Trump’s Latest Tariff Threat Raises The Stakes For The Supreme Court

President Trump’s on-again, off-again tariff threats against European nations that oppose his efforts to acquire Greenland are exactly why the Supreme Court’s pending import tax decision is so important — and why a quick decision is essential.

While Trump appears to have backed off his Greenland-related tariffs — at least for now — rattling that sword had consequences. It roiled world financial markets and further damaged already frayed relations with long-standing European allies.

U.S. tariff laws are explicitly intended to respond to unfair trade practices by other nations. Congress has passed four primary laws governing when, how and why the U.S. can impose import taxes. But none allow presidents to unilaterally use these duties as a weapon to pursue geopolitical goals.

And, critically, most require an administration to prove unfair trade practices, not merely assert them.

“Extraordinary Threats”

In general, Article I of the Constitution grants Congress, not the president, authority to impose taxes, including tariffs. Congress has delegated tariff power to the executive branch but only under explicit circumstances and usually with significant limits.

The worldwide tariffs Trump declared last April and the many changes he made since mostly relied on a 1977 law called the International Emergency Economic Powers Act. IEEPA gives the president authority to block certain financial actions, including imports, in response to what it describes as “unusual or extraordinary threats.”

Importantly, no taxes, including tariffs, are among the remedies included in IEEPA. While it grants the president power to ban certain imports, he cannot tax them without congressional permission.

And even if he could, most of Trump’s tariffs fall far short of satisfying the legal test of responding to “unusual or extraordinary threats” to the U.S.

For example, it is hard to credibly argue that Canada — until now perhaps the closest U.S. ally — is an extraordinary threat. Trump imposed (and later withdrew) 50% tariffs on products from Brazil because he objected to some of the country’s domestic political decisions, including “persecuting a former president of Brazil.” More recently, he threatened 200% tariffs on French wine because that nation’s president refused to participate in Trump’s “Board of Peace.”

This week, Trump threatened, then retreated from, 10 percent tariffs on eight European nations that objected to his efforts to acquire Greenland. Once again, he appeared to be claiming the disagreement was “an unusual or extraordinary” threat to the U.S.

The Limits of Presidential Tariff Authority

That is the crux of the case before the Supreme Court. Small businesses, which pay the tariffs despite Trump’s insistence that they are paid by foreign governments, argued that neither the Constitution nor IEEPA give presidents the authority to impose blanket import taxes on multiple countries.

Administration officials insist that if the Supreme Court blocks Trump from using IEEPA, they will use other powers to reimpose his tariffs. But that may be easier said than done.

Trump could cite four separate laws that give the president the power to impose tariffs. But all are narrow, generally requiring explicit findings of unfair trade practices, and some set time limits on the taxes.

1. Section 301 of the Trade Act of 1974 gives the U.S. Trade Representative the authority to investigate specific practices that violate trade agreements or disadvantage U.S. commerce. But it requires the USTR to first try to resolve any disputes with foreign governments. If that fails, it mandates public hearings, a written report and recommendations. These tariffs expire after four years.
2. Section 122 of same law allows the president to impose temporary tariffs in response to “large and serious” trade deficits. But the levies can be in place for no more than 150 days unless Congress extends them. Trump’s problem is the U.S. does not have “large and serious” trade deficits with many of the countries he targeted. Indeed, the U.S. runs trade surpluses with some.
3. Section 232 of the Trade Expansion Act of 1962 gives the Commerce Department the authority to investigate imports that risk national security. But this also requires formal hearings, a report and new regulations that would take months to create. Trump used this authority in his first term and more recently to tax imports of foreign computer chips.
4. Section 338 of the Tariff Act of 1930 also allows the president to tax imports, but only in cases where countries explicitly target U.S. exporters. For example, the president could use Section 338 to retaliate against a trading partner that imposed special high duties on imports of a U.S.-made product but not on similar goods produced in other countries.

All these laws are aimed at the trade practices of foreign countries. None allow for import taxes in response to international disagreements over foreign policy or because a president dislikes another country’s domestic policies. They must be linked to explicit unfair trading practices.

While Section 232 tariffs do include a national security component, the law applies to imports of goods, not to other actions that a president believes are a risk to U.S. national security such as, say, disagreeing with his effort to acquire a foreign country.

The Supreme Court soon will decide whether Trump’s authority to impose tariffs is unlimited, as he believes, or whether it is subject to limitations. As we have seen in the Greenland episode, the Court’s ruling will have profound effects on foreign policy as well as commerce.