Supreme Court Takes Up Tariff Battle

September 16th, 2025
Ayat Nayyer

The impact of recent trade tariffs is becoming increasingly visible to American consumers, with August inflation rising 2.9%, coffee prices surging 21% and furniture costs up 10%.

Despite being imposed by President Trump in April on the self-dubbed “Liberation Day,” tariffs and their effects have manifested unevenly as goods move through supply chains at varying rates. Many US businesses rushed to import large quantities of goods before the tariffs took effect, but these stockpiles are now running low. Trump’s April tariffs, which included a 10% baseline; 25% on imports from Canada, China, and Mexico; and up to 50% on imports from Brazil and India, were imposed under the International Emergency Economic Powers Act (IEEPA). But did he have the authority to impose them under IEEPA in the first place? The Supreme Court (SCOTUS) is set to take up that question in November, and its ruling could have lasting consequences for U.S. trade policy.

What is the IEEPA?

The IEEPA, enacted in 1977, is the successor to the Trading with Enemies Act, which was originally intended for wartime. However, Congress worried that presidents were abusing these emergency powers for non-war purposes and responded by passing IEEPA. In order to be used, IEEPA requires a declaration of an “unusual and extraordinary threat” concerning foreign policy or national security. Historically, it has been used for sanctions, but whether this regulation also includes tariffs is currently under debate.

The Legal Dispute

The Court of International Trade (CIT), which handles customs and trade disputes, previously ruled that Trump exceeded his authority under IEEPA with his "reciprocal" and “tracking and immigration” tariffs. More recently, the U.S. Court of Appeals for the Federal Circuit (CAFC) affirmed most of the CIT’s decision and remanded for further proceedings. CAFC postponed the ruling’s effect until October 14, 2025, so the government can appeal to SCOTUS, which now holds discretion over the case.

Opponents argue that IEEPA was never meant to give presidents unlimited tariff authority to “regulate” imports in emergencies, since it explicitly mentions neither “tariffs” nor “duties.” Since imposing tariffs is essentially taxation, the Constitution grants that power only to Congress. Furthermore, under the “major questions doctrine,” even when the president asserts authority over major economic or political issues, Congress must authorize it explicitly. Courts have said that the tariff program's expansive scope warrants the invocation of that doctrine.

However, the Trump administration claims that “regulating imports” under IEEPA includes tariffs, especially under national emergencies such as trade deficits. IEEPA confers this flexibility, they contend, when benefits to national security and the economy arise.

Broader Consequences

SCOTUS's decision, whichever way it goes, will have major economic and political implications. If they agree with the lower courts, the government might have to refund the money paid by importers or others who bore the cost, potentially amounting to $750 billion to $1 trillion. Though if they term the tariffs legal, it would further cement federal control.

Undoubtedly, the ramifications will extend well beyond the courtroom, and they are already being felt across the nation. The average tariff rate of 17.4% for households has raised annual costs by an estimated $2,300. With wages rising more slowly than prices, low-income families are facing the strain. Macroeconomically, prices are rising across the food, retail, manufacturing, and healthcare sectors in tandem with a weakening labor market. Fed Chair Jerome Powell cautioned that “the downside risks to employment are rising” and could “materialize…in the form of sharply higher layoffs and rising unemployment.” Tense relations have moved major US trade partners, such as Canada, to look for alternative sources of imports, attenuating dependence on US trade. Despite these negative effects, a Congressional Budget Office (CBO) report from last month projects that the increased tariff rates under Trump could actually help reduce the US federal deficit by about $4 trillion over the next decade, primarily through increased government revenue and a focus on domestic industries.

Concluding Thoughts

While the courts are engaged in a legal fight over IEEPA, American households, consumers, and businesses will directly feel its outcome. Be it higher prices at the checkout line or the long-delayed pinch on everyday essentials like coffee and furniture, SCOTUS’s ruling in November will be vital in defining the extent of presidential power and the future direction of U.S. trade policy.