Supreme Court Grills Trump Admin. What the Hearing Means for Tariffs.

Justices debated whether the powers claimed by the president would give a future Democrat the authority to impose massive tariffs justified by climate change. (Alex Wong/Getty Images)

Key Points

• Supreme Court justices questioned the Trump administration’s use of the International Emergency Economic Powers Act for tariffs.
• Polymarket investors reduced the government’s chance of winning its case from 36% to 30% after oral arguments.

President Donald Trump’s sweeping tariffs appear at least somewhat vulnerable to being struck down, after some of the Supreme Court’s conservative justices probed the Trump administration’s views of the powers underlying the levies in oral arguments Wednesday.

Over nearly three hours, the justices parsed the text of the International Emergency Economic Powers Act, which Trump has used to impose levies on America’s trading partners, and whether Trump had improperly seized Congress’ taxation power under the U.S. Constitution for himself.

Investors in Polymarket judged that the arguments went poorly for the government and Solicitor General D. John Sauer, who argued the case for the government. Before the arguments started, the betting market gave the government a 36% chance of winning its case. By the end of the arguments, that had faded to about 30%.

The stock and bond markets also moved slightly, as investors weighed the impact of the removal of billions of dollars in levies on company profits and government revenues. The S&P 500 rose about 0.4 percentage point between 10 am New York time and early Wednesday afternoon, while the 10-year Treasury yield, which was already up on the day, rose 0.01 percentage point to 4.15%.

While it is widely expected that the justices appointed by Democratic presidents would side against Trump, it has been more uncertain how the conservative justices would react to Trump’s assertion that he had the power to impose the tariffs under a national emergency. Conservative justices in other cases have been both deferential to a president’s ability to conduct foreign affairs but skeptical that a law could grant a major power to a president without explicit authorization. IEEPA does not mention tariffs explicitly.

The plaintiffs challenging the tariffs would need any two of the three-Republican appointee justices to join the three appointed by Democrats to win their case.

In a notable exchange, Chief Justice John Roberts, a Republican appointee, appeared to join with the liberal justices in asserting that tariffs are a form of taxation. The government has argued to the contrary that tariffs are part of the president’s foreign-affairs powers, because the Constitution gives the power to tax to Congress rather than the president.

“Yes, of course, tariffs are in dealings with foreign powers, but the vehicle is imposition of taxes on Americans, and that has always been the core power of Congress,” Roberts said. Roberts expressed doubt that the tariffs didn’t represent a major power that needed to be explicitly delegated by Congress.

Two other Republican-appointed justices, Amy Coney Barrett and Neal Gorsuch, also asked pointed questions of the government.

Justices’ questions don’t always reveal their eventual votes.

Lower courts ruled that Trump went too far in using the International Emergency Economic Powers Act to impose tariffs on the majority of America’s trading partners and additional levies related to fentanyl flows on China, Canada and Mexico. Trump has called the case “literally, LIFE OR DEATH for our Country,” though the president could likely reimpose tariffs using other laws even if the court ruled against him.

Trump has also threatened tariffs, including 10% on Canada for an anti-tariff ad run by Ontario and a 40% tariff against Brazil, citing the criminal prosecution of former President and Trump ally Jair Bolsonaro.

Pantheon Macro estimates the U.S. has collected $34 billion this month in customs and excise tax—on track to $400 billion over a year in tariff revenue.

If the Supreme Court rules against the tariffs, the administration has other options—albeit ones with more restrictions—to keep tariffs in the mix. For example, it could impose more tariffs on China through the Section 301 investigation it opened in its first term and it could widen the sectoral tariffs already in place under Section 232. Other avenues are also possible, though some come with limits on how high or for how long tariffs could be in place.

The government in its initial arguments challenged lower-court decisions pausing the tariffs and defended its position first before the justices.

“Unwinding those agreements [the president] warns would expose us to ruthless trade retaliation by far more aggressive countries and drive America from strength to failure with ruinous economic and national security consequences,” Sauer said in his opening remarks, echoing Trump.

A line of questioning to the government addressed whether tariffs invoke the “major questions doctrine,” a legal principle that requires clear congressional authorization for powers that have issues of major national significance. IEEPA, the law Trump used to impose the tariffs, doesn’t mention tariffs, but the government argues that tariffs are included in the law’s grant of the ability to regulate trade.

In his questions to the plaintiffs, Gorsuch suggested that IEEPA’s use of the word “regulate” could be read to include tariffs and that the challengers to the government might need to prove that the case invokes the major questions doctrine to win. “Do you need major questions to win? I think you might,” said Gorsuch, who is considered one of the swing votes that could tip the decision.

Gorsuch also suggested that the government’s logic could be used by a future president to impose a massive tariff on gas-powered cars to deal with the threat of climate change.

The government’s arguments about the president’s powers implied a “one-way ratchet toward the gradual but continual accretion of power toward the president,” Gorsuch said.

Trump-appointed Barrett provided perhaps the strongest early doubt from a conservative justice in her questions, asking Sauer to point to other cases where the power to “regulate importation” was used to justify tariffs and seemed to doubt his answer.

Kavanaugh, Alito, and Thomas sounded more receptive or neutral during their questions to the government.

Alito suggested that if the president’s authority to implement tariffs through IEEPA is ruled illegal, he could swiftly use other authorities to reimpose them and that the Supreme Court might want to ascertain that possibility now rather than to let the issue wend its way through lower courts.

In questions to the plaintiffs, represented by former Acting Solicitor General Neal Katyal, Roberts suggested that the tariffs might be treated differently than other kinds of taxes because they are “foreign facing.”

It was clear that in some cases tariffs “were quite effective in achieving particular objectives,” Roberts said.

Write to Reshma Kapadia at reshma.kapadia@barrons.com and Joe Light at joe.light@barrons.com