When President Trump declared a national emergency and imposed sweeping tariffs under the International Emergency Economic Powers Act (IEEPA), businesses challenged the move, arguing the president did not have authority under that statute to impose tariffs. The Supreme Court recently agreed. 

On a recent episode of Stanford Legal, co-host Professor Pamela Karlan sat down with international trade expert Alan Sykes, professor of law and Warren Christopher Professor in the Practice of International Law and Diplomacy, to unpack the Court’s 6–3 decision. Sykes is a leading expert on the application of economics to legal problems and the author of the book The Law and Economics of International Trade Agreements.

At the heart of the case, Sykes explains, was the question of whether a statute that allows the president to “regulate importation” can be stretched to authorize taxes on imports. The majority of the Court said no, emphasizing that the Constitution assigns the taxing power to Congress, and that if Congress intended to hand that power over, it would have said so clearly. The conversation explores the statutory arguments, the role of the Major Questions Doctrine, and the alignments among the justices.

But the ruling raises as many questions as it answers, Sykes notes. What happens to billions in tariffs already collected? Do international trade deals struck in the shadow of these tariffs still stand? And with other statutory tools available is this really the end of the tariff saga, or just the next chapter?

The following is an edited and shortened version of the full podcast transcript, which can be found here. 

Pam Karlan: Tell us a little bit about these tariffs and what the challenge was under IEEPA.

Al Sykes: One group of the president’s tariffs has been tied to the fentanyl trade and imposed against China, Mexico, and Canada. But the main focus of the litigation—and the real concern now when it comes to remedies—are the so-called reciprocal tariffs.

Those were announced by President Trump on “Liberation Day” last April. They were structured to discriminate across countries based on the size of their bilateral trade deficit with the United States. The rates ranged from roughly 15 percent at the low end to about 50 percent at the high end.

Since then, the tariffs have moved around quite a bit. They were imposed and then repeatedly modified—there were exemptions, adjustments, and other changes over time. Sometimes the president would raise them if he was unhappy with how negotiations with another country were going; sometimes he would lower them. He also reached tentative trade deals with certain countries that reduced some of the tariffs. 

All of these tariffs were imposed under the IEEPA statute. That statute can be triggered when the president declares a national emergency. It gives the president authority to address what it calls “unusual and extraordinary” threats originating abroad, using measures designed to deal with that emergency.  

Pam Karlan: I remember the formulas the president announced for calculating tariffs on different countries. But there are many countries we import from that we can’t export much to—for example, when what we’re importing is raw materials from very poor countries. Can you talk about that?

Al Sykes: That’s right. There are lots of bilateral trade imbalances, and they’re perfectly normal. Even in our own lives we see them. For example, I run a big trade surplus with Stanford—I sell my services to Stanford and buy very little from it. Countries work the same way: they export what they specialize in producing and import the things they need from countries that specialize in those products. The result is a wide range of bilateral surpluses and deficits, which economists generally view as entirely normal. But the president argued that bilateral deficits represent unfair treatment of the United States—that whenever we run a deficit with another country, it reflects a lack of reciprocity in the trade relationship. From an economic standpoint, that’s simply incorrect, but it became the starting point for the administration’s argument.

The claim was that this lack of reciprocity was harming U.S. manufacturing and therefore constituted a national emergency. Tariffs calibrated to the size of bilateral deficits were supposed to address that emergency. But there was never much specificity about what the emergency actually was, who exactly was suffering from it, or how tariffs based on bilateral deficits would solve the problem. So from the outset, it was a troubling argument.

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Pam Karlan: There was also a question about whether imposing tariffs like these would bring manufacturing back to the United States.

Al Sykes: If you want new investment in manufacturing, you need certainty. Investors need a stable, long-term policy environment. Tariffs that are constantly changing don’t provide that kind of certainty, so it was unlikely they would do much to bring manufacturing back.

And in fact, the data bear that out. U.S. manufacturing employment has actually declined since Liberation Day. That reflects a longer-term trend largely driven by productivity gains in manufacturing rather than trade policy.

Pam Karlan: Businesses challenged the tariffs, arguing that IEEPA isn’t a tariff statute. It was enacted to address things like trade embargoes or restrictions on imports during national emergencies. So when the case reached the Supreme Court, what happened?

