Supreme Court sceptical over legality of Trump's sweeping emergency tariffs

Decision could have significant implications for US President's economic agenda and limits to his power

Rick Woldenberg, chief executive officer of Learning Resources, arrives at the US Supreme Court in Washington. Bloomberg

The US Supreme Court justices expressed scepticism on Wednesday over the legality of US President Donald Trump's sweeping emergency tariffs, as oral arguments began in a case that will have far-reaching implications for his economic agenda.

The issue in front of the court's nine justices was whether Mr Trump has the power to unilaterally impose tariffs under the International Emergency Economic Powers Act. Lower courts have previously ruled against the tariffs.

Mr Trump is the first US president to set tariff rates under the act, invoking the law in announcing tariffs on dozens of countries on “Liberation Day”, when tariff rates were stretched from 10 cent for the UAE and Saudi Arabia, to 50 per cent for low-income countries like Lesotho, arguing the US trade deficit posed a national emergency.

He also cited the law in February to place tariffs on China, Canada and Mexico, arguing the three countries had not done enough to halt the flow of fentanyl and migrants into the US.

Some of the court's conservative justices – including Chief Justice John Roberts – joined the high court's liberal bloc in asking probing questions on the legality of the tariffs.

“The vehicle is imposition of taxes on Americans, and that has always been the core power of Congress,” Mr Roberts said during a line of questioning to US Solicitor General D John Sauer.

Mr Trump has also used the act as a bargaining chip in trade negotiations with US trading partners.

Should the Supreme Court rule against the Trump administration, about $90 billion in tariff revenue might have to be refunded, the Committee for a Responsible Budget said. It could also have implications for trade deals the US has struck with major trading partners.

Mr Trump has also used the act to place tariffs as high as 50 per cent on India and 145 per cent on China this year.

India has no problem with the US despite tariff hit, minister says

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A ruling against the government would have profound consequences on Mr Trump's economic agenda. He has made tariffs a central component of his second term to help pay off interest on the nation's debt and secure trade agreements with the UK, EU and other partners.

Mr Trump, who flirted with the idea of attending Wednesday's session before deciding otherwise, has spoken about the case in existential terms. In a Truth Social post on Tuesday, he called the decision a matter of “life or death”.

Mr Sauer said unwinding those trade agreements “would expose us to ruthless trade retaliation by far more aggressive countries and drive America from strength to failure with ruinous economic and national security consequences”.

Neal Katyal, the lawyer representing the businesses challenging Mr Trump's tariffs, argued the President is seeking to unilaterally alter global trade patterns.

“The President is seeking the power to set aside all of our trade treaties unilaterally under the word 'regulate'. I just don't think it can bear that weight,” he said.

US President Donald Trump said the Supreme Court case on his sweeping emergency tariffs is one of 'life or death'. AFP

Another issue before the court on Wednesday was the consideration of the application of the “major questions doctrine”, which requires Congress to use direct language to authorise broad-setting economic sanctions from the executive branch. Those challenging the administration argued the words “tariff” and “tax” do not appear in the law.

The justices questioned Mr Sauer over the major questions doctrine. The US solicitor general said it does not apply to this case because of the President's broad authorities, adding that the core issue is not about tax but foreign commerce.

Justice Sonia Sotomayor, a liberal member of the court, said “it's a congressional power, not a presidential power, to tax”.

“And you want to say tariffs are not taxes, but that's exactly what they are. They're generating money from American citizens, revenue, and you say it's incidental to the regulatory purpose,” she said.

The cases – Learning Resources, Inc v Trump, and Trump v VOS Selections – are the first that the US Supreme Court will consider in a key policy of Mr Trump's second term. The two cases were consolidated due to their similarity.

It could take months for the Supreme Court to address a ruling on the case, which Mr Trump has requested on an expedited basis. It did not cover his sectoral specific tariffs on goods such as aluminium or steel.