Supreme Court’s Trump Tariff Skepticism Means Uncertainty Reigns

President Donald Trump’s use of broad powers to impose his signature tariffs faced a barrage of skeptical questions at the Supreme Court on Wednesday that signal it may be ready to intervene.

Businesses and countries suffering from the duties and looking for resolution, though, are set for months of uncertainty whatever happens.

Whether or not the US high court rules Trump wrongly imposed tariffs on dozens of nations by invoking the 1977 International Emergency Economic Powers Act, the reality is that the president loves tariffs. And trade lawyers and experts say there are plenty of other laws he can draw on to fill the tariff gap if needed, even if none offers the immediacy Trump relishes.

That means uncertainty will hang over big geopolitical negotiations with China, the European Union and other trading partners, and the day-to-day conduct of business for the thousands of companies paying the duties or trying to find ways around them.

The Trump administration put on a brave face after Wednesday’s 2 1/2-hour arguments, which featured skeptical questioning by key conservative justices of the government’s case.

White House press secretary Karoline Leavitt said Trump had spoken with cabinet members who attended the hearing as well as some of his lawyers and was upbeat. “He remains optimistic that they’ll do the right thing,” she said.

Scott Bessent in Washington, DC, on Nov. 5.

Photographer: Eric Lee/Bloomberg

Treasury Secretary Scott Bessent, who attended Wednesday’s arguments, told Fox Business he “came away very, very optimistic.”

Read More: Here Are Trump’s Options If Ruling Against Tariffs Is Upheld

Listening from afar was Travis McMaster, general manager of Washington state-based COCOON, which imports sleeping bag liners, pillows and other travel accessories. He’s hopeful the court will find Trump’s tariffs unconstitutional, but is also resigned to ongoing levies and their consequences — from holding back on trips to trade shows that might generate new business to cutting his product line.

“We’ve seen the resolve of this president,” McMaster said.

Josh Lipsky, who leads the work on international economics at the Atlantic Council, a think-tank, said the list of questions hanging over Trump’s tariffs has only grown. They now run from just what a Supreme Court ruling against Trump’s tariffs might look like to whether it would call for refunds of the duties already paid.

That’s before you get to geopolitics. Ruling the tariffs Trump has imposed under IEEPA are illegal would mean “undercutting the core of not just the president’s international economic agenda, but also I would argue a lot of his foreign policy agenda,” Lipsky said.

Tariffs on China might be easier to replace because of existing authorities that Trump drew on during his first term, Lipsky said. But a ruling against Trump could also lead other economies from the EU to Brazil and India now negotiating with Trump to recalibrate their positions.

There are also trade deals being negotiated with countries like South Korea and Vietnam, all of which now face additional questions given the tariffs Trump has levied to apply pressure are now at risk.

China Calculations

Bessent, who has been leading talks with China, and others have emphasized the role tariffs played in helping Trump secure a trade truce last week. An adverse Supreme Court ruling isn’t expected to have a huge impact on the relationship itself.

Part of the reason for that is China is likely to face higher tariffs implemented through other authorities available to Trump. A temporary setback for the administration could give China a tactical win, but it is unlikely to be a permanent victory, according to a person familiar with the matter.

On the other hand, much of the recent economic crossfire between the US and China wasn’t related to tariffs and had more to do with each countries’ chokehold on sensitive products. The US imposed export controls on semiconductors and other advanced technologies while China used its dominance of rare earths development to impose pain on the US and its allies.

The fragile detente reached by Trump and Chinese President Xi Jinping is expected to lead to further meetings between the two leaders next year. Bessent has described the relationship as being “on a much more even keel now.”

President Donald Trump and Xi Jinping on Oct. 30.

Photographer: Mark Schiefelbein/AP Photo

But if the US imposes new tariffs using one of the other authorities at Trump’s disposal, that could also be viewed by the Chinese as a violation of the truce, potentially sending the relationship into a tailspin again, the person said.

“It’s widely expected that they will turn to other authorities to carry out the America First trade agenda that they laid out in the policy memo on Jan. 20,” said Blake Harden, senior chief trade policy adviser at EY’s Washington Council practice.

