The Supreme Court recently heard oral arguments on the limits, if any, under which the President can impose tariffs under the International Emergency Economic Powers Act (IEEPA). Regardless of how the Supreme Court rules, the presidency and executive power will have been weakened. Here’s why.
The President is vested with enormous powers to direct foreign policy under the constitution and to impose tariffs clearly under a wide range of statutes. Unfortunately, IEEPA is not a statute that provides unambiguous authority for tariffs.
Businesses large and small pay the IEEPA tariffs grudgingly. Some resent the uncertainty associated with the everchanging tariff rates. Many worry that the tariffs will hurt business. And still others harbor doubts about the wisdom and the legality of the tariffs.
A court defeat would clearly erode the Administration’s power. The Supreme Court may yet support the Administration’s interpretation of its IEEPA tariffing authority. But even court victory may be Pyrrhic.
Administrative actions such as writing rules and enforcing them—and imposing tariffs--are only as effective as the confidence that affected parties will comply with them and will support them as wise and lawful. Disaffected parties can and do challenge administrative actions, but disaffected parties should be the exception rather than the rule. If concern about the legality or wisdom of an administrative action is widespread, it ceases to be effective.
Doubts about the wisdom and legality of the IEEPA tariffs are, sadly, not the exception. They are widespread, and they corrode confidence in the rule of law as well in the power of federal government. Businesses that have without question paid tariffs—and consumers who paid prices for goods that included tariffs--in the past, now question whether any of those tariffs are lawful and wise. These questions erode governmental power.
Every administration has agencies that test the outer bounds of administrative authority. The result is not an expansion of administrative power but the exact opposite.
Consider the Federal Trade Commission (FTC). In 2024, the FTC promulgated a rule to limit non-compete labor contracts. The FTC claimed to have the authority under Section 5 of the Federal Trade Commission Act. That section outlaws “unfair or deceptive acts or practices in or affecting commerce.”
Common sense and history teach that the FTC does not have authority to regulate labor contracts. Various parties appealed the FTC rule. One court in Texas granted summary motion to set the rule, and one court in Florida granted a preliminary injunction to stay the rule.
The FTC in 2024 was trying to stretch Section 5 beyond reasonable limits. With a different majority of commissioners, the FTC in September withdrew its notice of appeal of the court decisions. The last vestiges of the rule claiming FTC authority to regulate non-compete labor contracts are no more.
Section 5 is a major source of enforcement authority for the FTC. Businesses engaged in unfair or deceptive business practices are challenged, often successfully, by the FTC in court based on broad statutory language, not necessarily based on narrower rules.
The FTC has remarkably few rules under Section 5 with good reason. In the more than 100 years of Section 5, the FTC has adopted approximately three dozen rules under Section 5, mostly procedural rules for enforcement actions. The FTC has few rules that clearly delineate a specific form of conduct as violating Section 5.
Ironically, by attempting to expand its regulatory authority under Section 5, the FTC diminished its regulatory authority. Businesses and courts will be skeptical of any new rules under Section 5. The FTC can still bring enforcement actions, but its rulemaking discretion is much more limited.
Theodore Roosevelt famously said “Speak softly and carry a big stick.” He was referring to foreign policy, but he might as well have been speaking about the conduct of federal administrative agencies.
The strongest government is not necessarily one that attempts to exercise the most power but one that exercises power with the confident consent and trust of the governed, both individuals and businesses. When much of the governed questions the legality and wisdom of government decisions, the government loses power, no matter how courts uphold the government. The wisest government is one that uses its power sparingly, but forcefully and lawfully when necessary.
