The Justices Take On Tariffs: Key Takeaways

The arguments Wednesday before the U.S. Supreme Court over the president’s authority to reshape import tariffs in response to international emergencies ranged from rousing questions about Congress’s ability to hold onto its trade mandate to talk of pastries. Here are the moments we’re still talking about.

Conservatives Came Out Swinging

Trump-appointed Justice Amy Coney Barrett and Chief Justice John G. Roberts were among the first to grill the government’s attorney, Solicitor General D. John Sauer, in what CNN deemed a “pile on.” Both drilled down on the novelty of the Trump administration’s position that a single phrase, “regulate importation,” in the International Emergency Economic Powers Act, empowered the president to upend the U.S. tariff schedule to address trade imbalances. 

“Can you point to any other place in the Code or any other time in history where that phrase together, ‘regulate importation,’ has been used to confer tariff-imposing authority?” Justice Barrett asked Sauer, who pointed to litigation over the statute’s predecessor and one other Supreme Court case. 

“None of those cases talked about it as conferring tariff authority,” she replied.

With the court’s three Democratic appointees virtually assured to oppose the IEEPA tariffs, just two conservative votes against the president’s authority could topple the framework underpinning the “reciprocal” tariffs and fentanyl tariffs imposed this year. 

Tim Brightbill, co-chair of Wiley Rein’s international trade practice, deemed Chief Justice Roberts, Justice Neil Gorsuch and Justice Barrett the “most skeptical” members of the majority, but noted that “other justices also asked tough questions.”

“This is still a very close decision,” Brightbill told The Export Practitioner.  

Are Tariffs Taxes?

Top of mind for both Chief Justice Roberts and Justice Gorsuch was whether the tariffs, which the administration stood up using the president’s power over foreign affairs, functioned as anything other than a tax on Americans. 

“[T]he vehicle is imposition of taxes on…Americans, and that has always been the core power of Congress,” Chief Justice Roberts said.

“The power to reach into the pockets of the American people is just different,” Justice Gorsuch said at another juncture in the arguments.

Sauer repeatedly endeavored to cast the tariffs as a regulatory measure – one meant to promote U.S. manufacturing over foreign imports — not an effort to raise revenue. 

“This policy is by far the most effective if nobody ever pays the tariffs,” he said. That position could be undermined, according to a New York Times analysis, by the government’s own briefing highlighting President Donald Trump’s celebration of the tariff’s success in reinvigorating the economy “because of the trillions of dollars being paid by countries that have so badly abused us.”

How About Licensing?

The question of licenses, a tool IEEPA identifies by name, unlike tariffs, also arose at several points in the nearly three-hour hearing, including an exchange where Justice Barrett appeared to float a hypothetical regime wherein the U.S. might require licenses for certain exports. 

“[C]ould you license exportation like saying we're not going to allow certain products that have national security implications to be exported?” she asked appellate attorney Neal Katyal. 

Katyal, attorney for the businesses challenging the IEEPA tariffs, affirmed that such a program would be legal, though only if any fees related to such licenses were to cover the government’s costs, not to raise revenue, in case anyone is wondering why BIS is chronically underfunded.

Licenses appeared to strike some of the conservative justice a potential workaround for the administration, Gibson Dunn international trade attorney Lindsay Bernsen Wardlaw noted.

“Both Justices Gorsuch and Barrett, who spent a lot of time questioning the Solicitor General and seemed the most skeptical of the Solicitor General's arguments, also seemed the most eager to find some way to read the statute that would still permit the government's actions, in my opinion, Wardlaw told The Export Practitioner.

As Trump officials have already remarked, even if the justices rule against IEEPA tariffs, the White House is poised to prop them on other authorities.

“The Trump administration is likely carefully considering its options for reauthorizing the tariffs in light of this discussion,” Wardlaw remarked.

Refunds May Be a ‘Mess’

Justice Barrett questioned Katyal as to what the process of refunding so many importers could look like, should the court rule the tariffs illegal. He laid out some broadstrokes possibilities involving administrative protests, which the justice dubbed “a mess.” But, he noted, besides the companies involved in the case who have been guaranteed refunds should they prevail, it’s possible no one else may get a refund at all.

“This Court could limit its decision to prospective relief under the John Q. Hammons case. So there's lots of possibilities,” Katyal said.

Refunds wouldn’t have to be so complicated and historically haven’t been, according to The Cato Institute’s Scott Lincicome.  

“All imports that come into the country have a tariff code assigned for that program, and Customs basically pushed a button and the money went back into people’s accounts, or in the olden days, they would get a check from the Treasury,” he told The Wall Street Journal.