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FOR A MAN who promised a “liberation day” for American trade, the shackles are tightening. On Friday the Supreme Court ruled, by six votes to three, that Donald Trump’s sweeping tariffs, imposed under the International Emergency Economic Powers Act (IEEPA), are illegal. The decision yanks away the legal scaffolding for levies covering hundreds of billions of dollars in imports, from European wine to Chinese machinery. America’s effective tariff rate, which hit 10% last year, the highest since the second world war, will now fall. But the constitutional drama has only just begun.
The case turned on a dry but devastating question of statutory interpretation. IEEPA, passed in 1977, lets a president “regulate…importation” in response to an “unusual and extraordinary threat”. Mr Trump’s team argued that regulation includes taxation. Chief Justice John Roberts, writing for the majority, begged to differ. No previous president had used the law to impose tariffs, he noted, let alone duties of “this magnitude and scope”. To allow it, he concluded, would let the executive bypass Congress’s constitutional power to set tariffs—a power the founders placed firmly with the legislature.
The ruling is a historic rebuke to the economic centrepiece of Mr Trump’s second term. His “liberation day” tariffs, announced in April 2025, sparked market turmoil and drew howls from allies. Although he later dialled back some of the more extreme measures, the legal foundation for his trade war always rested on shaky ground. That ground has now given way. For American businesses that sued—joined by a dozen states—the decision is a deliverance. Neil Bradley of the US Chamber of Commerce calls it “welcome news” for the 200,000 small importers hit by cost increases and supply-chain chaos.
Yet the ruling also opens a can of worms. It did not address whether the government must refund the billions collected from importers. Justice Brett Kavanaugh, dissenting, warned that the refund process would be “a mess”. Some importers passed costs to consumers; others absorbed them. Untangling who owes what to whom could take years and spawn a blizzard of litigation. As John Denton of the International Chamber of Commerce puts it, the administrative complexity is “worrying”.
The bigger question is what happens next. Mr Trump has other arrows in his quiver. Sectoral tariffs on metals, chips and cars, imposed under different statutes, remain untouched. He could also invoke Section 122 of the Trade Act of 1974, which allows temporary duties to correct balance-of-payments deficits, though that would require a clearer economic justification. As William Bain of the British Chambers of Commerce observes, countries like Britain and Australia, which struck “reciprocal” deals with the administration, may now face higher levies not lower ones.
The political fallout is already visible. Democrats cheered the decision; Elizabeth Warren called it a check on “massive damage”. Republicans split, with Bernie Moreno of Ohio denouncing the ruling as “outrageous” and Rand Paul of Kentucky praising it. Most on Capitol Hill stayed mum, unsure how to navigate a president who built his brand on tariffs and now finds his signature policy in tatters.
Markets took the news in stride. The dollar dipped briefly, then steadied. Shares in retailers and car-parts firms ticked up, betting on cheaper imports. Yet the calm may prove deceptive. As Francesco Pesole of ING notes, the ruling “opens up more uncertainty” about how the administration will respond. Mr Trump has not commented; his spokespeople are silent. But those who know him expect a fight.
For all the legal complexity, the core of the matter is that the constitution gives Congress, not the president, the power to set tariffs. For 50 years IEEPA was used for sanctions not taxes. Mr Trump stretched it to breaking point. The court has now snapped it back. Whether the administration accepts that verdict—or seeks new ways to wage its trade war—will determine the shape of American commerce for years to come. The machinery of global trade, which groaned under the weight of Mr Trump’s tariffs, may yet survive. But its operators will be watching Washington with an anxious eye. ■
