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President Trump is rushing to rebuild his tariff wall after the Supreme Court struck down a pillar of his trade agenda by ruling his use of the International Emergency Economic Powers Act (IEEPA) to justify them was unlawful.
Ahead of the first State of the Union address of his second term, Trump is racing ahead with his backup plan, laying the groundwork to replace tariffs he imposed on almost every U.S trading partner.
The court’s decision was a major blow to Trump and an important legal victory for thousands of businesses that may now be eligible for tariff refunds.
Even so, Trump still has plenty of power to impose new tariffs to replace the old, and he is warning trading partners against celebrating with his critics.
“Any Country that wants to ‘play games’ with the ridiculous supreme court decision, especially those that have ‘Ripped Off’ the U.S.A. for years, and even decades, will be met with a much higher Tariff, and worse, than that which they just recently agreed to,” Trump wrote Monday in a post on Truth Social.
In a 6-3 ruling released Friday, the court held that Trump did not have the legal authority to issue tariffs under the IEEPA, a 1977 law that gives the president power to “regulate” trade in response to national security threats.
Trump had used the IEEPA to impose tariffs on Canada, Mexico and China soon after taking office last year, claiming those countries had not done enough to stop fentanyl trafficking into the U.S.
The president also used the IEEPA to impose tariffs on dozens of other countries during his “Liberation Day” announcement in April. Many of those tariffs were reduced in later weeks amid bond market turmoil and negotiations with trading partners.
The court held that while the IEEPA allows Trump to block or limit the composition of foreign trade, it does not allow him to set tariffs, which falls within Congress’s exclusive constitutional power over taxation and spending.
Congress, however, had already deferred some of its power over tariffs to the White House through other laws Trump used during his first term and is turning to again in his second.
“The White House has been bracing for a negative outcome. Tariffs ruled illegal can be rapidly reinstated via other levers,” wrote Diane Swonk, chief economist at KPMG US, in an analysis. “It has been preparing for this.”
Trump’s first move was to impose a 10 percent universal tariff through Section 122 of the Trade Act of 1974. That provision allows the president to set an import tax of up to 15 percent to address balance of payment issues with foreign nations, for up to 150 days.
The president later threatened to increase that tariff to 15 percent.