Will the court roll back Trump tariffs? Odds are high

The Trump administration's sweeping tariff policy, central to Trump's trade and economic agenda, faces a critical test before the US Supreme Court. If the Court upholds the lower court ruling that struck down the tariffs, the federal government could be forced to refund billions of dollars collected from American companies. Treasury Secretary Scott Bessent, in a recent NBC interview, acknowledged this possibility, signalling the enormous fiscal and political implications of the case. He also spoke about a backup plan. His comments indicate the Trump administration is readying for a setback in the Supreme Court.

With a looming October 14 deadline and the Supreme Court expected to decide by September 10 whether it will hear the case, the outcome could shape not just Trump’s trade legacy, but the limits of presidential power in economic policy. Trump can lose face globally after arm-twisting many countries into trade deals and coercing many others like India to yield to his demands.

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Trump tariffs are on shaky legal ground
At the heart of this dispute is Trump’s use of the International Emergency Economic Powers Act (IEEPA), a 1977 law traditionally used to impose sanctions during national emergencies. Trump invoked IEEPA to impose what he called "reciprocal" tariffs, aimed at correcting trade deficits and curbing the flow of fentanyl and other illicit drugs into the US.

But the law has never been used to levy tariffs before. Historically, it’s been a tool for freezing assets or sanctioning hostile foreign actors. Critics argue that the Trump administration stretched the law beyond its intended scope, effectively turning it into a catch-all tool for economic policymaking.

Two lawsuits, one filed by small importers and the other by a coalition of 12 Democrat-led states, challenged the legality of Trump’s move. Their argument centered on the US Constitution, which gives Congress, not the president, the power to set tariffs and taxes. Delegation of this power must be clear and limited. In this case, they argued, the delegation was neither.

In a 7-4 decision, the US Court of Appeals for the Federal Circuit sided with the plaintiffs, stating, "It seems unlikely that Congress intended, in enacting IEEPA, to depart from its past practice and grant the President unlimited authority to impose tariffs." The court emphasized that using IEEPA to justify blanket tariffs violated the Supreme Court’s "major questions" doctrine, which demands clear Congressional authorization for executive actions of vast economic and political significance. The appeals court allowed the tariffs to remain in effect through October 14, giving the Trump administration an opportunity to appeal the decision to the Supreme Court.

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Why the Supreme Court can rule against Trump tariffs
The Trump administration has appealed to the Supreme Court, asking for a fast-track review. The Justice Department wants a decision by September 10, with oral arguments to follow in November, if the case is accepted.

On the surface, Trump might appear to have an advantage. The court has a 6-3 conservative majority, and three justices were appointed by Trump himself. However, recent history shows that Trump-appointed justices do not automatically rule in his favour. In two significant cases since 2020, Trump-nominated justices sided with the majority in rulings that went against his interests. Moreover, conservative justices have increasingly emphasized restoring power to Congress in the face of decades of executive branch expansion. The court’s use of the "major questions" doctrine to rein in executive overreach has gained momentum, and this case fits squarely within that framework.

Thus, despite the Court's ideological composition, there's a real possibility that the justices could rule against Trump’s tariffs on the grounds that they represent an unconstitutional expansion of presidential power, especially if they see IEEPA’s use here as setting a dangerous precedent.

This case isn’t just about tariffs. It’s about who holds the power to shape the American economy and how far a president can go in asserting that power without explicit Congressional backing. The Supreme Court's decision will reverberate far beyond the Trump administration. If it upholds the tariffs, it could vastly expand presidential authority over trade policy. If it strikes them down, it will mark a reassertion of Congressional primacy in economic affairs.

Loss of face, billions in refunds, shrunk power
If the Supreme Court upholds the lower court's ruling, the consequences would be immediate and costly. Secretary Bessent has made it clear that the federal government would be required to refund tariffs collected under the invalidated policy, potentially billions of dollars. But Bessent, echoing Trump’s rhetoric, framed the issue as more than financial. "This isn’t about the dollars. This is about balance," he said, warning that a loss would "diminish President Trump’s negotiating position" on the world stage.

Trump himself has issued dire warnings, saying on September 2 that without tariffs, the US could become a "Third World country," and suggesting he may "unwind" existing trade deals if the Court doesn't side with him.

Even if Trump loses at the Supreme Court, his administration has alternative paths to pursue a similar tariff agenda, though none offer the same sweeping authority. According to a Bloomberg News report, the Trump administration could turn to Section 232 of the Trade Expansion Act of 1962, which allows the president to impose tariffs on imports that threaten national security. This tool was used by Trump in his first term to justify tariffs on steel and aluminum.

Section 232 gives the president industry-specific authority, meaning he could still target sectors like steel and aluminum, semiconductors and wind turbines. However, this is a narrower and more legally vulnerable path. Tariffs under Section 232 must be supported by a Department of Commerce investigation and are subject to more rigorous judicial review. Any other option too won't give Trump the same power with which he has recklessly imposed tariffs on other countries. While a Supreme Court setback will have huge financial consequences for the Trump administration, more importantly it will mean loss of face for Trump who will no longer be able to use tariffs as an all-purpose tool to extort economic, political and strategic benefits from other countries.

Talking of alternatives if the Supreme Court strikes down tariffs, Treasury Secretary Bessent said, “But there are numerous other avenues that we can take. They diminish president Trump’s negotiating position. This isn’t about the dollars. This is about balance. The dollars are an after amount.”