Tariffs in trouble: On the U.S. Supreme Court and Donald Trump

In a major blow to a central pillar of U.S. President Donald Trump’s foreign policy, the country’s Supreme Court (SCOTUS) has ruled by a 6-3 margin that his use of the International Emergency Economic Powers Act (IEEPA) to impose tariffs on numerous countries is not in accordance with law and must be struck down. With Chief Justice John Roberts and two other conservative justices appointed by Mr. Trump siding with the three liberal justices on the subject, the Court ruled that Mr. Trump’s assertion of “extraordinary power to unilaterally impose tariffs of unlimited amount, duration, and scope”, is contravened by the absence of “clear congressional authorization” to exercise it. It also observed that the IEEPA contained no reference to tariffs or duties and that the executive had not identified any statute that used the word “regulate” to authorise taxation. Arguing that until now no President has read IEEPA to confer such power, the SCOTUS concluded that all the evidence available and its reading of the statutes implied that the Court believed that “IEEPA does not authorize the President to impose tariffs.” Unsurprisingly, Mr. Trump reacted angrily on social media, posting that he would be raising his global tariff rate to 15%, after initially suggesting that it would be imposed at 10%, under the authority conferred to the White House for 150 days under Section 122 of the Trade Act of 1974. Tariffs imposed under laws other than the IEEPA, including those on aluminium and steel under Section 232 of the Trade Expansion Act of 1962, are unaffected by this ruling although Mr. Trump would face challenges in bringing fresh tariff rounds under this umbrella.

While multiple countries were slapped with tariffs earlier, including India at a whopping overall rate of 50% owing to Washington’s objections to New Delhi purchasing oil from Russia, the impact of the SCOTUS ruling will vary based on the specifics of trade agreements struck, if any. Indian negotiators seeking to conclude the terms of a free trade agreement would not be blamed for feeling like they were suspended in limbo after the ruling has changed the terms of debate on which sectors to open up to concessionary rates in bilateral trade, especially after the American side’s punitive potential has now been defanged to an extent. At a broader level, the ruling is to be welcomed by anyone valuing robust democratic checks and balances. The two administrations of Mr. Trump have stretched, and in some cases exceeded, the scope of permissible policy actions under domestic and international law. Until this ruling by the court, there has been a deafening silence on containing such actions by institutions rooted in constitutional authority that are capable of imposing a countervailing force.