Congress) and the executive (President) branches of the US government. After all, if a US President can invoke an emergency provision to do all that Congress can do and more, the legislature must confront a moment of reckoning.