Harden said she expects the administration to continue using Section 301, the statute that underpinned Trump’s first-term China tariffs, in some instances, or continuing with the Section 232 sectoral tariffs he has so far applied on products including cars and steel and threatened to use against semiconductors, pharmaceuticals and robots.

They may also use other authorities like Section 122, which allows tariffs of up to 15% for 150 days, or Section 338, which has been on the books since 1930 but never used.

Uncertainty, Harden said, “is the name of the game right now.”

The consequences of so many unknowns also apply to the economy, where companies will need to plan for many contingencies regarding their supply chains and costs.

According to Bloomberg Economics, a broad ruling against Trump would cut the US average effective tariff rate to 6.5%, a level not seen since before the president’s April 2 Rose Garden announcement of his “Liberation Day” tariffs on dozens of countries.

GLOBAL REACT: Supreme Court Puts US Trade Policy in Limbo

Such a move would blunt the impact of Trump’s trade war on the US economy, leading to a 0.6% hit to US GDP, compared to a 1.7% blow if the current tariffs are preserved. That also doesn’t account for the potential economic boost from tariff revenue refunds.

Bessent has gone back and forth about how important tariff revenue is to balancing the US’s fiscal books. He has by turns said it would be “terrible” if the Supreme Court rules against the administration, thereby forcing the Treasury to return a good portion of the revenue already collected, and said the revenue is “all extra” and won’t have that big an impact if it goes away.

The tariff revenue has played an important role in narrowing the budget deficit, bringing it down to $1.78 trillion for the most recent fiscal year, a drop of 2% from the $1.82 trillion in 2024. But it has only made a dent in the overall trajectory of the government’s borrowing. And the amount of tax revenue being taken in by the government is expected to shrink as a result of Trump’s signature tax cuts passed earlier this year.

“The deficit would be even wider if they weren’t generating revenue through this channel,” said Rachel Ziemba, an adjunct senior fellow at the Center for a New American Security.

‘Massive Project’

Customs broker Cindy Allen said the lack of predictability stemming from Trump’s tariffs — especially those using IEEPA — is her clients’ biggest concern. Citing IEEPA, the administration has taken almost immediate tariff action “without any published investigation or process has created such instability in importing.” That will continue, at least for now.

Allen, who is CEO of Trade Force Multiplier LLC, said whatever the IEEPA outcome, changes to the tariff regime aren’t going to help with the administration’s rocky tariff rollout.

“It is very difficult at Customs and Border Protection. Right now, with the government shutdown, they are all considered essential they haven’t been paid in over a month,” she said. “If the court says refunds are to be issued I think it’s going to be a massive project.”

Businesses certainly aren’t planning on a rapid refund.

Nichole MacDonald, who patented a 10-pocket sash bag and founded Sash Group Inc. in California 13 years ago, said she’s “somewhat optimistic” the court will rule against the administration based on Wednesday’s arguments. But she’s worried any relief will come too late for small businesses like hers.

“Until I see a duties invoice that reflects a lower tariff, I’m not getting my hopes up,” she said.

She has leather bags produced in India stuck there because she can’t afford the $575,000 in tariffs to import them. So she scrambled to make more non-leather bags in China because the cost is still lower to import them and at least she’ll have more product to sell in the fourth quarter.

MacDonald said she has already had to raise her prices twice this year and lay off seven of her 12 employees to pay the additional costs from duties. She’s concerned the damage from tariffs may be irreversible.

“We’re not dead in the water yet, but my fear is that by the time something happens, it might be too late,” she said. “As a small business, you don’t have enough reserves to just coast your business along for eight or 12 months while the government figures out what it’s doing.”

--With assistance from Enda Curran and Catherine Lucey.

To contact the reporters on this story:
Shawn Donnan in Washington at sdonnan@bloomberg.net;
Daniel Flatley in Washington at dflatley1@bloomberg.net;
Laura Curtis in Los Angeles at lcurtis7@bloomberg.net;
Mark Niquette in Columbus at mniquette@bloomberg.net

To contact the editors responsible for this story:
Margaret Collins at mcollins45@bloomberg.net

Brendan Murray, Malcolm Scott

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