The U.S. Supreme Court on Wednesday will hear arguments on whether U.S. President Donald Trump has authority to impose tariffs under emergency powers — a case Trump has called “one of the most important” in the court’s history.
The case centres around Trump’s use of national emergency authorities to lay tariffs on countries around the world, including the so-called fentanyl tariffs on Canada, Mexico and China, as well as the “reciprocal” levies on dozens of other nations.
Trump has argued the tariffs are a “vital” negotiating tool to reach deals on trade and policy, and points to the rising revenues they are generating for a government facing a nearly US$38 trillion national debt.
Yet the state and small business plaintiffs, who say they’re facing economic harm from the extra costs on imports, have so far won support from lower courts that have ruled Trump overstepped his authority as president by ordering tariffs without approval from Congress.
Whether the nation’s highest court will uphold those rulings is an open question, lawyers and analysts say.
“It could go either way,” said Chi Carmody, a professor at Western University who studies international trade law.
Trump declared a national emergency on fentanyl in February to justify the economy-wide tariffs on Canada, Mexico and China, saying they were necessary to elicit action from those countries to curb the flow of the deadly opioid.
Those tariffs, now set at 35 per cent for Canada, do not apply to goods compliant with the Canada-U.S.-Mexico Agreement on free trade (CUSMA).
In an April order, Trump said the United States’ trade deficits with several countries also amounted to a national emergency, dubbing his announcement of “reciprocal” tariffs as “Liberation Day.”
Both emergencies were declared under the 1977 International Emergency Economic Powers Act (IEPPA), a law that allows the president to manage economic transactions during an emergency. The Trump administration has argued that gives him broad power over how to respond, including through actions on imports to the U.S.
The plaintiffs have argued the IEEPA makes no specific mention of tariffs as a remedy to national emergencies, that Trump’s tariffs are an inappropriate response to the specific emergencies he declared — particularly the one over the fentanyl crisis — and that persistent trade deficits aren’t an “emergency” at all.
They also point out that the U.S. Constitution gives Congress the sole authority over domestic and foreign taxes, which includes tariffs on countries as a whole. Other powers, like Section 232 of the Trade Expansion Act, give the president authority to target specific products for national security purposes.
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Two lawsuits — one filed by more than a dozen states and some small businesses against the fentanyl and reciprocal tariffs, the other from other business owners against just the global tariffs — were combined into one case.
The U.S. Court of International Trade ruled against Trump in May, and the U.S. Court of Appeals for the Federal Circuit in Washington, D.C., followed suit in August.
If the Supreme Court upholds those rulings, the small business plaintiffs say they could be owed as much as US$100 billion in refunded tariff payments, which the U.S. Department of Justice has argued could financially cripple the government.
“With tariffs we’re a strong, sound country,” Trump said in the Oval Office earlier this month. “We’re a nationally secure, internationally secure country. We’re a very rich country,” he said.
“Without tariffs, it’s a slog for this country, big slog.”
The case has earned support from more than 700 American small businesses who collectively signed an amicus brief as a coalition called We Pay the Tariffs.
In a conference call with journalists last week, some of those business owners said the higher cost of importing their products from manufacturing countries like China has forced them to pause expansion opportunities, new hires and investments in innovation.
Even businesses that manufacture their products in the U.S. — which Trump has said is the goal of his tariffs — said they’re paying more for materials.
“You can’t fix an emergency with a chainsaw,” said Alicia Navarro, whose North Carolina-based company Two Hounds Design sells its patented no-pull dog harnesses in the U.S., Canada and abroad.
“I believe that what this has done, with 40 changes in this year alone, all that’s being done is harm. And as a small business, I don’t have the tools and the resources and the team to navigate these changes.”
Jess Nepstad, owner of coffee and drinkware product-maker Planetary Design in Montana, said he openly wept when the first court ruling striking down the tariffs was released.
“I had no idea I was carrying that much stress,” he said, after noting his company has shifted its entire focus to growing outside the U.S. because of the tariffs, including in Canada.
He and other business owners said they have spoken to both Republican and Democrat lawmakers in Washington and their home states about the pressures they’re facing, but Nepstad said they appeared “frozen.”
“I think there’s a lot of career politicians out there that are nervous about standing up for their constituents because of the retaliatory nature of this administration,” said Cassie Abel, who runs a women’s outdoor apparel company called Wild Rye in Idaho.
“We had a few people say that straight up, (but) I’m not going to name names.”
Jeffrey Schwab of the Liberty Justice Center, one of the lead lawyers for the plaintiffs, said on the We Pay the Tariffs call that he expects the Supreme Court to rule before the end of the year due to the desire from both sides for a speedy resolution.
He said past court rulings in their favour has his side feeling good about their chances.
“We feel very confident … because we only have to win one of our arguments to win the case, and the administration has to win every single one.”
An early October note to investors from JPMorgan said 70 to 80 per cent of trade and legal experts surveyed at a recent London conference expect the justices to strike down Trump’s tariffs.
But Carmody was more skeptical, noting the conservative supermajority of the high court, thanks to Trump’s three appointments in his first term.
“This Supreme Court has generally adopted a sort of deferential posture to the exercise of presidential powers in foreign affairs recently,” he said.
“I’m not convinced that tales of importer or even exporter woe are necessarily going to sway the court the way it did the lower courts,” he added, while acknowledging the plaintiffs’ “sound” arguments.
While economists and legal experts agree the case could set a new precedent reigning in presidential tariff power, they note that Trump will still be able to use Section 232 like he’s done to tariff steel, aluminum, autos and more.
If the IEEPA tariffs are struck down, they say, Trump will likely expand the use of Section 232 and find other ways to tariff countries as he sees fit to extract concessions.
Tariffs will also likely factor into next year’s CUSMA review, though Carmody noted that there will be “a lot of kicking and screaming and pounding of fists on the desk” before any agreement is struck.
He also predicted a long, dragged-out court fight if the Trump administration is ordered to repay the small business plaintiffs, who will have to request any refunds from U.S. Customs and Border Protection — and those requests may be refused.
“It’s going to take a very long time and there’s going to be some uncertainty” going forward, he said.
