IEEPA grew out of the Trading with the Enemy Act (TWEA), which was restricted to wartime. In 1977 Congress specifically created a new law to permit the president to deal with peacetime emergencies, threats to national security, foreign policy, or the US. economy and so on, short of actual war. He could block or embargo trade altogether, but not apply tariffs. This, the SC ruled, was a tax-raising power reserved for Congress, not the president.
This is what the ruling says:
"While taxes may accomplish regulatory ends, it does not follow that the power to regulate includes the power to tax as a means of regulation. Indeed, when Congress addresses both the power to regulate and the power to tax, it does so separately and expressly. That it did not do so here is strong evidence that “regulate” in IEEPA does not include taxation."
Trump's legal team had argued that to regulate trade also included the power to do so by using tariffs that are nothing more than a tax on American consumers of imported goods.
In his deranged press conference following the decision, Trump attacked the six members of the SC who ruled against him, accusing them of making a big mistake and even of being influenced by “foreign interests.”
Nobody asked him who provided the legal advice he got last year, which suggested he could introduce swingeing and sweeping tariffs on all and sundry on a whim to punish countries that he claimed had been ripping America off for decades. By ‘ripping off’ he meant selling wealthy Americans things they wanted to buy. By that standard, Tesco has been ripping us off forever.
He was asked why he doesn’t just 'work with Congress' to implement tariffs, and his answer was, ‘because I don’t have to.’ He literally doesn’t understand how the US Constitution works or the separation of powers. He thinks he's King Donald the First.
The decision has taken about a year from liberation day (April 2nd 2025) last year, when he sprang massive, random tariffs on friends and foes alike, to grind through the US legal system to the Supreme Court, during which something like $150 billion has been raised for the US Treasury, 90% of which was paid by US consumers. That has now been shown to be illegal, and that money will need to be returned to whoever paid it, usually the US importer.
However, the importer probably passed most, if not all the cost on to others, sometimes directly and sometimes via independent retailers. These others may well demand their money back, too. The administration seems to be taking the position that everyone who wants a refund will need to go through the courts, which will take years and cost a fortune. I assume, if you are owed significant amounts, it’s worth doing otherwise perhaps not.
The SC is at least beginning to show a bit of backbone and I wouldn’t minimise that. Justices Roberts and Gorsuch, up to now, have shown a lot of deference to Trump and bent the Constitution to give the president more power. But now, even they have shown willingness to draw a red line. His reaction won’t have endeared him to them, and they may at last be prepared to stand up to him more..
It also shows how Trump rules by knee-jerk and caprice. He has had months to develop a plan B but when the SC ruled against him, he reached for another statute, one actually suggested by Justice Kavanagh (whose dissenting opinion is almost as long as the decision itself), and immediately imposed a 10% global tariff on everything. That lasted less than 24 hours before he increased it to 15%, the maximum allowed. He clearly hadn’t thought about it.
Kavanagh said (page 169):
"Section 122 of the Trade Act of 1974 permits the President to impose a 'temporary import surcharge' to 'deal with large and serious United States balance-of-payments deficits'.”
So, that's what Trump did. His next problem is that he can only impose the 15% surcharge (effectively a tariff) for 150 days maximum before Congress needs to approve any extension to the time. And, more importantly, using that statute is almost certainly going to be found to be illegal as well.
Why?
Because the US does not have a "large and serious balance-of-payments deficit." Kavanagh got it wrong and has completely misunderstood the issue. The USA does have a huge and persistent balance of trade deficit, mainly in goods, but a surplus in services. More importantly, the 'balance of payments' is different, it's not just trade but takes account of all monetary flows in and out of the country.
And because there is a lot of money flowing in via foreign investment, repatriation of profits by US firms, etc, plus the fact that the dollar is the world’s reserve currency and is always in demand - effectively being sold abroad to finance oil trading, for example - the US balance of payments is actually in balance.
There is no deficit, and certainly no large or serious one and therefore no crisis demanding a 15% surcharge. You can read more on this HERE.
Unfortunately for American importers, Donald Trump is even more stupid than Brett Kavanagh. He has already imposed the 15% tariff, and it will take another year, with many more billions of dollars taken in by the US Treasury, before the SC rules that unlawful and requires that money to be paid back as well.
Trump's legacy will still be rumbling through the courts years after King Donald the Deranged has gone.
