Trump tariffs: Supreme Court to hear arguments in historic case

US high court's decision on Trump's signature policy could have far-reaching implications

The US Supreme Court is set to hear oral arguments on President Donald Trump's sweeping emergency tariffs. Reuters

The US Supreme Court on Wednesday is set to hear arguments over US President Donald Trump's sweeping emergency tariffs in a case that could have significant implications for the global economy and the limits of presidential power.

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

Mr Trump has acknowledged the significance of the case, referencing the court's decision in existential terms.

DP World predicts 2026 will be a 'year of growth' despite tariffs

Read More

"Tomorrow’s United States Supreme Court case is, literally, life or death for our Country," he wrote in a Truth Social media post on Tuesday.

"With a Victory, we have tremendous, but fair, Financial and National Security. Without it, we are virtually defenseless against other Countries who have, for years, taken advantage of us."

Tariffs have been one of Mr Trump's signature economic policies during his second term in office, and have cast uncertainty on the global economy.

Under the Constitution, Congress is given the power to impose taxes. But Mr Trump has argued that a 1977 law, the International Emergency Economic Powers Act, gives him the power to impose tariffs during an emergency. While the law allows a president to “regulate importation” during emergencies, it does not specifically mention tariffs.

Mr Trump has used the IEEPA to place tariffs on imports from China, Canada and Mexico – the US's three largest trading partners – saying they had failed to prevent the flow of fentanyl into the US.

And in April, he used the IEEPA when he announced a sweeping set of tariffs, ranging from 10 to 50 per cent on dozens of countries, to address the US trade deficit, which he said was an “extraordinary and unusual threat”.

Trump announces tariffs on the rest of the world

01:03

Mr Trump had considered attending Wednesday's hearing but opted against it, saying it would be a distraction. He was expected to speak at the America Business Forum in Miami later that day.

However, in attendance will be Treasury Secretary Scott Bessent, who has said there are other options for the Trump administration if the Supreme Court were to rule against it.

“We also have numerous trade deals in effect. So I don’t think that countries are going to back out of the trade deals,” Mr Bessent said.

Lower courts have previously ruled that the tariffs enacted under the IEEPA are illegal. If the Supreme Court were to uphold the ruling, about $90 billion of the $195 billion in tariff revenue might have to be refunded, the Committee for a Responsible Budget said, quoting data from the US Customs and Border Protection.

The threat and implementation of tariffs have caused shock waves through the global economy this year, weighing on growth output. While Mr Trump's withdrawal of the harsher “reciprocal” tariffs and the lack of retaliation by trading partners have soothed some fears, the International Monetary Fund last month warned risks still remain.

Those lower-than-expected tariff increases have had a minimal impact so far on the Middle East, according to the World Bank.

Most economists also expect tariffs to lead to higher inflation as costs are passed on to consumers. Officials at the Federal Reserve, who have moved cautiously this year amid Mr Trump's on-again, off-again tariff policy, broadly suggest tariffs will lead to a one-time price increase.

A report from Oxford Economics estimates that a Supreme Court decision against the Trump administration to lift country-specific tariffs would lower the effective US tariff rate to 7.8 per cent, with Vietnam, Mexico and Canada to benefit most.

But “the odds that tariffs stay at that level are low”, wrote Grace Zwemmer, associate US economist at Oxford Economics, and Sara Godfrey, US international economist.