Supreme Court Shocker: Tariff Revenue Vanishes

The Supreme Court just handed Congress back the keys to America’s tariff authority, and the economic fallout could reshape the next decade of federal budgeting.

Quick Take

Supreme Court ruled 6-3 that President Trump exceeded constitutional authority by imposing tariffs under IEEPA without congressional approval
The decision eliminates over $200 billion in tariff revenue and could increase federal deficits by $2 trillion over ten years
Chief Justice Roberts invoked the major questions doctrine, establishing that Congress must explicitly delegate powers with massive economic consequences
Importers face potential refunds, while consumers who paid tariff-inflated prices may see relief in future goods pricing

When Presidents Overreach Their Authority

On February 20, the Supreme Court delivered a decisive rebuke to executive power expansion. The 6-3 majority held that the International Emergency Economic Powers Act, a statute from 1977 designed for cold war-era sanctions, does not grant presidents unlimited tariff authority. Chief Justice Roberts emphasized that IEEPA contains no reference to tariffs or duties, and the statute’s regulatory language does not include taxing power. The precedent matters: until now, no president had attempted this interpretation of IEEPA.

Roberts, joined by Justices Gorsuch and Barrett, grounded their reasoning in the major questions doctrine. This principle requires Congress to be particularly explicit when delegating powers with vast economic consequences. The three justices rejected arguments that courts should defer to executive judgment on foreign relations, stating that Congress would not relinquish tariff power through vague language without careful limits. This doctrinal framework constrains not just Trump, but any future administration seeking unilateral economic authority.

The dissent, authored by Justice Kavanaugh, argued that tariffs represent a traditional trade regulation tool and that IEEPA’s language clearly authorized them. Yet even Kavanaugh acknowledged that numerous other federal statutes authorize presidential tariffs, suggesting alternative legal pathways may exist for future administrations. This concession reveals the dissent’s weakness: the majority was not eliminating presidential tariff authority, but rather requiring Congress to explicitly authorize it.

The $2 Trillion Hole in the Budget

The fiscal consequences demand immediate congressional attention. The ruling eliminates tariff collection estimated at over $200 billion in 2025 alone. The Committee for a Responsible Federal Budget projects the decision could increase deficits by approximately $2 trillion over the next decade absent alternative fiscal measures. Maya MacGuineas, the committee’s president, stated bluntly that the country would now be $2 trillion deeper in debt and called on Congress to fill that hole through border-adjusted cash flow taxes, tax break reductions, or spending cuts.

Consumers experienced the tariff burden directly. A Yale report cited by California officials found that tariffs cost the average American family $1,751 in 2025, with costs passed through the supply chain as higher prices on everyday goods. The ruling opens the possibility of refunds to importers, though Justice Kavanaugh warned the refund process would be a logistical mess. The federal government now faces administrative complexity in determining which tariffs qualify for refunds and calculating interest owed.

Trump’s Defiant Response and the Path Forward

Trump responded to the ruling by defending his tariff policies as economically beneficial. In a Georgia visit, he stated that tariffs were the greatest thing to happen to the country and claimed factories were booming due to tariff-driven production increases. He questioned why the Supreme Court would rule against him and criticized the justices for taking months to resolve the issue. His comments suggest he views the decision as a temporary setback rather than a fundamental constitutional constraint on executive power.

The ruling’s long-term implications remain uncertain. Justice Kavanaugh’s suggestion that alternative statutes authorize presidential tariffs indicates that Trump or future administrations could pursue tariff authority through explicit congressional delegation rather than emergency powers. The decision does not eliminate presidential tariff authority; it requires Congress to explicitly grant it. This distinction matters for trade negotiations with the European Union, Japan, South Korea, and other partners who negotiated tariff reductions under Trump’s executive orders.

Governor Gavin Newsom, whose California lawsuit initiated the legal challenge in April 2025, characterized the tariffs as an illegal cash grab that drove up prices and hurt working families. He called for immediate refunds with interest, framing the ruling as validation of California’s constitutional challenge. State governments emerged as key plaintiffs, demonstrating how executive overreach triggered federalism concerns that resonated with the Court’s major questions doctrine reasoning.

The Supreme Court’s decision reasserts congressional power over trade policy at a moment when executive unilateralism threatens constitutional boundaries. Congress now holds the tariff authority explicitly, and future presidents seeking broad tariff powers must return to Capitol Hill for authorization. Whether Congress acts to reclaim that authority through new delegation or allows it to remain dormant will shape trade policy for the next decade.