Tariffs were front and center in Washington, D.C. last week with arguments before the Supreme Court on challenges to lower court decisions that ruled his reciprocal and fentanyl emergency tariffs under IEEPA illegal. Administration representatives and tariff opponents expressed optimism that their respective positions would prevail. The media consensus is that the tariff opponents fared better but it is still unclear how the Court may ultimately rule. Liberal justices, Sandra Sotomayor, Elena Kagan and Ketanji Brown Jackson expressed skepticism on the authority for the Executive to exercise tariff authority under IEEPA while conservatives, Samuel Alito, Clarence Thoman and Brett Kavanaugh appeared more open to it. That leaves Justices Neal Gorsuch, Amy Coney Barrett and Chief Justice John Roberts as swing votes. All were appointed by Republicans but have been willing to vote with the liberals on various issues. Gorsuch expressed reservations about the violation of the non-delegation and major questions doctrines in granting the Executive Branch tariff authority under IEEPA whereas Roberts and Barrett were more circumspect in their questioning.
A decision is expected relatively quickly, perhaps in December or January if there are conflicting opinions but a range of possibilities exist from a clear rejection of the IEEPA tariffs to a split decision that could uphold the Fentanyl tariffs while barring the reciprocal tariffs. It is also unclear to what degree a decision confirming the tariffs are illegal will treat the issue of refunds and the administration retains a variety of tariff authorities that could mean the tariff regime is continued regardless of a favorable decision on IEEPA. They include:
The administration has already ratcheted up 301 and 232 activity with a 301 investigation into China’s compliance with the Phase 1 trade agreement from the first Trump term that is continuing notwithstanding the recent trade deal brokered with Chinese President Xi and another focused on Brazil. While these investigations take longer, they generally result in the levying of duties and are more resilient against legal challenge and it should be noted that the 301 and 232 tariffs implemented in the first Trump term were carried forward by President Biden. On the other hand, the Democratic sweep in the off-year elections came with a clear message that voters are unhappy with President Trump’s handling of the economy. So far, the stock market has been the only entity that has been able to alter administration tariff policy but the prospect of a similar Democratic sweep of the mid-term elections in 2026 may become a factor. There continues to be data to indicate that the impact of tariffs on inflation has been limited but consumer and business confidence remains low.
No one can predict the outcome with certainty, but the most likely outcome is continued uncertainty for businesses that are just beginning to adjust to the current tariff regime. It is likely that further engagement by tariff opponents will be needed either to seek a formal exemption process if IEEPA tariffs are validated or clarity on refunds if they are wholly or partially rejected.
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