Supreme Court to Decide Legality of Trump’s Tariff Strategy

President Donald Trump‘s tariff strategy, aimed at reducing the U.S. budget deficit, faces a significant legal challenge that could reshape trade policy in the country. The strategy has reportedly generated an additional $165 billion for the U.S. Treasury Department in the fiscal year 2025. However, a ruling from the Federal Circuit Court of Appeals on August 29 has questioned the legality of these tariffs, which could lead to substantial refund liabilities for the government if the Supreme Court does not rule in favor of Trump’s approach.

During his second term, Trump implemented broad tariffs on imports from numerous countries, including the Reciprocal Tariffs and Trafficking & Immigration Tariffs. The legal challenge centers on the assertion that these tariffs were imposed under the International Emergency Economic Powers Act (IEEPA). Plaintiffs, which include small businesses and a coalition of states, argue that Trump exceeded his authority by invoking emergency powers to impose tariffs—a power they contend Congress never granted.

In May 2025, the U.S. Court of International Trade (CIT) ruled that many of Trump’s tariffs exceeded the presidential authority outlined in IEEPA, declaring them unlawful. Subsequently, the Federal Circuit Court of Appeals upheld this decision in the case of V.O.S. Selections, Inc. v. Trump, stating that IEEPA does not permit the president to impose tariffs on such a wide scale. Despite these rulings, the government has appealed, and the lower-court decisions are currently stayed.

At the core of this legal dispute are fundamental constitutional principles. Critics argue that the tariffs violate the separation of powers, as the Constitution assigns the authority to levy duties exclusively to Congress. Judges are also assessing whether the IEEPA was intended to authorize tariffs of such extensive nature or only in limited emergency situations. Furthermore, the courts are examining whether Congress clearly delegated this level of executive authority regarding trade and international relations.

The uncertainty surrounding the tariff strategy could prompt policy responses from the Trump administration if the Supreme Court rules against them. Lou Crandall, chief economist at Wrightson ICAP, emphasized the unpredictability of the situation, stating, “It is a wild card that will have to be dealt with when the time comes.” He suggested that if the administration seeks to mitigate further deficit growth, a policy response will be necessary, although the specifics remain unclear.

While the additional tariff revenue is significant, it still falls short of addressing the nearly $2 trillion budget deficit reported for the first eleven months of fiscal year 2025. Economists support Treasury Secretary Scott Bessent‘s prediction that this could lead to a current annual run-rate of about $300 billion, approximately 1% of U.S. gross domestic product (GDP), potentially aiding in deficit reduction over the coming decade.

Many businesses have expressed frustration over the fluctuating U.S. tariffs. For instance, Hand2mind Inc., a manufacturer of educational toys, had to relocate production from China to India due to the tariffs. According to Elana Ruffman, a marketing executive at the company, despite the transition and associated costs, they ended up facing higher tariffs than if production had remained in China, as the surtax on Indian imports increased to 50% last month. Ruffman’s company is among those suing the Trump administration regarding its use of IEEPA to impose tariffs.

The case is now awaiting review by the Supreme Court, which has agreed to hear it in early November 2025. If the justices uphold the lower court rulings, many tariffs could be deemed unconstitutional. Additionally, the Court might require the government to refund a significant portion of the collected tariffs. A ruling against the tariffs could also lead to an estimated revenue loss of around $1.5 trillion over the next decade, with remaining levies potentially collecting $496 billion.

The implications of the Supreme Court’s decision extend beyond immediate financial considerations. The outcome could redefine the balance of power between the executive branch and Congress in establishing trade policy, with significant ramifications for future administrations. As the legal battle unfolds, the nation awaits a pivotal resolution that could alter the landscape of U.S. trade relations.