U.S. President Donald Trump holds an executive order in the Oval Office on Feb. 13. The President has imposed sweeping tariffs on goods entering the U.S. under the International Emergency Economic Powers Act.Kevin Lamarque/Reuters
Donald Trump’s sweeping imposition of tariffs is not intended to raise revenue, his administration told the U.S. Supreme Court Wednesday, as it defended the presidential use of border measures against charges that it is usurping Congress’s powers of taxation.
Instead, the import levies Mr. Trump has imposed under the International Emergency Economic Powers Act – including the fentanyl tariffs on Canada, and the global “Liberation Day” measures announced in April – are simply tools to achieve an objective unrelated to the collection of cash, U.S. Solicitor-General John Sauer told the court.
“These are regulatory tariffs. They are not revenue-raising tariffs,” he said.
“The fact that they raise revenue is only incidental. The tariffs would be most effective, so to speak, if no person ever paid them.”
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The oral arguments before the Supreme Court mark the final legal test of tariffs that lower courts have found to be an overreach of presidential powers. At stake is Mr. Trump’s ability to use a favoured tool, the rapid imposition of punitive import taxes under IEEPA to punish companies that manufacture goods outside of the United States and countries that refuse to do his bidding.
Mr. Trump has promised that tariffs will raise trillions of dollars for the U.S., and pledged an “External Revenue Service” to collect money they raise as a way to offset domestic taxes. His administration has also said it’s prepared to raise tariffs on other legal grounds if the Supreme Court rules against it.
But the legal questions at the heart of the case directly confront the powers that a U.S. president can wield.
“Tariffs are taxes. They take dollars from Americans’ pockets and deposit them in the U.S. Treasury. Our founders gave that taxing power to Congress alone. Yet here, the President bypassed Congress and imposed one of the largest tax increases in our lifetimes,” argued Neal Katyal, a lawyer representing a handful of small businesses that have sought to overturn the tariffs.
If they succeed, the U.S. government could be forced to refund importers an enormous sum of the tariffs they have already paid – US$140-billion, according to the calculations of investment bank Piper Sandler.
Canda, and countries around the world, are waiting anxiously as the U.S. Supreme Court considers whether U.S. President Donald Trump has the authority to continue using his favoured tariff tool.
The Canadian Press
The complexities and importance of the tariff case were underscored by the 2½-hour length of the oral hearing, which probed whether the word “regulate” – the term used in the text of IEEPA – can be understood to mean “tariff.”
Justice Sonia Sotomayor, an appointee of Barack Obama, cited Mr. Trump’s threat to impose a 10-per-cent additional levy on Canada over an anti-tariff ad the Ontario government ran on U.S. television.
The question, she said, is whether the word “regulate” alone can give, ”without limit, the power to a president to impose this kind of tax.”
Six of the current Supreme Court justices were appointed by Republican administrations, three of them by Mr. Trump. The court has, in a series of recent cases, shown a deference to presidential power.
Nonetheless, one of the Trump-backed justices, Neil Gorsuch, raised concern about the use of IEEPA to augment presidential authority in ways that Congress cannot easily reverse.
“It’s a one-way ratchet toward the gradual but continual accretion of power to the executive branch,” he said. He also questioned the limits of how much Congress can empower the White House.
In its decision, which is expected to take several months, the court will have to grapple with history dating to the dawn of an independent United States. Presidents dating to Abraham Lincoln have imposed tariffs on enemies, a power that was codified in the Trading with the Enemy Act of 1917 – and IEEPA employs much of the language from that act.
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The court, too, must balance the president’s authority over foreign affairs with congressional power over taxation.
The Tariff Act was the second act of Congress, and tariffs have long formed an integral part of how the country regulates imports, Mr. Sauer said.
The enormous reach of Mr. Trump’s tariffs, he said, reflects the gravity of a situation in which the U.S. has lost manufacturing capacity and accrued vulnerability in its supply chains.
Chief Justice John Roberts, however, cast doubt on the Trump administration’s use of a prior precedent, a 1981 case that endorsed some presidential powers under IEEPA. The court in that case, Chief Justice Roberts said, “went out of its way to say that it was issuing a very narrow decision and pretty much expected to apply only in this case.”
Lawyer Neal Katyal, standing outside the U.S. Supreme Court on Nov. 5, represents a group of small businesses that have sought to overturn the Trump administration’s tariffs.Nathan Howard/Reuters
Mr. Katyal argued that IEEPA gives the president the power to fully block trade but not to raise revenue, because tariffs have always been guarded by Congress as a special authority.
“Our founders feared revenue raising, unlike embargoes,” he said. “There was no Boston embargo party. But there was certainly a Boston Tea Party.”
Outside the court, observers said it was telling that the government argued Mr. Trump’s tariffs would be most effective if they raised no revenue.
It is an admission that ”the tariffs would work best if Americans stopped buying foreign products,” said Mark Chenoweth, president of the New Civil Liberties Alliance, a conservative group that has fought Mr. Trump’s use of IEEPA.
This “tool works by coercing Americans. Not by coercing foreign powers. … And because of that, this is something that has to be done, if at all, by Congress – and not by the President unilaterally.”
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Mr. Trump, who has called tariffs “the most beautiful word,” wrote this week on social media that his ability to impose them is a matter of “literally, LIFE OR DEATH for our Country.”
“With a Victory, we have tremendous, but fair, Financial and National Security,” he wrote. “Without it, we are virtually defenseless against other Countries who have, for years, taken advantage of us.”
Treasury Secretary Scott Bessent told CNBC this week that “there are lots of other authorities that can be used” if the use of IEEPA tariffs is struck down. The administration has already used different laws to back tariffs that have struck deeply at the Canadian economy, including levies on imports of steel, aluminum and automobiles.
But, Mr. Bessent acknowledged, IEEPA is for Mr. Trump “by far the cleanest, and it gives the U.S. and the President the most negotiating authority.”
Speaking to reporters Wednesday, Mr. Bessent said the Supreme Court case “went very well. I think the Solicitor-General has made a very powerful case.”
Since Mr. Trump’s return to office, U.S. stock markets have defied concerns that tariffs would do broad damage to the country’s economy, while inflation rates have remained modest.
Still, “friend-of-the-court” documents filed by states, legal experts and individuals underscored the cost of those border measures, which are “not only unprecedented,” but are “causing irreparable harm,” the U.S. Chamber of Commerce and the Consumer Technology Association wrote.