By an 7-4 vote, the U,S, Court of Appeals for the Federal Circuit has ruled that many of President Donald Trump’s “beautiful” tariffs were imposed illegally under the 1977 International Emergency Economic Powers Act (IEEPA). The president exceeded his constitutional authority by unilaterally imposing the largest indirect tax on consumers in memory without involving Congress.
The ruling was a temporary win for consumers, our economy, and the rule of law under our Constitution, at least until October 14, 2025, giving the president time to appeal. It was another court loss for President Trump.
Treasury Secretary Scott Bessent worried that this outcome would embarrass the President and his trade “negotiations.” But both he and the Congress should be more worried about the economic and political impacts of Trump’s chaotic and costly tariffs on consumers and our economy. Congress also needs to stop and reflect on the senseless global trade war Trump unleashed against our allies and trading partners.
The president wrongly believes that tariffs are the remedy for most of the economic challenges we face today. Unfortunately, Trump’s tariffs are grounded in his unorthodox, 19th century mercantilist view of a world that no longer exists. He refuses to acknowledge the role and benefits of free markets and fair trade to the United States in a competitive global economy that President Ronald Reagan embraced. As we know from our history, isolationism and protectionism are failed policies.
Left unchecked in a fragile economy, the president’s tariffs could easily lead to recession, stagflation, capital flight, and lost jobs. The worst case scenario is another depression, as we know from the history of the 1930s after the Tariff Act of 1930 (Smoot-Hawley tariffs). Add in Trump’s fiscal irresponsibility, his assault on the Federal Reserve’s independence, and his dismissal of economic facts (firing the Bureau of Labor Statistics (BLS) commissioner), and we face more crippling economic calamity of his making aided and abetted by Congressional silence and impotence.
The Supreme Court will ultimately decide the pending tariffs case. Its decision could go one of two ways. If it reverses the lower courts’ rulings and deems the President’s actions legal, then some variation of the scenarios outlined above will unfold unless reversed by Congress. Americans will face higher prices (inflation), lost jobs and higher unemployment along with slower economic growth . . . or worse.
If, however, the Supreme Court upholds the lower court’s decision as many expect, then the President must go back to where he was on March 31 before his so-called Liberation Day and start over. Only legally this time.
The President has legal options under current trade law, but they are limited by time and amounts, slower to implement, and often require investigations and reports that impede a president’s impulsive actions. He also would likely face claims from importers, who paid his “illegal” tariffs when their goods cleared customs. The U.S. Treasury also would take an unexpected hit to pay the importers’ claims, and that would be embarrassing. How the ultimate consumer gets reimbursed for paying higher prices on imported goods or parts with illegal tariffs remains to be seen and likely only happens at the ballot box next November.
Regardless of how the Supreme Court rules, the Republican Congress needs to intervene immediately to reclaim its Constitutional authority over tariffs. If Congress does not stand up to Trump, then next year voters will blame both the president and Congress, just as they blamed Republicans in the 1930s. After the Smoot-Hawley tariffs, Republicans lost 52 seats in the House of Representatives in 1930 and 101 more in 1932.
ORL opposes Trump’s reckless tariffs because they are already harming our economy. Congress must do three things if it wants to avoid being blamed for Trump’s looming recession and suffer the resulting political consequences.
First, Congress must roll back Trump’s destructive tariffs to the status quo on March 31, 2025, before his infamous Liberation Day chaos was unleashed.
Second, it should impose a 12-month moratorium on tariffs. During that period, Congress can conduct the necessary oversight hearings to review the impact of tariffs on consumers, businesses, and the economy.
Third, if needed after careful review, Congress can legislate revised tariff authority for the President, but only under tighter Congressional controls and oversight. Part of any new legislation should be a mandate for the President and his Trade Representative to negotiate a new, modern global trade agreement to reverse protectionism and lower tariffs worldwide to spur more international commerce and higher economic growth.
The president’s destructive tariffs and trade war must be stopped before they do more economic harm. Congress has options now to avoid a recession or worse. Voters will have options next year at the mid-term elections.
