Supreme Court Justices Grill US, Challengers in IEEPA Tariffs Argument

Justice Amy Coney Barrett, often a swing vote on the court, showed her skepticism of the administration's arguments when she asked Solicitor General D. John Sauer to point to anywhere in the U.S. Code or any time in history where the phrase "regulate ... importation" has been used to confer tariff authority.

Sauer invoked a Supreme Court decision that upheld the president's use of Section 232 to impose tariffs. That statute says the president will "determine the nature and duration of the action that, in the judgment of the President, must be taken to adjust the imports of the article and its derivatives."

Barrett said that "adjust imports" is different from regulating importation, though she acknowledged that the Trading With the Enemy Act, the IEEPA's predecessor, was judged to authorize President Richard Nixon to impose a global 10% duty that lasted about four months.

Justice Ketanji Jackson, also expressing skepticism about the IEEPA's use for tariffs, during the Nov. 5 hearing said the legislative history of Section 232 talks extensively about tariffs, and the IEEPA's legislative history doesn't.

The cases the justices are considering are Donald J. Trump v. V.O.S. Selections, U.S. 25-250, and Learning Resources v. Donald J. Trump, U.S. 24-1287.

While the court frequently waits until June to release its decisions on the most important cases, the fact that the court scheduled the oral argument about two months after the appellate court weighed in suggests to many observers that this decision may be issued months ahead of that traditional schedule.

Barrett asked Neal Katyal, counsel for the individual importers challenging the tariffs, how the government would make the importers whole if they win. She asked if refunding tariffs paid from February until the decision is issued would "be a complete mess."

Katyal said that the specific importers that are suing would get refunds, and other importers would either need to join a class action lawsuit or file a protest with CBP, which could take a long time, given the administrative procedures.

"So, a mess," Barrett responded.

Katyal replied, "Absolutely, we don't deny that it's difficult," but said that Congress could lay out a process to do it. He said the Supreme Court also would have the option to "limit its decision to prospective relief ... . There's lots of possibilities."

If the Court were to rule the tariffs unconstitutional, but say there could only be prospective relief, companies would no longer have to pay tariffs under the IEEPA but would get no refunds.

At a press conference following the argument, Oregon Attorney General Dan Rayfield said the implementation of remedies "needs to be done in a conversation with the appropriate government agencies." He said in a "perfect world," the money should be paid back.

The U.S. Constitution gives Congress the ability to tax and tariff, not the president, and Justice Neal Gorsuch questioned whether an unbounded tariff power delegated to the president would be unconstitutional.

Gorsuch asked the solicitor general if the president could completely delegate the Constitution's Article I power to regulate foreign commerce. After Sauer said that "would be different than a situation where there are metes and bounds," Gorsuch noted that Sauer previously said the court isn't there to judge metes and bounds. "That's what I'm struggling with," he said, adding that there has to be some test. And while Sauer said the test is less than the court's usual "intelligible principle" test for delegation, the justice wanted to know what the proper test would be. Sauer merely suggested a greatly deferential application of the intelligible principle test should apply.

Gorsuch then asked why the court should accept the notion that Congress can hand off the power to declare war to the president. After Sauer said he doesn't contend that, the justice responded that the solicitor general is contending that, since Sauer said it's unreviewable and there's nothing to be done about such a declaration. Gorsuch ultimately acknowledged that Sauer "backed off that position."

The justice also asked about the fact that if the court grants this tariff power, it's practically impossible for Congress to claw it back, given that they would have to rescind the emergencies with veto-proof margins.

He said that Sauer emphasized that Congress can always take back its powers. While the Senate has voted to terminate the IEEPA emergencies for the global reciprocal tariffs, for the additional 40% tariffs on Brazil, and for the 25% IEEPA tariffs on Canada, all those votes were a little more than a majority, nowhere near a veto-proof majority. With the House of Representatives controlled by Republicans, they have chosen not to take a vote on the tariffs.

He said Congress can't rewrite the laws on tariff delegation unless they pass with veto-proof margins.

"What president's ever going to give that power back? Pretty rare president. So how should that inform our view of delegations and major questions?"

Sauer said that initially, only a majority of the House and Senate had to terminate the emergency for the action to end, and Gorsuch interjected that the Supreme Court struck down such legislative vetoes.

Gorsuch argued, "So Congress, as a practical matter, can't get this power back once it has handed it over to the President. It’s a one-way ratchet toward the gradual but continual accretion of power in the executive branch and away from the people's elected representatives."

Sauer tried to push back, noting that Congress ended the COVID-19 emergency during President Joe Biden's term, but Gorsuch reminded him that Biden agreed to terminate the emergency.

The distinction between a tariff and a tax was central in the argument. The argument was attended by Commerce Secretary Howard Lutnick, Treasury Secretary Scott Bessent, U.S. Trade Representative Jamieson Greer, and the chairman and ranking member of the House Ways and Means Committee, the committee with the power to write tariff law.

