Tariffs Could Survive the Supreme Court. But Why Should They?

A demonstrator holds up a protest sign outside the Supreme Court on Nov. 5. The court heard oral arguments in a case against the Trump administration over its use of IEEPA to issue tariffs. (MANDEL NGAN/AFP via Getty Images)

About the author: Ben Harris is vice president and director of economic studies at the Brookings Institution. He was assistant secretary for economic policy and chief economist at the Treasury Department in the Biden administration.

The Supreme Court heard oral arguments Wednesday in President Donald Trump’s use of the International Emergency Economic Powers Act to levy sweeping tariffs on virtually every U.S. trading partner starting in April.

It did not go well for the administration. A majority of the justices expressed skepticism over the unprecedented use of the law to supersede Congress’ constitutional authority to tax. Betting markets took notice. The likelihood of a Trump win fell from roughly 50% to 25% on prediction markets like Kalshi and Polymarket after the hearing.

The court’s ruling, which should be delivered ahead of the normal summer decision schedule, hinges on two main questions. Does IEEPA’s permission to “regulate” transactions with foreign countries during national emergencies give presidents the power to unilaterally and indefinitely set tariffs? And is Congress even permitted to delegate its authority over taxation to the president?

Assuming betting markets are correct, the court will say no to those questions. Even so, Trump’s tariff regime likely won’t end neatly. He has other options at hand.

It is important to note that roughly 30% of the existing tariffs have been imposed by authorities other than IEEPA. Those tariffs aren’t threatened by the current case and will continue to stand regardless of the court’s decision. Perhaps more important, the Trump administration can largely re-create the IEEPA tariffs through a series of more established authorities.

This would likely begin with Section 122 tariffs, which allow an administration to levy tariff rates of up to 15% for a maximum of 150 days on countries with which the U.S. has a balance of payments deficit. That would account for virtually all of our trading partners. Section 122 tariffs could immediately replace the IEEPA tariffs for countries with a 15% or lower rate. Only a handful of countries with tariff rates above 15% would see a temporary reprieve.

The second step to replacing the IEEPA levies would be to invoke Section 301 authority to put in place more permanent—and even higher—tariffs. Under this authority, tariffs can be levied on countries deemed by the U.S. Trade Representative to have engaged in unfair trade practices. That language is sufficiently broad that virtually every country could be a target.

The administration has already gathered evidence against China and Brazil to levy Section 301 tariffs, and it has started to document claims against a handful of others. Add those Section 301 tariffs to the other dozen or so countries that could be targeted by Section 122. At the end of the day, this one-two punch could largely mimic the current tariff regime.

So, yes, even if it loses before the Supreme Court, the Trump administration will likely still be able to implement its punishing tariff regime. A more important question is whether it should.

Trump’s promises around tariffs have fallen flat. Manufacturing employment—one of his primary justifications for tariffs—has actually declined in recent months. Inflation has accelerated about 1.2 percentage points due to tariffs, according to the Yale Budget Lab. That is equivalent to a $1,600 annual tax on American households.

The cost of building new homes, which heavily relies on imported materials like lumber and steel, will rise by around $30 billion due to the tariffs, according to estimates by my colleagues at the Urban-Brookings Tax Policy Center. Auto makers, similarly, will be slammed. The Yale Budget Lab estimates the average cost of a new car will rise 10% because of auto tariffs.

And yet the most egregious costs of Trump’s tariffs are still to come. Much of the cost of tariffs have yet to be passed on to consumers by businesses that stockpiled inventory before the tariffs were implemented. Businesses have thus far viewed the tax as temporary and therefore haven’t yet reshuffled their operations to account for a permanent tariff regime. When they do, people will lose jobs and productivity will fall.

And lastly, we have only begun to see trading partners retaliate or seek other, more accommodating trade relationships. This will surely intensify if tariffs become permanent. America will pay a hefty price.

There is good news for the president: he doesn’t need to replicate the IEEPA tariffs. The Supreme Court’s ruling, if not matched by higher subsequent tariffs, would provide thousands of dollars of relief for American families and lower costs for U.S. manufacturers.

Here, Trump should accept his courtroom loss as an economic win, and let his “Liberation Day” tariffs fade into history as a failed experiment.

Guest commentaries like this one are written by authors outside the Barron’s newsroom. They reflect the perspective and opinions of the authors. Submit feedback and commentary pitches to ideas@barrons.com.