The Trump administration closed out August with the most significant legal defeat of its second term. Last Friday, the Federal Circuit Court of Appeals ruled that most of Trump’s tariffs were illegal under existing federal law—a potentially landmark setback for the Trump administration’s economic agenda.
At issue in the case is whether Trump can use the International Emergency Economic Powers Act of 1977—more commonly known as IEEPA—to levy a wide range of tariffs on imported goods. While IEEPA gives presidents broad powers to influence trade when a national emergency is declared, a coalition of small businesses argued that these powers did not extend to the kind of tariffs that Trump imposed.
In a 7-4 decision, the Federal Circuit agreed. “We are not addressing whether the President’s actions should have been taken as a matter of policy,” the court explained. “Nor are we deciding whether IEEPA authorizes any tariffs at all. Rather, the only issue we resolve on appeal is whether the [specific tariffs] imposed by the challenged executive orders are authorized by IEEPA. We conclude they are not.”
Trump’s next step will likely be to ask the Supreme Court to intervene. The court’s conservative supermajority has given the president practically everything that he has asked for over the past two years, including “presidential immunity” before the 2024 election and near-unlimited leeway to impose his governing vision on the nation by executive order. At the same time, upholding Trump’s tariffs would run counter to many of the justices’ major rulings over the past decade.
In recent years, for example, the justices used the major-questions doctrine to kneecap policy initiatives by the Biden administration. The doctrine holds that when the executive branch issues a rule or regulation of “vast economic and political significance,” the statutory authority it invokes must be unambiguous. The justices have said that Congress must “speak clearly” in such cases, and on those grounds the court has invalidated a Biden-era plan for student-loan debt relief and a moribund EPA plan to regulate power-plant emissions, among other rulings.
The Supreme Court has never before applied the major-questions doctrine to a Republican president’s policy initiatives. But the Federal Circuit found it appropriate when judging the legality of Trump’s tariffs. “Reading the phrase ‘regulate … importation’ to include imposing these tariffs is ‘a wafer-thin reed on which to rest such sweeping power,’” the court wrote, quoting first from the language in IEEPA that Trump cited as authority, and then from a Supreme Court decision that invalidated the CDC’s Covid-era eviction moratorium in 2021 on major-questions grounds.
The Federal Circuit noted that Trump’s attempt to use IEEPA in this way appeared to be an entirely novel one in the statute’s half-century history. “Since IEEPA was promulgated almost fifty years ago, past presidents have invoked IEEPA frequently,” the court wrote. “But not once before has a President asserted his authority under IEEPA to impose tariffs on imports or adjust the rates thereof.”
Trump also deserves less deference on these questions, the court explained, because levying tariffs is a core power of Congress under the Constitution. Presidents do have some powers to raise and lower tariff rates in certain circumstances, it noted, but Congress has typically “done so explicitly, either by using unequivocal terms like tariff and duty, or via an overall structure which makes clear that Congress is referring to tariffs.” IEEPA, by contrast, makes no mention of tariffs at all.
The court even included a reference to Chief Justice John Roberts’s landmark ruling in 2012 that upheld the Affordable Care Act. Tariffs, in practical terms, are a tax paid by individuals and companies on foreign-made goods at the time of import. “Contrary to the government’s assertion, the mere authorization to ‘regulate’ does not in and of itself imply the authority to impose tariffs,” the majority noted, observing that the Constitution grants these powers to Congress in separate clauses. It cited Roberts’s Obamacare ruling, which upheld the individual mandate to buy health insurance under Congress’s taxation powers, as proof of the distinction.
These conclusions are not much different from those reached by the Court of International Trade in May when it ruled against the tariffs in the first instance. The Trump administration also appears to have expected a defeat before the appellate court. Over the past month, it has sent multiple letters to the court to make additional arguments beyond what it offered in oral arguments in July. These arguments, which were not legal in nature, tended toward the hyperbolic and—in some cases—the apocalyptic.
“If the United States were forced to unwind these historic agreements, the President believes that a forced dissolution of the agreements could lead to a 1929-style result,” Solicitor General D. John Sauer wrote last month. “In such a scenario, people would be forced from their homes, millions of jobs would be eliminated, hard-working Americans would lose their savings, and even Social Security and Medicare could be threatened. In short, the economic consequences would be ruinous, instead of unprecedented success.”