Al Sykes: That argument was essentially accepted by a majority of the Court—that IEEPA does not authorize the president to impose tariffs. The statute says the president may “regulate importation,” and the key argument was that the power to regulate does not include the power to tax. A tariff, of course, is a tax on imported goods.

The Court was also concerned about the broader implications. If the president could impose tariffs under IEEPA to address this situation, why couldn’t he do so to address any number of real or imagined emergencies? That would allow the president to disrupt trade and raise substantial revenue without congressional participation. The majority concluded that Congress never intended to grant that kind of taxing authority in IEEPA.

Some justices said that conclusion was clear from the face of the statute. Others reasoned that even if the statute could be read to authorize tariffs, the Major Questions Doctrine would require a clear and unambiguous delegation of such significant power—and IEEPA does not provide that clarity.

There were also dissenters, who argued that the power to regulate importation can include tariffs, since tariffs are often used to limit imports. But in a 6–3 decision, the majority held that IEEPA does not give the president the authority to impose tariffs.

Pam Karlan: The three more liberal justices—Justices Sotomayor, Kagan, and Jackson— agreed that IEEPA did not give the president the power to impose these tariffs, but there was an interesting back-and-forth within that group. Justice Gorsuch and Justice Barrett joined those three in a joint opinion, while Justice Jackson wrote separately. What do you make of the fact that so many justices felt the need to write and explain their views here?

Al Sykes: It seemed to me that the disagreement centered on the scope and future of the Major Questions Doctrine. The three more liberal justices have generally been skeptical of the doctrine, particularly after it was used in cases involving EPA authority over greenhouse gases and the student loan forgiveness program. So they may have preferred to resolve this case purely on statutory grounds, without relying on the Major Questions Doctrine.

Chief Justice Roberts and others seemed more open to the idea that the phrase “regulate importation” could potentially include tariffs, since tariffs have historically been used to regulate imports. For them, the Major Questions Doctrine helped reinforce the conclusion that Congress would have needed to speak clearly if it intended to delegate such significant authority.

There was also a smaller debate between Justice Barrett and Justice Gorsuch about how exactly the Major Questions Doctrine should be understood.

Pam Karlan: What happens to all the money that importers paid while these tariffs were in effect?

Al Sykes: I have to first explain a term from customs law called “liquidation.” When goods enter the country, the importer makes a preliminary estimate of the tariff owed—based on the classification and value of the goods—and pays a deposit equal to that estimated amount. Customs then reviews the paperwork and eventually determines the final tariff liability. That final determination is called liquidation, and it usually occurs several months after the goods arrive.

If the entries haven’t yet been liquidated, the importer can ask Customs to correct the calculation and refund any duties that were improperly collected under the IEEPA tariffs.

If the entries have already been liquidated, the importer can file a protest arguing that the tariffs were unlawful and seeking a refund. That protest has to be filed within 180 days of liquidation, so some importers may miss the window if they didn’t act in time.

A third possibility is that companies can go to the Court of International Trade and ask the court to order Customs to reliquidate the entries and refund the excess duties. There are already some cases along those lines, but it remains uncertain how the courts will ultimately handle them.

Pam Karlan: What about the foreign countries that were originally hit with these tariffs and tried to negotiate side deals with the Trump administration—agreeing to certain concessions in exchange for lower tariff rates? What happens to those deals now? They were negotiated in the shadow of tariffs that the Court has now said were invalid. Does that affect their status, or are those countries essentially stuck with the agreements they made?

Al Sykes: Once you get into the realm of international deals like this, there isn’t really a formal enforcement mechanism. Either side can choose to walk away. The real question is whether these countries now feel less pressure to honor the agreements, given that the tariffs that created the leverage in the first place have been struck down.

We’re already seeing signs of that. The European Parliament, for example, has paused the approval process for the deal it reached with the Trump administration. Other countries may take a similar approach.

At the same time, President Trump has warned that he would look very dimly on countries that fail to honor the agreements they made after the tariff ruling. So this is likely to play out less as a legal dispute and more as a diplomatic one.

Pam Karlan: What happens next? Shortly after the Supreme Court issued its decision, the president sharply criticized the Court and said he intended to impose tariffs anyway. So what are his options now? If I recall correctly, the administration had suggested in the litigation that other statutory paths weren’t available to them. What other tools, if any, does the president have to impose tariffs?

