WASHINGTON — President Trump’s global trade agenda ran into a wall Friday as the Supreme Court struck down his “reciprocal” trade and anti-fentanyl tariffs.
The 6-3 ruling by the court puts at risk an estimated $175 billion already collected over the past year and jeopardizes the fate of Trump’s trade pacts with major partners, many of which have not been ratified.
The court found that Trump exceeded his authority under the International Emergency Economic Powers Act of 1977 (IEEPA) citing “national emergencies” related to trade imbalances and drug smuggling.
Trump’s duties targeted China, Canada and Mexico — America’s three largest trading partners — to stop the flow of illicit fentanyl, which had killed 330,000 Americans over the preceding five years, while his “reciprocal” tariffs announced last April sought to equalize long-standing trade imbalances.
The fentanyl tariffs elicited vows of increased anti-smuggling cooperation from the three countries and his reciprocal tariffs resulted in the brokering of massive trade deals with nearly all of America’s largest economic partners, which vowed to break down barriers to US imports.
Trump officials have for months said they would seek to resurrect tariffs under different legal authorities if the Supreme Court ruled against them, but the defeat creates significant uncertainty about what comes next.
When can consumers see tariff refunds?
Likely never.
Consumers have paid higher prices since last year after US businesses hiked prices in anticipation of raised rates.
Businesses that paid the higher tariffs, however, are expected to seek refunds.
“[T]he Court’s decision is likely to generate other serious practical consequences in the near term. One issue will be refunds,” wrote dissenting Justice Brett Kavanaugh, nominated by Trump during his first term.
“Refunds of billions of dollars would have significant consequences for the US Treasury. The Court says nothing today about whether, and if so how, the Government should go about returning the billions of dollars that it has collected from importers. But that process is likely to be a ‘mess,’ as was acknowledged at oral argument.”
Kavanaugh added: “A second issue is the decision’s effect on the current trade deals. Because IEEPA tariffs have helped facilitate trade deals worth trillions of dollars—including with foreign nations from China to the United Kingdom to Japan, the Court’s decision could generate uncertainty regarding various trade agreements. That process, too, could be difficult.”
The two other justices nominated by Trump — Amy Coney Barrett and Neil Gorsuch — ruled with the majority in finding the president overstepped his legal bounds.
Are any Trump tariffs unaffected by the ruling?
The court case, brought by two educational toy companies that import products, only directly asked the justices to analyze whether the “reciprocal” and fentanyl tariffs were permissible under IEEPA’s grant of presidential powers to regulate commerce during emergencies.
Other Trump tariffs applied under IEEPA could be at-risk as a result of subsequent proceedings, including the extra 25% duty Trump applied to Indian goods last year over New Delhi’s importation of Russian oil and the 40% supplemental tariff slapped on Brazil over online censorship and the prosecution of ex-president Jair Bolsonaro.
Many of Trump’s major tariffs aren’t impacted, however.
The president’s 25% tariffs on most foreign-made vehicles was adopted under a different legal authority and remains in effect.
The car levies give Trump leverage to keep intact major pending trade deals due to the fact that he agreed to lower the vehicle tariff to 15% for Japan, South Korea, and the European Union — and 10% on shipments from the UK — under subsequent agreements.
Sen. Chuck Grassley (R-Iowa), an advocate of reining in presidents’ abilities to unilaterally impose tariffs, expressed hope that pending trade deals would hold.
“He’s already succeeded in deals, including getting American beef into Australia, ethanol and beef into England, rice into Japan and pork into Taiwan. I appreciate the work he and his administration are doing to restore fair, reciprocal trade agreements,” Grassley said.
“I urge the Trump administration to keep negotiating, while also working with Congress to secure longer-term enforcement measures so we can provide expanded market opportunities and certainty for Iowa’s family farmers and businesses.”
Other tariffs still in effect include a 50% markup on foreign steel, aluminum and copper.
What happens to Trump spending that was built on tariff revenues?
Trump has boasted repeatedly about his ability to redirect tariff revenue flowing into the country — and suggested he’s putting it to good use.
In December, Trump announced plans to distribute $12 billion to farmers impacted by his trade war. That plan is now cast into uncertainty.
He also claimed that $1,776 Christmas bonuses for military members would be taken from tariff revenue, though later reporting indicated it was instead taken from $2.6 billion in unused military funding.
Trump additionally proposed $2,000 tariff rebates for citizens that would require congressional approval.
The court decision threatens to blow a hole into projected federal revenues — with the Committee for a Responsible Federal Budget saying Friday it could lower Washington’s monetary intake by $2 trillion over the next decade.
“With the national debt already the size of the entire US economy and interest on the debt costing more than $1 trillion this year,” said CRFB president Maya MacGuineas, “this is very bad news.”
