Trump to Ask Supreme Court for Expedited IEEPA Ruling

The U.S. Court of Appeals for the Federal Circuit on Aug. 29 wrote: "We are not addressing whether the President’s actions should have been taken as a matter of policy. Nor are we deciding whether IEEPA authorizes any tariffs at all. Rather, the only issue we resolve on appeal is whether the Trafficking Tariffs and Reciprocal Tariffs imposed by the Challenged Executive Orders are authorized by IEEPA. We conclude they are not."

The court ruled in a 7-4 vote against the president's use of IEEPA to impose tariffs ranging from 10% to 50% on all countries.

Trump, speaking at the White House on Sept. 2, called the appellate court a liberal court, and called the decision "very shocking," though he repeatedly praised "an Obama judge" who ruled in favor of his administration, saying "that took great courage."

Although Judge Richard Taranto was nominated by Barack Obama, he had served in the Solicitor General's office during Reagan's second term, and he had clerked for conservative icon Robert Bork, as well as moderate former Justice Sandra Day O'Connor. (Taranto was chosen after a previous, more liberal, pick never got a vote in the Senate.)

Trump said he thought the Supreme Court would preserve the tariffs, saying they have been wise. "Frankly, if they make the wrong decision, it'll be devastation for our country," Trump said.

He said "almost $17 trillion" in promised investments are at risk without the tariffs.

"If that ruling, if it went against us, I guess we'd have to give back hundreds of billions ... we would have to give trillions and trillions of dollars back to countries that have been ripping us off for the last 35 years," he said.

According to the Committee for a Responsible Federal Budget, if IEEPA tariffs are removed, and current sections 232 and 301 policies remain, the Treasury would collect about $400 billion in 232 tariffs through the end of 2028; in July, all tariff collections were $25 billion, up nearly fourfold from late last year.

Trump claimed the stock market is down because of the ruling, but it was flat. "All these countries signed agreements" due to the tariffs, he said, "and they're happy about it."

On social media over the weekend, Trump wrote, "More than 15 Trillion Dollars will be invested in the USA, a RECORD. Much of this investment is because of Tariffs. If a Radical Left Court is allowed to terminate these Tariffs, almost all of this investment, and much more, will be immediately cancelled! In many ways, we would become a Third World Nation, with no hope of GREATNESS again. TIME IS OF THE ESSENCE!!!"

Sidley trade practice co-lead Ted Murphy, in a telephone interview, said the administration believes that a court ruling that ends the IEEPA tariffs would be ruinous, and, in filings, has made "an ends justifies the means" argument.

Murphy said he was surprised that the administration didn't pivot from IEEPA to another law to impose the reciprocal tariffs in August, given that the Court of International Trade ruled against the use of IEEPA in May.

Murphy said the administration knows it could use other laws, such as Section 122 and Section 338. Section 122 allows for 15% tariffs due to balance of payments imbalances, but they only last six months. Section 338 requires a finding of discrimination from the International Trade Commission, allows for tariffs of up to 50%, but also with a time limit -- five months.

"They generally didn’t want to use them because most of them come with required process and the administration wasn’t interested in the process," Murphy said.

Treasury Secretary Scott Bessent told Reuters on Sept. 1 that other authorities are "not as efficient, not as powerful," and expressed confidence the Supreme Court will bless the use of IEEPA. He specifically mentioned Section 338 of the Smoot-Hawley Act as an alternative.

"We've had these trade deficits for years, but they keep getting bigger and bigger," he said. "We are approaching a tipping point ... so preventing a calamity is an emergency."

Murphy pointed to the use of the IEEPA to increase tariffs on Brazil from 10% to 50% on about 36% of Brazilian exports. "Look, they immediately started a 301 investigation" over the same issues that Trump put in the IEEPA investigation. "That sort of speaks volumes of how they think the IEEPA tariff is going to work."

But Murphy said he doesn't think that trading partners who have agreed to lower their own tariffs while accepting double-digit tariffs on their exports to the U.S. will back away from those agreements as they wait for the Supreme Court -- or even if the courts unwind IEEPA tariffs.

"For other countries, I don’t think this changes their calculus at all," he said. "I think they’ve got to play the person in front of them, and I think President Trump is pretty clear on his desire to increase tariffs and right other wrongs."

Murphy said he also doesn't think that manufacturers who have said they will expand production in the U.S. will hesitate because of the ruling, because "new tariffs could come into place one way or the other. The direction of travel is clear."

But Murphy also said it's not clear that the promised investments will materialize for other reasons -- with all the tariffs on inputs, and cost and efficiency advantages that led to offshoring, it may not make economic sense to produce in the U.S., even with 15% or 20% tariffs.

Felicia Pullam, executive director of CBP's Office of Trade Relations during the Biden administration, also said she doesn't think the loss in court changes foreign countries' approaches to trade relations or businesses' sourcing decisions.

"I don’t think that the ruling on Friday was necessarily a surprise," she said in a phone interview Sept 2. "It mostly reconfirmed the lower court ruling, and we haven’t seen any change in [business] behavior based on the lower court ruling.

The National Retail Federation issued a statement after the appellate court ruling that said: "The retail industry is at the mercy of a tug-of-war between the courts, the administration and the congress when trying to plan and implement business operations and supply chain continuity. Tariffs have created significant disruption to the retail supply chain resulting in increased costs for retailers large and small. The ongoing instability threatens economic growth and will ultimately, and most certainly, result in higher prices for goods and services to be paid by American consumers. Retailers need certainty, and we look forward to the case being settled by the Supreme Court."

While Pullam said it would be better for the country "to have revenue that’s secure, that doesn’t have to be returned," she doesn't expect the administration to shift its plans to exclusively using Section 232 -- there are nine investigations still pending -- Section 301, or even to replace IEEPA with Section 122 while it waits for a final decision in court.

The appellate ruling retains the tariffs through Oct. 15, but if the Supreme Court ultimately rules against the use of IEEPA, more than a billion dollars in refunds will be owed to importers.

Even if the Supreme Court upholds the use of tariffs under IEEPA, some portion of those tariffs could be reversed by politicians in the future -- either via a veto-proof majority in Congress, or a future president.

Pullam, senior director of Geo-Commerce at APCO, said the tariffs may last beyond this administration.

"I think it’s very difficult to let go of leverage once you’ve regained it," she said, noting that the U.S. lowered its tariffs more than other countries as the trading system evolved in the 20th century.

She said there's no reason to give up tariffs "unless you get something, either in negotiations, or it could be in the form of economic growth."

In other words, if the tariffs are clearly dragging on the economy, future politicians could roll them back without concessions from trading partners.

Pullam said the tariff reductions from trading partners could be durable, too, but acknowledged, "I also think over time other countries would want their own level of reciprocity."