Al Sykes: The administration does have other statutory tools it could try to use. In fact, the president has already imposed a 10 percent across-the-board tariff on imports under Section 122 of the Trade Act of 1974. That provision allows the president to impose tariffs of up to 15 percent for up to 150 days if the country is facing severe balance-of-payments problems.

Economists would generally say the United States does not currently have a balance-of-payments problem. That term refers to a situation where a country’s currency is under pressure and the government lacks sufficient foreign exchange reserves to stabilize it. In that kind of crisis, tariffs can be used to reduce imports and therefore reduce demand for foreign currency. But that is a very different issue from simply running a trade deficit.

Under Section 122, the president’s authority is limited: the tariff cannot exceed 15 percent and it can only remain in place for 150 days. The idea is that the measure is temporary, meant to stabilize the currency while other adjustments take place.

Beyond that, however, there are other trade statutes that give the president authority to impose tariffs that are targeted at particular countries and that are not subject to the same short time limits. So while the Supreme Court’s decision closed off the use of IEEPA for tariffs, it doesn’t mean the president lacks other legal avenues to pursue trade restrictions.

The most important alternative going forward is probably Section 301 of the Trade Act of 1974. Under that statute, the president can act after the U.S. Trade Representative determines that a foreign government is engaging in practices that are unjustifiable and burden U.S. commerce. Once that finding is made, the president has broad authority to respond—imposing tariffs, quotas, or other trade restrictions—and there is no fixed ceiling on the tariff level. The measures can remain in place as long as necessary to pressure the other country to change its behavior.

Each year the U.S. Trade Representative publishes the National Trade Estimate Report, which catalogs trade barriers and other practices the United States considers unfair across its major trading partners. In practice, that provides a ready set of potential justifications for a Section 301 action against a particular country—for example, alleging unfair treatment of U.S. financial services providers or other industries. So that is likely to be the most significant tool available if the administration wants to continue pursuing tariffs.

Pam Karlan: Why did he use IEEPA, which never mentions tariffs at all?

Al Sykes:  Section 301 requires a formal process. The U.S. Trade Representative has to conduct an investigation, identify the foreign practice at issue, and publish findings explaining why it is unfair and how it burdens U.S. commerce. In other words, there has to be some specificity about what conduct you’re responding to.

IEEPA, by contrast, is much faster and more flexible. The president simply declares a national emergency and, under the administration’s interpretation, can immediately impose tariffs without an investigation, agency findings, or detailed explanations about the alleged problem. There’s no requirement to spell out exactly what the emergency is or which practices are being targeted.

So it was essentially the most expeditious way to impose broad tariffs quickly. That said, if the administration is determined, it could probably replicate much of what it did by relying on other statutes such as Section 301—though it would have to go through a more formal process to get there.

Pam Karlan: Do you think that we’re in for another three years of tariff yo-yo?

Al Sykes: The main constraint on President Trump’s use of tariffs is likely to be political rather than legal. The question is whether concerns about affordability and public opinion—polls show fairly significant disapproval of tariffs—will cause him to pull back.

Some of the hope behind the litigation was that a Supreme Court ruling against him might provide a political off-ramp. But if he’s determined to continue pursuing tariffs, he likely has other statutory tools that, after clearing a few procedural hurdles, would allow him to do much the same thing.

Alan O. Sykes is a leading expert on the application of economics to legal problems whose most recent scholarship is focused on international economic relations. His writing and teaching have encompassed international trade, torts, contracts, insurance, antitrust, international investment law and economic analysis of law. In 2010, he founded Stanford Law School’s LLM program in International Economic Law, Business and Policy (IELBP). Professor Sykes has been a member of the executive committee and the board of the American Law and Economics Association, and served as reporter for the American Law Institute Project on Principles of Trade Law: The World Trade Organization. He is on the Board of Editors for the Journal of International Economic Law, the World Trade Review, and a member of the editorial board of the American Journal of International Law. He formerly served as an editor of the Journal of Legal Studies and the Journal of Law and Economics. He is also a former National Science Foundation graduate fellow in the Department of Economics at Yale University.