Trump: US can pay debt with tariffs

Lawyers representing small businesses and states challenging former President Donald Trump’s authority to impose broad tariffs on nearly all U.S. imports urged the Supreme Court on Monday to uphold lower court rulings that invalidated most of the measures. One coalition of small businesses argued the tariffs “amount to the largest peacetime tax increase in American history,” while another said they “upend a century of trade law.”

Trump introduced the tariffs through a series of executive orders beginning in February, which fall into two categories. The first, labeled “trafficking tariffs,” targets imports from Canada, China, and Mexico—countries Trump claims have failed to adequately curb the flow of fentanyl into the United States. The second, the “reciprocal tariffs,” imposes duties ranging from 10% to 50% on products from nearly all other nations.

The executive orders were issued under the International Emergency Economic Powers Act (IEEPA), a federal statute allowing the president to take action against “any unusual and extraordinary threat” to U.S. national security, foreign policy, or the economy, provided that a national emergency is declared. Under IEEPA, the president may “regulate importation” of property in which a foreign country or national holds an interest.

In Washington, D.C., two educational toy companies — Learning Resources and hand2mind — filed suit challenging the tariffs, arguing they would face losses of $100 million this year, roughly 45 times their 2024 tariff costs. U.S. District Judge Rudolph Contreras agreed, ruling that Trump’s actions exceeded his authority under IEEPA. The companies then petitioned the Supreme Court directly in June, asking it to take up the case before the D.C. Circuit Court of Appeals ruled on the government’s appeal.

Two additional challenges were filed in the Court of International Trade—one by five small businesses and another by twelve states led by Oregon. Both cases resulted in rulings that IEEPA did not authorize Trump’s tariff program.

On appeal, the U.S. Court of Appeals for the Federal Circuit upheld those rulings by a 7–4 vote, finding that Trump’s tariff actions were of “vast economic and political significance” and thus required “clear congressional authorization,” which the court said the administration failed to demonstrate.

The Trump administration asked the Supreme Court on September 3 to review the decisions, and six days later, the justices agreed—fast-tracking briefing and scheduling oral arguments for the November session.

In a September 19 brief, U.S. Solicitor General D. John Sauer defended the tariffs, asserting that Trump’s use of IEEPA was valid because tariffs are a “traditional and commonplace way to regulate imports,” falling within the statute’s grant of power to “regulate importation,” even if tariffs are not explicitly mentioned.

The challengers countered Monday that IEEPA’s text offers no basis for tariff authority. Learning Resources and hand2mind emphasized that “unlike every actual tariff statute, IEEPA nowhere mentions ‘tariffs,’ ‘duties,’ or any other revenue-raising mechanism.” They further argued that “regulate importation” does not conventionally include the power to impose taxes or tariffs, noting, “The government cannot find a single other example where Congress delegated taxing authority through the word ‘regulate.’”

Another group of small businesses, led by V.O.S. Selections, added that “hundreds of statutes grant the power to regulate, and none has ever been understood to grant taxing powers. If ‘regulate’ meant ‘tax,’ it would overturn the accepted understanding of all these laws.”