MethodologyContact usSupportLogin
Key takeaways:
The Supreme Court heard oral arguments on November 5 in the cases brought by several small businesses led by Learning Resources, Inc. and twelve states co-led by Arizona and Oregon. Lower courts ruled the tariffs exceeded the President’s authority under IEEPA, staying their rulings pending an appeal.
The IEEPA tariffs were imposed by the Trump Administration earlier this year against Canada, Mexico and China. Further, Trump invoked IEEPA when he imposed “reciprocal” tariffs on trading partners to address trade deficits and trading policies the President deemed unfair.
Some of the reciprocal tariffs have been reduced subsequently after countries and trading blocks, such as the European Union, reached new bilateral trade agreements with the US.
Q: What do you make of the decision of the Supreme Court to review the lower court rulings?
A: The Supreme Court could have taken an easy way out if they wanted to get rid of the tariffs, and that would have been deciding not to take the case – because then the lower court decisions, which favored the plaintiffs, would remain in effect. So, they clearly decided not to go that route. So now the question is: how will they come out?
I watched the oral arguments, and it was a little hard to tell from those.
Naturally, people were trying to ask very penetrating questions – and they did ask some penetrating questions – but my guess is that it will turn out to be a split decision, whatever way it goes.
A couple of Justices seemed quite opposed to any expansion of executive authority. So, my guess is that you’re very likely going to see a 5-4 kind of decision.
Q: What do you see as some of the potential outcomes?
A: If it goes negative to Trump, there are… ways they could really do it. One would be just a blanket thing saying: ‘No, this whole thing is out of whack. He didn’t have the authority to do any of it,’ and blow up everything.
And what would be strange about that would be they would [also] be blowing up a number of transactions [where trade deals have been reached] with the other countries. So that would be very bizarre, in that the plaintiffs here are not the countries. The plaintiffs here are state governments and some individual small businesses. So that would be strange.
Even stranger would be the question: to whom do you make refunds or not?
There is some precedent for saying the President went too far, but leaving in place what’s already been collected. So that’s one option they might have.
Q: What would be the impact of some of those decisions?
A: If they knock out the whole thing and order repayment, then it [raises] some interesting questions of fairness. To whom do you give the refunds? Do you give it to the importer who wrote the first check? Do you give it to the retailer, who probably absorbed at least part of it or maybe all of it? Or do you give it to the consumer for whatever the consumer paid?
If you were to refund it all to the importer, and if the importer didn’t pass any of it along, that would be fine, but I don’t think that’s the case. I think the importers have been passing it along.
So you get into a question of: Do you give a windfall to importers and leave the ultimate consumers stuck?
Since a lot of these turn out to be part of bilateral agreements, what do you do? Here’s a country that lowered its tariffs to us in order to get Trump to reduce the tariffs he had originally proposed. Well, if you now knock out the reduced tariffs, what happens to the concessions that these other countries made to American businesses? Do they stay in effect? Do they go away? It’s totally unknown territory.
I think if they knock them out altogether, there’ll be a huge mess, a huge set of confusion in the securities market and in the trade markets as well. So I hope they don’t do that.
Q: What other outcomes are possible?
A: What they may do is [set] some limits to what he can do and pick one or two cases that they think are particularly egregious, and then knock them out.
I think there are a whole range of solutions that they may see and, of course, it’s possible that they will simply approve everything that was done.
So it’s very hard to figure out, especially since my take of the politics and my take of the oral arguments [that it is] probably going to be a split decision, one way or the other.
Q: Do you think the Justices will take into consideration the impact of their decisions on trade?
A: Even though it’s not really a legal matter, I would assume that they will think about… What are the implications, what are the complexities there?
Those [questions] weren’t really very much addressed in the oral argument, but I would think, and I would hope, that they would be considerations that they would take into effect in the final decision.
Let’s say they did knock out some or all of his tariffs. What does that do to the picture going forward? if you’re an importer, you would know that there are other pieces of legislation that he could use in a lot of instances to impose tariffs. So would you assume that he would just put them back in? Would you assume the tariffs would just go away? What would you assume? if you’re somebody who’s started to move his production, what do you do?
Q: Do you think President Trump will, as he has vowed, impose similar tariffs under other trade laws if the Supreme Court rejects them under IEEPA?
A: Oh, sure. Sure. I think it’s extremely likely, unless it were just one or two isolated cases. Maybe then he would let it go. But if it’s anything substantial, he’s so wedded to the tariffs, I’m 100% sure that he would seek other measures.
Although it would be a heavy lift, he might even think about going back to Congress to get legislation to make it clearly appropriate. So he’s got a lot of options. But it they do lock it out overall, it will really cause quite a bit of confusion.
Q: Why do you think President Trump and US Trade Representative Jamieson Greer have been so optimistic that the Supreme Court will view favorably the President’s authority under IEEPA to impose tariffs?
A: I’m sure they consulted with counsel before they launched this whole thing. So it’s clearly the opinion of someone they’re listening to that these tariffs are OK.
Q: If someone had asked you ahead of time about using imposing tariffs under IEEPA, what would you have advised?A: Well, you can certainly read the legislation as giving [the President] very broad authority, because it says the law entitles him to regulate imports under the emergency situation by means of licenses or other methods. And it doesn’t say what the other ways could be.
But certainly, anybody with any familiarity with tariffs or trade would know that one of the main ways that trade has been regulated is with tariffs. So, they didn’t use those words, and that seems to trouble some of the Justices, but it clearly is an open-ended thing.
A lot of the legislation that gives emergency powers tends to broad and open-ended because you never know what will be the details of the emergency that you’re trying to deal with.
Q: Given the Justices concern expressed in questioning Solicitor General John Sauer, how clear do you think the law is on the matter of imposing tariffs?
A: I think the wording is broad enough that [the Justices] could practically come out however they feel like. And of course whatever they come out with will be the law, at least, as it relates to what’s already happened.
Q: Do you think the lack of a specific mention of tariffs might weigh against support of the President’s legal authority tariffs under IEEPA? .
A: Well it could go either way, depending on how they want to read it. I was a little bit surprised there wasn’t too much discussion in the oral argument about the question of if there is a real emergency. Because that would be the definitive basis for knocking it out, if they wanted to, just to say trade deficits have been around for a while now, maybe it’s not an emergency and this statute doesn’t apply.
In the end, the very fact that it’s easy to outline all these potential different ways they could go shows how hard it is to forecast the outcome.
Navigating the fast-changing implications of Trump’s tariffs for commodity trading? Do it with confidence using Fastmarkets’ news and analysis.