As I noted last month, it is difficult to believe that unwinding tariffs that did not exist six months ago would collapse the American economy overnight. The administration then followed up with a second letter a few days before the court’s ruling. This one included almost 40 pages of sworn statements by members of Trump’s Cabinet, each one warning of myriad harms to the American economy if the court ruled against Trump—or, alternatively, if it blocked him from collecting the tariffs until they could ask the Supreme Court to intervene.
Secretary of Commerce Howard Lutnick warned that invalidating the tariffs would “effectively consign American producers to the back of the line, resign the United States to permanent dependency on foreign supply chains, and accelerate the drift toward America’s decline into a vassal state to global manufacturing powers that include our geopolitical rivals.” He described the tariffs as “America’s last chance to turn the tide, to restore our industrial base, and to secure economic might for generations to come.”
Scott Bessent, the secretary of the treasury, has acted as the adult in the room since last spring on trade-related matters. To that end, he was somewhat more constrained in his affidavit. Bessent warned that a court defeat would “lead to dangerous diplomatic embarrassment, which emboldens allies and adversaries alike.” (It is unclear why emboldening our allies would be a bad thing.) He also claimed, more reasonably, that a narrower reading of IEEPA would reduce the U.S.’s ability to impose retaliatory tariffs in the future.
All of the Cabinet officials emphasized that invalidating the tariffs would weaken the administration’s hand in ongoing negotiations. Jamieson Greer, who holds an ambassador-level diplomatic post as the United States trade representative, warned that an adverse ruling would “undermine this once-in-a-generation opportunity to protect national security by expanding the U.S. defense-industrial base.” If the court rules against Trump, he continued, it would “interrupt ongoing negotiations to memorialize these framework agreements midstream, and that discontinuity cannot be remedied by a stay or reversal at a later date.”
None of that is particularly persuasive, since the question is not whether the tariffs are good or bad or effective or ineffective, but whether they are legal. If the tariffs are so good and important and vital, one might wonder, why could Trump not simply ask Congress to enact them into law through the normal legislative process? He has the luxury of Republican control of both the House and the Senate. He also enjoys more influence over his party’s lawmakers than perhaps any other president in American history.
For now, Trump’s easier option may be to ask the Supreme Court to bail him out. It is hard to predict exactly how the court will approach the case, aside from the baseline assumption that they favor Trump. Justice Brett Kavanaugh gave a forecast of sorts into how he might rule in an unrelated case last term. In a concurring opinion in Federal Communications Commission v. Consumers’ Research last June, he wrote broadly on the major-questions doctrine and suggested that it might not extend to national-security matters.
“The major questions canon has not been applied by this Court in the national security or foreign policy contexts, because the canon does not reflect ordinary congressional intent in those areas,” Kavanaugh explained. “On the contrary, the usual understanding is that Congress intends to give the President substantial authority and flexibility to protect America and the American people—and that Congress specifies limits on the President when it wants to restrict Presidential power in those national security and foreign policy domains.”
Kavanaugh did not reference the ongoing tariff litigation, but four dissenting judges in the Federal Circuit took the hint. They cited him directly when disagreeing with the majority’s ruling. “Congress very clearly made a broad delegation here, as in other emergency-authority delegations,” Judge Richard Taranto wrote. “Whether to provide such delegations is certainly open to policy debate, as it carries obvious risks, and such debate has occurred over the decades, but the policy debate is not for us to resolve.”
It is worth emphasizing that Kavanaugh’s views do not amount to binding legal precedent for lower courts, which is why the majority did not have to agree with them. Nor are there any indications that they are shared by any of the justice’s colleagues. Kavanaugh’s dissent in Consumers’ Research in June was a solitary one. It is also unclear why Congress can be flexible with presidents in some circumstances but not others.
Now that the Federal Circuit has spoken, the Supreme Court’s conservative justices face a choice. They can apply their existing precedents as written to constrain Trump on a matter of vast economic and political significance (to borrow their phrasing), and risk his ire. Or they can find yet another escape hatch for him, at the cost of further diminishing their public standing and the legitimacy of their anti-regulatory rulings. If Trump can send the United States into a recession on a whim, what purpose does the major-questions doctrine serve other than to constrain Democratic presidents? We’ll find out in the court’s upcoming term.
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