The Trouble with Tariffs

The U.S. Supreme Court will decide which branch of government ultimately has the power to impose tariffs as a foreign policy mechanism to address a national emergency. A dozen states, and a consolidated group of small businesses and other entities, filed lawsuits against President Donald Trump and his administration over the far-reaching tariffs he imposed this year. Oral arguments were presented to the Court on November 5, 2025.

Days later, Trump announced on his Truth Social channel that he’s giving Americans at least a $2,000 dividend per person from the windfall on tariffs. He chided anyone who is challenging his tariffs and stated that the U.S. is bringing in “Trillions of Dollars.” His early morning post on November 9 caused a new wave of surprise and questions.

Treasury Secretary Scott Bessent was tasked with navigating many of those questions on various Sunday morning news shows later that day. He told ABC’s This Week that that money could come in from numerous forms, pointing to tax credits as a potential source. He also stated that the primary goal of the tariffs is to balance manufacturing and trade. The tariffs remain in force at least until the Supreme Court issues its decision.

The case began in April when Trump proclaimed his “Liberation Day” to announce universal tariffs on 57 nations, from allies, competitors and adversaries alike. Tariffs are a means for raising revenue quickly by tacking on fees for products imported into the country. Trump showcased his large chart of countries facing his tariffs as a way to shore up large trade deficits.

The tariffs caused market uncertainties and large unforeseen bills for many companies that normally import products. The rates in numerous cases were well beyond expectations and have had negative effects on many industries. While part of Trump’s strategy was to bring more manufacturing to the U.S., many industries are unequipped to build the infrastructure needed for such operations. And bringing back manufacturing to industries once part of the American industrial fabric, would bring about greater expenses that would be challenging to the economy.

States, businesses, and numerous economic institutions pushed back through the legal system. Oregon and Arizona initiated lawsuits that brought together other states and small businesses to fight the imposed tariffs. In quick succession, the cases were elevated through the courts to the U.S. Supreme Court, which agreed from all parties to hasten the case. They heard oral arguments from representatives of the Trump Administration, the 12-state coalition and the small businesses on November 5, 2025.

As one of the lead petitioners, Oregon presented oral arguments before the Court. Benjamin Gutman, solicitor general for the Oregon Department of Justice, presented the case that hinged on the President exceeding his authority to impose sweeping tariffs under emergency conditions. The coalition’s argument stems from their interpretation of the legal vehicle used to impose the tariffs, one of which is the International Emergency Economic Powers Act (IEEPA). According to their defense, the tariffs imposed by Trump amounts more to a revenue-generated tax, of which such powers lie with Congress, not the Executive Branch.

The state-led coalition challenged the declared “reciprocal tariffs” announced by Trump in July, as well as the tariffs imposed against Mexico, Canada and China that are supposed to address drug smuggling and other criminal acts. Gutman questioned the basis of the tariffs as a revenue-generating action, thus defining it as a tax, which is a power of Congress.

The IEEPA has been used as a mechanism to shift power to the Executive Branch during national emergencies. Jonh Sauer, Solicitor General of the U.S. Department of Justice, who represented the Trump Administration’s position before the court, invoked a dire situation that required such actions from the President. He told the court that, “President Trump determined that our exploding trade deficits had brought us to the brink of an economic and national security catastrophe.” He justified the actions upon the trafficking of fentanyl and other opioids creating a public health crisis.

Since the U.S. Constitution does not address government conduct in emergencies, the three branches of power have explored and implemented varying actions.

During Trump’s first administration in 2018, the U.S. targeted China with tariffs on over 800 products that were part of the country’s Made in China 2025 Initiative. The 25-percent tariff was aimed at machinery, electronics and communications technologies. Those actions were legal under the framework of the IEEPA and other rules.

China responded then with threats to the U.S. energy sectors and agriculture, including mineral fuels, crude oil and liquefied propane, and soybeans. Much of the recent retaliations point to similar markets.

