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The Supreme Court heard highly anticipated arguments earlier this month around whether President Donald Trump overstepped the law and the Constitution in imposing much of his tariff agenda this year.
The arguments were the latest step in ongoing legal challenges to Trump’s unprecedented use of the International Emergency Economic Powers Act (IEEPA) to levy country-specific duties (as well as a 10% universal tariff). Several states, as well as multiple businesses, sued the government over the creation of a new tariff regime using a law that grants the president economic sanction powers.
Justices across the ideological spectrum asked pointed questions of Solicitor General John Sauer, the administration’s chief legal representative before the court. Despite Trump’s frequent reference to the amount of money being brought in by the tariffs, Sauer argued that the tariffs “are regulatory tariffs, they are not revenue-raising tariffs” and added that, “The fact that they raise revenue happens to be incidental."
Several justices, including Chief Justice John Roberts, observed that the actual text of IEEPA, the law cited by the administration as granting power to immediately impose tariffs on all products from select countries, does not contain the word “tariff.” Roberts and others noted tariffs could also be considered taxes, which would fall under Congress’s powers as laid out in the Constitution.
The court has until next summer to decide the case but is expected to hand down a decision earlier due to requests from both the administration and challengers to expedite it and the prominence of the issues at hand.
Grant Thornton insight:
The court could rule several ways, but it’s worth noting that a Supreme Court ruling against the use of IEEPA to impose tariffs would not mean the end of all current tariffs. The Trump administration also has implemented tariffs under Section 232 of the Trade Expansion Act and has more than 10 ongoing trade investigations using that law and Section 301 of the Trade Act of 1974. Several other statutes also grant explicit tariff power to the presidency.
However, most of those laws mandate investigatory periods that take months and allow for public comment on the proposed tariffs. That process provides more lead time for businesses to plan and structure around the tariffs than the current IEEPA orders, which can change almost overnight — and in some cases have.
A ruling against the Trump administration’s use of IEEPA also could mean tens of billions of dollars in tariff refunds for businesses, though that will be highly dependent on the precise decision of the court. The Treasury Department reported that $195 billion in revenue was raised from tariffs in Fiscal Year 2025 — a 150% increase from FY 2024 — and that amount was heavily backloaded as Trump’s tariffs began taking effect in April. Data from U.S. Customs and Border Protection shows that about $90 billion of the FY 2025 total came from IEEPA tariffs and therefore is at risk in this case.
Trump pitches tariff rebate, Bessent floats limited tariff rollback
There were multiple signs after major Democratic wins in state and local elections on Nov. 4 that political pressure may cause some of the Trump tariff agenda to crack.
Despite a large amount of the tariff revenue being at risk from the Supreme Court decision, the president on Nov. 9 publicly pitched the idea of a substantial “tariff rebate” for most households. In a social media post, Trump suggested a $2,000 “rebate” for most households, while also claiming tariffs would pay down the now $38 trillion-plus national debt. However, cost estimates for such a rebate range from $300 billion to $600 billion, depending on how eligibility is determined, and far exceed the tariff revenue taken in.
Grant Thornton insight:
Congress would need to approve any such payments, and it is doubtful they would have the votes to do so as the payments would increase deficits and likely be inflationary.
On Nov. 14, the Trump administration implemented its first major reversal of tariff policy, with an executive order lifting tariffs put in place this year on agricultural products including: coffee, tea, tropical fruits and fruit juices, cocoa, spices, bananas, oranges, and tomatoes, beef, and fertilizers.
The White House also announced new trade frameworks with Argentina, El Salvador, Ecuador and Guatemala on Nov. 13. Separately, the Trump administration announced an agreement with Switzerland to lower tariff rates on Swiss imports from the current 39% to 15%.
The announcements about Central and South American countries largely avoid specifics on which products will see U.S. tariffs lowered, though that for Ecuador says the U.S. will “remove its reciprocal tariffs on certain qualifying exports from Ecuador that cannot be grown, mined, or naturally produced in the United States in sufficient quantities.” Notably, the U.S. already has free trade agreements with El Salvador and Guatemala, which tariffs raised by the Trump administration likely violated.
According to the White House, El Salvador, Ecuador and Guatemala agreed not to levy digital services taxes, while Argentina, by far the largest of those economies, “committed to facilitating digital trade with the United States by recognizing the United States as an adequate jurisdiction under Argentine law for the cross-border transfer of data, including personal data; and by refraining from discrimination against U.S. digital services or digital products.”
The exemptions represent a political acknowledgement from the Trump administration that voters are unhappy over prices – a major issue during the 2024 presidential campaign that continues to be top of mind for many.
Affordability became a watchword among candidates and voters in state and local elections that took place in New Jersey, New York City and Virginia on Nov. 4. Economic and cost-of-goods issues were top of mind for voters in all three places, and Democrats handily won self-identified independent voters. That puts a renewed emphasis on pocketbook issues for the Trump administration and Republicans as the political focus now turns to next November’s midterm congressional elections.
“You’re going to see some substantial announcements over the next couple of days in terms of things we don’t grow here in the United States, coffee being one of them,” Treasury Secretary Scott Bessent said in a televised interview on Nov. 12. “Bananas, other fruits, things like that. So that will bring the prices down very quickly.”
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