Trump’s tariffs face Supreme Court test as businesses challenge his power to impose them

Amna Nawaz:

Tomorrow, the Supreme Court will hear oral arguments in the case challenging President Trump's authority to impose sweeping tariffs.

Economics correspondent Paul Solman has a preview.

Donald Trump, President of the United States: To me, the most beautiful word in the dictionary is tariff.

Paul Solman:

Donald Trump's campaign zest for tariffs has become a fixation of his second term.

Donald Trump:

You know I have used tariffs for lots of different reasons. Tariffs, as you know, are starting to come in at record levels. And with tariffs, we're the wealthiest nation ever in the history of the world.

Paul Solman:

President Trump first imposed sweeping tariffs, taxes on imported goods in February, executive orders on Canada, Mexico and China, calling their collective failure to stem the flow of drugs here a national emergency.

Donald Trump:

They're sending massive amounts of fentanyl, killing hundreds of thousands of people a year with the fentanyl.

Paul Solman:

In April, on liberation day, the president announced tariffs on virtually all U.S. trading partners, plus country-specific so-called reciprocal tariffs. The emergency? Large and persistent trade deficits.

Donald Trump:

Such horrendous imbalances have devastated our industrial base and put our national security at risk. In short, chronic trade deficits are no longer merely an economic problem. They're a national emergency that threatens our security and our very way of life.

Paul Solman:

Many of the tariffs were, as you have doubtless heard, later amended, paused, even removed. But tomorrow the Supreme Court will hear challenges to their legality, specifically the president's use of a 1977 emergency law to levy tariffs without Congress' OK.

Amy Howe:

The International Emergency Economic Powers Act gives the president, essentially, as the name suggests emergency economic powers.

Paul Solman:

SCOTUSblog co-founder and "News Hour" analyst Amy Howe.

Amy Howe:

If he concludes that there's a threat with respect to the national security, foreign policy or economy, then it gives him a wide variety of powers, including the power to regulate imports.

Paul Solman:

But a group of states and small businesses, including toy makers and a wine distributor, claim the import taxes are crushing them and that the power to regulate is not the power to tax.

Amy Howe:

The challengers claim that there's nothing in the law about tariffs or duties. No president in nearly 50 years has ever invoked this law to impose tariffs or duties, and that there are hundreds of laws that give the power to regulate, and no one has ever understood that power to regulate to give the power to impose tariffs. They say that's Congress' job.

Paul Solman:

The Trump administration's counter?

Amy Howe:

The Trump administration says that the text is on their side. They say that the law gives the president the power to regulate imports and that tariffs have been traditionally understood as a way to regulate imports.

Rick Woldenberg, CEO, Learning Resources:

These taxes were unlawful.

Paul Solman:

Rick Woldenberg is CEO of Chicago-based educational toy company Learning Resources. He's a plaintiff in the case.

Rick Woldenberg:

The government has the ability to tax me however they wish, but the way James Madison designed our form of government is, they have to go to Congress and have them write a law, solicit comments, debate the law, and then stand in the public square in the sunshine and vote where all the voters can see them.

Paul Solman:

Most of Woldenberg's products, like the Pretend & Play cash register and Spike the Fine Motor Hedgehog, are made in Asia.

Rick Woldenberg:

In 2024, we paid $2.3 million in annual costs for duties and tariffs. We believe that we will end up paying $14 million this year, and I would guess that the number will be double or triple next year, but, of course, who knows what the rates will be tomorrow?

Paul Solman:

Now, some tariffs are kind of hard to connect to emergency law, like new ones on Brazil, Trump citing a witch-hunt in the trial of his ally former President Jair Bolsonaro.

Narrator:

Throughout the world, there's a growing realization.

Paul Solman:

And he trumpeted more tariffs on Canada after an Ontario ad ran during the World Series showing that President Ronald Reagan opposed tariffs.

Ronald Reagan, Former President of the United States: America's jobs and growth are at stake.

Paul Solman:

As to the effect of tariffs on Woldenberg's small business:

Rick Woldenberg:

We are bearing the burden of an asphyxiating tax. Taxes went up by millions and millions and millions of dollars that we did not have. It has made our business worse.

Paul Solman:

According to Goldman Sachs, U.S. companies have passed 37 percent or so of those taxes onto consumers thus far and absorbed more than half themselves, but will pass more than 50 percent onto consumers by the end of the year. And that means hits to the larger economy, says Yale Budget Labs Natasha Sarin.

Natasha Sarin, President, Budget Lab at Yale University: We expect inflation to be about 1.8 percent higher as a result of these tariffs. We expect the GDP of this country, the economy of this country, to persistently be about 0.4 percent lower. And we expect prices to be thousands of dollars higher for the average American family.

Paul Solman:

On the other hand, tariffs have been a boon for the government, which collected nearly $200 billion in tariffs in fiscal year 2025, up over 250 percent from fiscal year 2024.

Natasha Sarin:

The tariffs over the course of the next decade are going to raise somewhere on the order of $2.5 trillion in additional tax revenue.

Paul Solman:

And if the government loses the case, Treasury Secretary Scott Bessent predicts a nightmare.

Scott Bessent, U.S. Treasury Secretary:

We would have to give a refund on about half the tariffs, which would be terrible for the treasury.

Paul Solman:

And, argues President Trump, just awful for America.

Donald Trump:

That's one of the most important cases in the history of our country, because if we don't win that case, we will be a weakened, troubled, financial mess for many, many years to come.

Paul Solman:

But Sarin says the economy is pretty resilient.

Natasha Sarin:

I do think these tariffs are damaging to the economy, but I don't think it's appropriate to start to prognosticate about what type of downturn you're going to get as a result of any one particular policy, because, invariably, you will turn out to be inaccurate.

Paul Solman:

As inaccurate, perhaps, as the predictions that tariffs would quickly devastate the American economy.

For the "PBS News Hour," Paul Solman.