While the U.S. Constitution tasks Congress with the power to manage tariffs, Congress has given much of that authority and leadership to the President over the years. Tariffs rose as a vehicle within the nation’s foreign policy efforts, ever since they decreased as a revenue source for the domestic tax base. The 16th Amendment, which helped re-establish the U.S. income tax levies, was instrumental in helping solidify tariffs toward control of the President, notably in 1934 to give President Roosevelt power to negotiate bilateral trade agreements.

After World War II, the U.S. entered in numerous agreements and treaties to establish international frameworks for tariffs. One of the largest, the World Trade Organization (WTO), has been instrumental at managing tariffs and other trade in recent decades.

In 1974, Congress enacted legislation to give the President expedited authority to set tariff and other trade policies, if the foundational objectives and requirements were met. The Presidential Trade Authority (TPA) became a component of the President’s arsenal of negotiation tactics to manage foreign trade. Over the decades, the TPA also provided the President authority to react to national security interests. Section 232 of the Trade Expansion Act of 1962 most notably gave the President power to determine tariffs and trade policies on goods and services that threatened the U.S.

The Secretary of the Treasury is tasked with establishing regulations on collection with the U.S. Customs and Border Protection (CBP) overseeing the collection of tariff funds.

According to CBP, tariffs were not a large source of revenue for the U. S. government, taking in less than two percent in any given year since the 1950s. During the first Trump Administration, tariffs were increased, though still only reflected a 1.57% of the total federal revenue during. The Biden Administration kept most of those tariffs, raising $77 billion during the government’s fiscal year (FY) 2024.

The second Trump Administration moved forward with its power to manage tariffs and trade, largely leaving Congress out of the process. The increasing debate in the U.S. and abroad about tariffs is that they are deeply impacting the American public as much as foreign nations.

The Yale Budget Lab tracks the effects of tariffs on the American consumer and the U.S. economy. Their October 30th data shows an overall average of 17.9%, which has risen to the highest rate since 1934. Their data predicts that the Trump tariffs (as they stand now) would increase the poverty rate for 650,000-875,000 Americans. The Yale Budget Lab finds that the tariffs themselves do not increase prices, but the wedge from higher prices passed forward to the consumer because of the tariffs incurred by companies.

The state-led coalition pointed to Trump’s justification of his sweeping tariffs far exceeds the conditions set forth by the IEEPA. The state-led coalition lawsuit argues that the IEEPA only give the President options to address specific national security threats and caps the amounts and time implemented. Gutman told the court that the IEEPA does not grant the President such authority to impose reciprocal tariffs that go beyond the specific offenses tied to the administration’s actions.

While many cases before the Supreme Court elicit major attention from the American public, this case is different. Every state has felt the impacts of Trump’s tariff policies.

Many companies which are not or cannot shift their manufacturing or other sourcing into the U.S., are finding it nearly impossible to conduct business without raising prices on their goods and services. That, in effect, is why the arguments of taxing consumers are gaining ground.

Oregon Attorney General Dan Rayfield issued a statement upon the filing of the lawsuit, “We think the court understands the stakes, not just for Oregon, but for every state affected by these overreaching tariffs. We’re optimistic the court will recognize that the President cannot tax the American people without their representatives in Congress having a say.”

V.O.S. Selections, an import wine company serving New York, New Jersey and parts of Pennsylvania, filed a lawsuit to address the crushing impact the tariffs hold on their company. They posted their reasons for the lawsuit on their website, stating that the tariffs are not only having devastating consequences on their business, but on the farmers they represent. V.O.S. Selections joined the state-led coalition, along with Learning Resources, a Chicago, Illinois-based educational toy company. They and other petitioners fear the devastating impacts on their businesses and vendors, from the shifting unknowns to the unmanageable expense of importing from China and other countries.

The oral arguments of the case were brought on November 5 before the Supreme Court. The justices questioned all parties on an array of laws, their wording and specific definitions of words and their intents. One of many concerns discussed involves what outcomes would arise from invalidating the tariffs or allowing them to stand.

All parties in the case requested a quick response from the Court, but they have until June-July 2026 to issue their decision before they recess for the year.

By Sherry Harbert