Today in Learning Resources, Inc. v. Trump, the Supreme Court struck down the administration’s reciprocal tariffs, imposed on imports from nearly every country, as well as the retaliatory tariffs specifically imposed on Canada, Mexico, and China.
In a 6-3 split, the Court held that the International Emergency Economic Powers Act (IEEPA) did not authorize the president to impose tariffs. The majority — composed of Chief Justice Roberts and Justices Kagan, Sotomayor, Gorsuch, Barrett, and Jackson — reasoned that IEEPA’s grant of authority to “regulate imports” could not be extended to include tariffs. The dissenters – Justices Thomas, Alito, and Kavanaugh - believed that “[l]ike quotas and embargoes, tariffs are a traditional and common tool to regulate importation.”
In deciding the case, the justices considered the major questions doctrine, a principle of statutory interpretation used by the courts to limit executive power. The application of the major questions doctrine split the justices into three camps. Justices Kagan, Sotomayor, and Jackson concurred separately, explaining that they would not have resorted to the major questions doctrine where more established canons of statutory construction already dictated the outcome. The rest of the majority applied the major questions doctrine, writing that “there is no exception to the major questions doctrine for emergency statutes.” The dissenters would not have applied the major question doctrine to the area of foreign affairs. These considerations will likely shape the Court’s approach to executive power in the future as well.
It is not clear how much the decision will affect national tariff policy. In addition to IEEPA, several other emergency power statutes grant tariff authority. The Smoot-Hawley Act authorizes tariffs of up to 50% against countries that discriminate against American goods or impose unreasonable barriers to trade. Section 122 of the Trade Act of 1974 gives the president emergency power to address large balance-of-payment differences, which the administration may deploy to reinstate a 10% global tariff on imports. And Section 301 of that Act authorizes tariffs against countries that violate trade agreements or engage in unfair trade practices. What’s more, Congress might authorize tariffs on a non-emergency basis. For these reasons, it is likely that businesses will continue to face tariff uncertainty for some time.
While the Court’s decision would appear to lend support for those seeking refunds of tariffs already paid, they will also face uncertainty in pursuing such refunds. Amicus and commentators have suggested that the other statutes that might have authorized similar tariffs should be applied retroactively; the Court, however, did not address the matter. Another potential issue is the decision in Trump v. CASA, Inc., which prohibits nationwide injunctions and might require an individual determination for each individual case that the tariffs were unlawful. Importers may be able to settle the question of whether refunds are available through a class action.
Kostelanetz LLP is available to help guide importers through the post-Learning Resources chaos and onto the best path for recovery of unlawful tariffs.
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For 80 years, Kostelanetz LLP has built a global reputation as a law firm of choice for clients facing high-stakes controversies, negotiations with government agencies, and complex domestic and international tax planning decisions. Our attorneys have extensive experience in tax controversy, tax fraud defense, white-collar criminal defense, securities enforcement defense, trust and estate planning, transactional tax planning, and government investigations. We are regularly called upon to handle the most challenging and sensitive matters and internal investigations. Important parts of the firm’s practice also include commercial litigation and government procurement and contracting.
