Trump’s Global Tariffs Struck Down by US Supreme Court (2)

The US Supreme Court struck down President Donald Trump’s sweeping global tariffs, undercutting his signature economic policy and delivering his biggest legal defeat since he returned to the White House.

Voting 6-3, the court said Trump exceeded his authority by invoking a federal emergency-powers law to impose his “reciprocal” tariffs across the globe as well as targeted import taxes the administration says address fentanyl trafficking.

The justices didn’t address the extent to which importers are entitled to refunds, leaving it to a lower court to sort out those issues. If fully allowed, refunds could total as much as $170 billion — more than half the total revenue Trump’s tariffs have brought in.

Trump said at a press conference that he will reimpose some tariffs using alternative legal tools. The fall-back options tend to be either more cumbersome or more limited than the wide-ranging powers Trump asserted under the International Emergency Economic Powers Act.

Read More: Trump’s Options After Supreme Court Said His Tariffs Are Illegal

Stocks rose on news of the decision given investors previously fretted tariffs would hurt the outlook for economic growth and company earnings. Treasuries extended declines with yields rising broadly and the rate on the benchmark 10-year note climbing to 4.10% as investors priced in the likelihood of lower tax revenues. A Bloomberg gauge of the dollar fell as much as 0.2% before erasing the drop.

The decision invalidates Trump’s April 2 “Liberation Day” tariffs, which put levies of 10-50% on imports from most countries. It also scuttles duties he imposed on goods from Canada, Mexico and China in the name of addressing fentanyl trafficking, and it casts doubt on separate IEEPA tariffs placed on goods from Brazil and India for various reasons.

Trump Agenda

The ruling strikes at the heart of Trump’s agenda, blunting an all-purpose cudgel he has enthusiastically wielded against trading partners. Trump this month set up a process to impose tariffs as high as 25% on goods from countries doing business with Iran. He previously threatened to impose tariffs on European countries resisting his attempt to take over Greenland.

The decision could cut the US average effective tariff rate by more than half. A Bloomberg Economics analysis before the ruling concluded that a broad decision against Trump would reduce the rate from 13.6% to 6.5%, a level not seen since March. Trump’s tariffs on steel, aluminum and automobiles were put in place under a different law, so are not directly affected.

Trump blasted the ruling — and the court — during a press conference in Washington.

“The Supreme Court’s ruling on tariffs is deeply disappointing, and I’m ashamed of certain members of the court — absolutely ashamed,” Trump said. “They’re very unpatriotic and disloyal to our Constitution.”

Two Trump appointees — Justices Neil Gorsuch and Amy Coney Barrett — joined Chief Justice John Roberts and the court’s three liberals in the majority.

When the opinion was released, Asia was asleep and Europe was headed into the evening and a weekend, so the full scale of the worldwide response and markets reaction will be felt in coming days. Few officials wanted to appear to be gloating. A UK official noted that the ruling focuses only on one prong of Trump’s trade policy. The head of Germany’s chamber of commerce called for “cool heads.”

GLOBAL REACT: SCOTUS Terminates Trump Tariffs - They’ll Be Back

“The administration’s tariff taxes – which my business was forced to pay – threatened our survival,” Victor Owen Schwartz, founder and president of V.O.S. Selections Inc., one of the companies that sued over tariffs, said in a statement. “These duties were not like past tariffs set by Congress, which we could plan around. These new tariffs were arbitrary, unpredictable, and bad business.”

Some companies were eager to turn to the subject of refunds of tariffs that they paid.

“They have a record of what they took from me, just reverse the gears, guys, and gimme my money back,” Rick Woldenberg, chief executive of toymaker Learning Resources Inc., another plaintiff. “The US government sends out millions of tax refunds a year, and no one, when they open the check, goes: ‘Oh my God, how did they do that? That’s a marvel.’ They know how to do it. They can do it. It’s our money. Give it back.”

The high court majority said the 1977 law doesn’t authorize tariffs. IEEPA, as the law is known, gives the president a panoply of tools to address national security, foreign policy and economic emergencies but doesn’t explicitly mention tariffs or taxes.

“When Congress grants the power to impose tariffs, it does so clearly and with careful constraints,” Roberts wrote in the court’s majority opinion. “It did neither here.”

Refund ‘Mess’

The justices in the majority splintered on some parts of their reasoning.

Justices Brett Kavanaugh, Clarence Thomas and Samuel Alito dissented. Kavanaugh wrote for the group that IEEPA “clearly authorizes the president to impose tariffs.” He added that the ruling “might not prevent presidents from imposing most if not all of these same sorts of tariffs under other statutory authorities.”

Kavanaugh said the refund process was “likely to be a ‘mess,’ as was acknowledged at oral argument.”

Read More: More Than 1,000 Firms Join Tariff Suits as Court Ruling Looms

The conservative-dominated Supreme Court until now had largely supported Trump’s sweeping assertions of presidential power in his second term, siding with him in a torrent of emergency orders that let him implement policies temporarily. The tariff decision is the court’s first full-scale ruling on Trump’s far-reaching initiatives.

Peter Navarro is the architect of US President Donald Trump’s trade war. He talks to Mishal Husain about US-China relations and an upcoming Supreme Court ruling that could unravel many Trump tariffs.

“This is a win for the wallets of every American consumer,” Senate Democratic leader Chuck Schumer said in a statement. “Trump’s chaotic and illegal tariff tax made life more expensive and our economy more unstable. Families paid more. Small businesses and farmers got squeezed. Markets swung wildly.’

The tariffs were challenged in two lawsuits filed by small businesses, along with a third case pressed by 12 Democratic state attorneys general. All three lower courts to rule in the cases declared the tariffs to be unlawful, though the decisions were put on hold during the Supreme Court review.

The case is Learning Resources v. Trump, 24-1287.

--With assistance from Zoe Tillman, Skylar Woodhouse, Adrienne Tong and Laura Curtis.

To contact the reporter on this story:
Greg Stohr in Washington at gstohr@bloomberg.net

To contact the editors responsible for this story:
Elizabeth Wasserman at ewasserman2@bloomberg.net

Steve Stroth

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