Court Rules Executive Overreach
The US Supreme Court on Friday invalidated Donald Trump’s broad global tariffs, ruling that he exceeded his authority by invoking emergency powers. In a 6–3 decision, the justices emphasized that the Constitution grants Congress — not the president — the power to levy taxes, including tariffs. Chief Justice John Roberts wrote that “the Framers did not vest any part of the taxing power in the Executive Branch.” Justices Samuel Alito, Clarence Thomas, and Brett Kavanaugh dissented, with Kavanaugh arguing the tariffs were legally justified despite policy questions.
Legal Battles and Emergency Powers
The ruling focused on Trump’s use of the International Emergency Economic Powers Act (IEEPA), a 1977 law that allows presidents to declare a national emergency and impose sanctions. Trump was the first to use it to justify widespread import tariffs, including “reciprocal” duties on nearly all US trading partners. He framed the tariffs as responses to trade deficits and drug trafficking issues involving countries such as China, Canada, and Mexico. The move triggered lawsuits from a coalition of states and small businesses, arguing that emergency powers do not authorize tariffs and citing precedents that limited executive overreach, including challenges to former President Biden’s student loan plan.
Economic Impact and Market Reaction
Since April 2025, when Trump unveiled the tariffs on “Liberation Day,” the US Treasury has collected about $240 billion in revenue. Analysts estimate potential refunds could total roughly $120 billion, around 0.5% of GDP. Justice Kavanaugh warned that refund disputes could become chaotic. Investors responded positively to the ruling, with the S&P 500 rising as much as 1% before moderating. While the decision restricts Trump’s use of emergency powers for tariffs, he could still impose duties under other laws, leaving open the possibility that his administration will continue to pursue a robust trade agenda despite this legal setback.