Sauer repeatedly stressed that the tariffs imposed under the IEEPA are "regulatory tariffs" and not a tax, claiming that the claimed tariff authority should be viewed as both a congressional power and a presidential power in the realm of foreign affairs.

This claim received considerable questioning from the justices, starting with Justice Sonya Sotomayor.

The justice said she just doesn't "understand this argument," adding that the power to tariff is a "congressional power, not a presidential power to tax." Responding to the notion that tariffs aren't a tax, Sotomayor said "that's exactly what they are." They generate money from U.S. citizens. The justice also distinguished quotas from tariffs, since quotas don't raise revenue.

Katyal, made this exact point during his argument, repeatedly arguing that the IEEPA gives the president a whole host of powers, though none of them raise revenue, unlike tariffs.

Justices Clarence Thomas and Samuel Alito pushed back, with Thomas asking whether Katyal's argument that the IEEPA isn't an "open-ended power to junk the tariff laws" falls apart in the face of the president's ability to impose embargoes. In response, Katyal made three points: tariffs are "revenue raising," while embargoes are not; "textually," the IEEPA explicitly includes the power to impose embargoes, while there's absolutely no mention of tariffs; and Congress has displaced any such executive tariff power through a host of tariff statutes.

Alito repeatedly asked Katyal whether his argument survives if the tariffs imposed under the IEEPA are not implemented for the purpose of raising revenues but rather to accomplish some other policy aim. For instance, Alito asked, if the president were facing the "imminent threat of war" from a powerful nation "whose economy was heavily dependent on U.S. trade," could he impose a tariff as a way to stave off that war. In response, Katyal said no, adding that there's a "category shift between a tariff and the other eight powers in IEEPA because it is revenue raising."

Katyal noted that Alito has said "many times" that you look to what the government is actually doing and not its stated purpose.

Relatedly, Justice Brett Kavanaugh noted Sauer's claim that if tariffs are removed from the statue, it would leave a "donut hole" in the text given the broad economic powers given to the president, including the power to block all goods from entering the country. When asked about this line, Oregon Solicitor General Benjamin Gutman, counsel for the 12 U.S. states challenging the tariffs, quipped that it's "not a donut hole, it's a different kind of pastry," emphasizing that tariff power is a "fundamentally different power."

While Sauer said he didn't see an economic distinction between licenses and tariffs, Katyal and Gutman argued that while licenses may be used to permissibly recoup the government's costs, they can't be used to raise revenue. Barrett noted that perhaps licenses could be used under the IEEPA to merely permit certain importers to bring in goods that otherwise would not be allowed under some embargo imposed under the statute.

Sotomayor, meanwhile, said that the term "licenses" in the statute only relates to the means by which the president can implement the nine actions permitted under the IEEPA, none of which explicitly is the power to impose tariffs. She noted that it doesn't confer an additional power. Gorsuch pressed Katyal on both the term "licenses" and "otherwise," noting that "licenses" and tariffs are very similar, "so 'otherwise' might encompass tariffs."

Katyal countered that the government "isn't even making that argument," adding that there's a "strong presumption against reading statutes this way," since it would add unfettered tariff power to the law. Gorsuch responded that Katyal is imposing a "major questions thumb" on the plain meaning of the text. Katyal said this characterization is fair, though his view of the statute is also the most "natural way of understanding what the statute is about."

While most of the argument centered on the broader authority to impose tariffs, some questions were asked about the other limits seemingly found in the IEEPA. For instance, Barrett asked about Trump's declaration of an "unusual and extraordinary threat." Specifically, the justice centered on the reciprocal tariffs, asking if every country needed to be subject to a tariff. She questioned whether tariffs really needed to be on Spain and France to protect the U.S. defense industrial base.

Relatedly, Jackson referred to an earlier hypothetical posed by Gorsuch about whether another president could declare climate change a threat and impose a 50% tariff on gas-powered cars. While Sauer said this administration would never call climate change an unusual and extraordinary threat, he admitted such an action could be taken. Jackson asked whether the court would be able to review such a threat determination, and Sauer replied, "that'd be a question for Congress."

Jackson also inquired about the IEEPA's "deal with" provision, which the Court of International Trade used to strike down the tariffs on China, Canada and Mexico meant to combat fentanyl. The trade court said IEEPA can't be used to impose tariffs as leverage over foreign countries. Jackson asked Gutman if the fentanyl tariffs adequately deal with the emergency of fentanyl. Gutman replied that they don't, since the tariffs aren't applied directly against traffickers, and the IEEPA typically only allows for sanctions against wrongdoers. Jackson pushed back, suggesting such leverage is used by the U.S. all the time.

One additional wrinkle in the argument came from Alito's inquiry about the potential use of Section 338, which is a statute allowing the president to impose tariffs of up to 50% on countries that discriminate against U.S. trade. Alito pushed back against Katyal's claim that the statute "may have lapsed." To this, Katyal said that Sections 232 and 301 seem to have superseded the law, and, in any event, the government has never argued that Section 338 can serve as the basis for these tariffs. They have only cited the IEEPA, and Katyal said that statute "doesn't come even close to authorizing these worldwide tariffs."