A wine importer and other small businesses took on the President of the United States at the Supreme Court on Nov. 5. The case challenges Donald Trump’s imposition of tariffs on imports from nearly every foreign nation. Many legal scholars feel the majority of the justices were dubious about the White House’s justification for the tariffs, but a decision is weeks or months away.
For fans of imported wines and the companies that sell them, the decision could decide whether prices drastically rise in coming months.
The oral arguments combined two cases: Donald J. Trump, et al. v. V.O.S. Selections, Inc., et al. and Learning Resources, Inc., et al. v. Donald J. Trump, et al.
V.O.S. Selections is a small wine importer based in New York City. Learning Resources makes educational toys. The companies joined with others to challenge the President’s authority to unilaterally impose tariffs under a 1977 law called IEEPA, the International Emergency Economic Powers Act, which gives the president broad powers to regulate financial transactions upon declaring a national emergency but does not explicitly mention tariffs. No president has previously used IEEPA to enact them.
For more than two hours, the nine justices heard from the Trump administration’s solicitor general, D. John Sauer, as well as a lawyer for the plaintiffs, Neal Katyal, and Oregon’s solicitor general, Benjamin Gutman, who represented a group of states challenging the tariffs. The justices peppered the lawyers with questions on presidential power.
Why Do The Plaintiffs Say the Tariffs Are Unconstitutional?
Katyal started his arguments with the crux of the small businesses’ case: “Tariffs are taxes,” he told the Court. “Our founders gave that taxing power to Congress alone.”
Tariffs are a tax—importers pay them to customs when wine arrives on U.S. shores and then pass on part or all of that cost to consumers. Article One of the Constitution gives Congress, not the president, the power to impose taxes and tariffs.
Congress has passed laws delegating tariff powers to the president, but those laws require the White House to follow a process, usually by having the administration conduct an investigation into why tariffs are justified. President Trump did just that when he imposed tariffs on foreign steel and aluminum.
But when the President instituted tariffs against nearly every nation earlier this year, stating that U.S. trade deficits with other countries constituted a national emergency, and when he imposed tariffs on Canada and Mexico over what he says is their complicity in allowing fentanyl into the U.S., he turned to IEEPA. The law specifically gives the president the power to “regulate” foreign financial transactions in an emergency. It does not use the word tariffs, taxes or duties. And because the tariffs are effectively a tax on U.S. citizens, the plaintiffs argue they go beyond his powers.
Several of the justices seemed to agree. “It’s a congressional power, not a presidential power, to tax,” said Justice Sonia Sotomayor. “The Constitution is structured so that if I’m going to be asked to pay for something as a citizen, it’s through a bill that is generated through Congress.”
Then there’s the so-called “major questions doctrine,” which this group of justices has developed in recent decisions, including a ruling striking down President Joe Biden’s attempt to forgive large amounts of federal student loans without congressional approval. The doctrine states that the executive branch cannot exceed regulatory powers Congress assigns to resolve “major questions” of federal policy that Congress may not have anticipated. The plaintiffs argue that imposing tariffs of 10 percent or higher on more than 100 nations certainly fits the bill.
Justice Neil Gorsuch seemed particularly worried about the president poaching the right to tax from Congress. “When Congress gives a president a power, what president is ever going to give that back?” Gorsuch asked Sauer. “What happens if the president simply vetoes a resolution to take those powers back? Congress as a practical matter can’t get this power back. It’s a one-way ratchet ratcheting power to the president and away from the people’s elected representatives.”
What’s the White House Response?
Responding to skepticism from all three of the court’s liberal justices, as well as three of the conservative members, Sauer argued that the president’s tariffs are not taxes, but a method of regulating foreign affairs. Congress and the courts have traditionally given presidents much leeway in handling foreign policy, and IEEPA specifically focuses on international emergencies. Past presidents have relied on the law to impose sanctions or embargoes on other countries.
“The fact that [the tariffs] raise revenue is only incidental,” Sauer argued.
Justices Brett Kavanaugh and Samuel Alito sounded sympathetic to the administration’s assertion that tariffs are a necessary foreign policy tool under IEEPA. Kavanaugh asked why Congress would give the president the power to shut down trade with a country, but not allow him to impose a tariff on that nation.
The White House has called America’s trade deficit with other nations a national emergency and has argued that if the Court strikes the tariffs down, it could lead to recession and financial ruin. But while Sauer argued the tariffs are not about revenue, Trump has repeatedly pointed to them as a way of raising money and paying down the budget deficit.
“The [IEEPA] justification is being used for power to impose tariffs on any product from any country in any amount, for any length of time,” said Chief Justice John Roberts. “The vehicle is the imposition of taxes on Americans, and that has always been a core power of Congress.”
What’s Next?
Normally the Court works on decisions for months after oral arguments, but there have been signals a ruling in this case could come sooner.
Trying to guess how justices will rule is a dangerous sport. Roberts, Gorsuch, Sotomayor and Justices Amy Coney Barrett, Elena Kagan and Ketanji Brown Jackson all sounded skeptical of the Trump administration’s arguments, but how they will rule in chambers when trying to craft a decision that sets a precedent for future presidents is a mystery. And the majority of justices have so far been sympathetic to President Trump in other cases regarding the limits of presidential power. It’s also possible that they strike down the tariffs, but also offer a guidelines for how the president could impose tariffs under IEEPA under certain conditions.
What happens if the tariffs are struck down? That would provide immediate relief for importers and wine consumers. While many wineries and importers have swallowed at least some of the tariffs’ cost so far, they have signaled that’s not economically viable for much longer. If the Court ends the tariffs, it’s possible the duties collected so far would be refunded.
But the President has several other constitutionally tested methods of imposing tariffs. The administration could use Section 122 of the 1974 Trade Act to enact a 15 percent global tariff for 150 days, to start. Simultaneously, the White House could launch multiple trade investigations under a regulation titled Section 301, which allows the president to issue broad tariffs in response to unfair trading practices, after first conducting an investigation.
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