Partner, Portfolio Manager
Last Friday in a 6-3 decision, the Supreme Court ruled that President Trump did not have legal authority to impose tariffs under the International Emergency Economic Powers Act, or IEEPA. The Court upheld prior rulings from both the federal trade and federal appeal courts, which previously declared IEEPA tariffs illegal.
Today, we’re reviewing the ruling, what tariff options the administration may implement moving forward and what is already in effect, as well as how all of this impacts investors.
Supreme Court Ruling Reignites Trade Concerns
Chief Justice John Roberts authored the majority opinion, stating that while IEEPA allows a president to regulate commerce during certain national emergencies, it does not grant the power to levy taxes or tariffs—that right is reserved solely for Congress.Notably, the ruling did not mention what the US government should do with the estimated $200 billion in tariff revenue that has already been collected. Justice Brett Kavanaugh wrote in his dissent that refunding tariff revenue “is likely to be a mess” and would have “significant consequences for the US Treasury.”
President Trump previously floated the idea of sending each American a $2,000 “tariff dividend” check, though corporations are lining up for refunds.
On Monday, FedEx sued the US government for a “full refund,” marking the first suit to be filed by a major American company after the Supreme Court ruling. Since Monday, L’Oreal, Dyson, and Bausch + Lomb, among others, have filed similar lawsuits.
What's Next For Tariffs?
Undeterred from the SCOTUS ruling, President Trump immediately announced a 10% global tariff last Friday—later raised to 15% over the weekend—citing the authority he has under Section 122 of the Trade Act of 1974.President Trump’s quick reaction to the ruling underscores the administration’s ability to pivot and use other means to apply trade pressure. Section 122 allows the president to apply up to a 15% tariff for up to 150 days, which means this authority would expire in June unless extended by Congress.
Importantly, the Court’s ruling does not affect tariffs levied under other trade statutes. Section 232 of the Trade Expansion Act of 1962, which can be used for national security measures, remains intact and is already used to tariff imports of steel, semiconductors and aluminum.
Likewise, the president can invoke Section 301 of the Trade Act of 1974 to counter “unreasonable” or “discriminatory” trade practices. There are no limits to the size of Section 301 tariffs, and while these sanctions expire in four years, they can be renewed.
What Does This Mean For Investors?
First, it means that trade policy uncertainty is back in play. There will be volatility around the legal viability of Trump’s new tariff plan pivot. Uncertainty also remains over what the government will and will not be required to do with the already collected tariff revenue.Second, while the administration’s options for tariff implementation have narrowed, it is clear the administration remains resolute in using tariffs as both an economic and policy tool, and they have no interest in abandoning that strategy.
These uncertainties have the ability to affect not only specific industries, but also the ongoing, precarious balance of global trade.
