US SUPREME COURT STRIKES DOWN PRESIDENT TRUMP’S TARIFFS
Long a proponent of tariffs to prevent other countries from “ripping off” America, President Trump proclaimed ‘Liberation Day” on April 2, 2025, when he imposed sweeping tariffs on most countries of the world. The President circumvented the US Constitution (Article 1, Section 8, Clause 1) which gives power to the Congress to “lay and collect Taxes, Duties, Imposts and Excise.” The Article also gives Congress the authority to “regulate Commerce with foreign Nations.” Instead, President Trump relied on another law, the International Emergency Economic Powers Act (IEEPA) which gives the President sweeping powers to regulate international commerce and financial transactions after declaring a national emergency in response to an “unusual and extraordinary threat’ that originates outside the United States.
The case of Learning Resources Inc. v Trump challenged the power of the US President to impose tariffs in the manner that he did under the IEEPA. The US Supreme Court ruled 6-3 that the IEEPA did not authorize the President to impose tariffs. The Court held that IEEPA’s authorization to “regulate” imports does not include taxing authority which is reserved for Congress. The ruling affirmed that imposing tariffs is part of the taxing power reserved for Congress under Article 1 of the Constitution. The court invalidated tariffs imposed under IEEPA, stating that they exceeded the statutory authority delegated to the executive branch. It is estimated that the US will have to return US$175 billion unlawfully collected as tariffs.
President Trump exploded in unmitigated fury. He described the Court’s ruling as “deeply disappointing” and that he is ashamed of certain members of the Court for not having the courage to “do what’s right for the country.” Their families would be ashamed of them, he claimed. He expressed the view that the Court has been swayed by foreign interests and by people who are “obnoxious, ignorant and loud” and that certain judges are afraid of that. He accused the liberal-leaning justices who were part of the majority as being “fools” and “lapdogs.” President Trump had become accustomed of obtaining all he desired from the US Supreme Court dominated by conservative judges, three of whom were appointed by him. He had received almost everything he wanted, including virtual immunity in Trump v US which granted him absolute immunity from criminal prosecution for official presidential acts. This situation was described by the Guardian as provoking “mounting alarm among constitutional jurists and democracy advocates.”
The imposition on tariffs has created chaos in the international community. Fearful that their economies will suffer irretrievable economic harm by restricting exports to the world’s largest economy, all countries sought to negotiate trade deals with the US. Most were successful but had to settle for increased tariffs anyway. Having seen the fear of countries on which tariffs were imposed and the anxiety to negotiate deals, the imposition of tariffs began to assume a political dimension, being used as a political weapon and for non-economic reasons. 50 percent tariffs were imposed on Brazil, 30 percent on South Africa and 50 percent on India for purely political reasons.
President Trump had set out some economic objectives for the tariffs which included the reducing the deficit in the balance of payments, encouraging manufacturing and ending harmful trade practices directed to the US. President Trump has recently boasted that the US economy is experiencing unprecedented investment and development citing US$17 trillion in investment, increase in manufacturing and the higher Dow Jones Index. The reality, however, is that GDP figures are on a downward trend, the employment rate has declined, and an affordability crisis is sweeping the US. These developments point to a potential devastating loss by the Republicans at the mid-term elections to be held in November.
President Trump has announced that he has signed a global 10percent tariff on all countries that is effective immediately under section 122 of the Trade Act 1974. This section empowers the President to impose a “temporary import surcharge” up to 15percent for 150 days, so long as he/she finds “large and serious” balance of payments deficits. The law is meant to prevent “imminent” and “significant” depreciation of the US dollar in foreign exchange markets. The White House statement said: “By taking this action, the United States can stem the outflow of its dollars to foreign producers and incentivize the return of domestic production.” There is no indication of what the President intends to do after the 150 days.
Tariffs were the fundamental element of President Trump’s economic policy and became increasingly a weapon in his political armoury. He wielded it as a blunt instrument with increasing effectiveness, as in the case of India, which succumbed and entered into an agreement which at 18 percent tariffs on its goods, is unlikely to be unaffected by the Court’s decision. Other countries, such as Brazil and South Africa, did not succumb. Now that the President’s main economic lever is no longer available to him, which he has been relying on to solve all of the US’s economic problems and resolve some of its political issues, we await the US’s new policy directions, if any.
