Six-Chart Sunday – Supremely Disrupted: Trade After IEEPA

6 Infographics + 1 Video (Ben Sasse -- "Not Dead Yet")

Friday’s Supreme Court rejection of the Trump Administration’s use of IEEPA to impose tariffs upended trade policy, economic policy, foreign policy, Tuesday’s State of the Union and my previous plans for today’s Substack. Some argue the decision reaffirms the rule of law & primacy of the legislative branch, may reduce inflationary pressures and “will make for a more orderly, disciplined, rational, and stronger tariff policy going forward.” Others fear greater policy uncertainty, higher market volatility, larger deficits, less geopolitical leverage for the U.S. and greater friction between the Executive Branch, Supreme Court and Congress. Here’s six things to know:

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1. There Will Be Tariffs

Expect the Trump Administration to leverage alternative authorities to advance the President’s tariff agenda. Recall that after the Supreme Court rejected President Biden’s attempted use of a 2003 statute to forgive more than $400 billion in student debt in 2023, his Administration still proceeded to forgive over $188 billion in student debt under different authorities. While IEEPA was “the most potent and unchecked instrument in [Trump’s] tariff tool kit… an Oval Office ‘tariff switch’ that Mr. Trump could flip on and off at any time, for any reason and in any amount,” Cato’s Scott Lincicome observes…

U.S. trade law is littered with provisions delegating the president broad powers to impose tariffs for various reasons…

[But these] alternative authorities, by contrast [to IEEPA], have substantive and procedural guardrails that limit their size and scope or, at the very least, give companies time to prepare for tariffs (or lobby against them).

Indeed, President Trump immediately announced Sec. 122 across the board global baseline duties to temporarily replace IEEPA (set at 10% on Friday and raised to 15% yesterday, with all IEEPA exemptions maintained). Bloomberg finds Sec. 122 tariffs could “more than replace” IEEPA if set at just 10%, but they only last for 150 days and could themselves face court challenge.

2. Extreme Disruption to Existing Trump Trade Architecture

While the Trump Administration is already pivoting to alternative authorities to impose new tariffs, they have a massive task ahead given the overwhelming reliance on IEEPA heretofore. Sec. 122 is a temporary tariff that only lasts 150 days, as Axios explains well. The majority of duties in recent U.S. unilateral tariffs and announced deals with trading partners rested on IEEPA and will require longer-lasting replacement:

3. Court Loss Could Enable Political Win

Trump won in 2024 promising to increase tariffs — calling yourself “a tariff man” is about as transparent as it gets — but U.S. voters are increasingly anxious about the economy, inflation and trade, reflected in the President’s sagging approval numbers. As the Administration pivots to focus more on “affordability,” the IEEPA ruling offers an opportunity to reset, better target or quietly shelve the least politically-popular tariffs… if they want to. Lower tariffs could reduce inflationary pressures, and $175 billion in refunds could inject well-timed fiscal stimulus in an election year.

4. Refunds Likely Owed But Not Likely Imminent

Although the ruling did not dive into when & how, the Administration will probably need to refund $175 billion in tariffs collected under IEEPA so far. Per above, some see political opportunity to inject hefty fiscal stimulus into the economy in an election year. However, Cato’s Lincicome predicts a long slog for those seeking refunds:

These refunds could be remarkably easy: With almost all duty payments now made electronically, and with every IEEPA-related import assigned a specific tariff code, U.S. Customs and Border Protection could return most of the money owed to importers, with interest, at the push of a button. In several past cases, CBP has issued automatic blanket refunds covering many years and billions of dollars, and duty refunds in general are a daily occurrence.

Yet unless Congress mandates the easy approach, the Trump administration will probably make the refund process as burdensome as possible, requiring every importer to file mounds of paperwork, if not a lawsuit, to get its money back.

5. Less Tariff Revenue Would Mean Greater Deficits

For the calendar year 2025, the U.S. collected $287 billion in customs duties, taxes and fees, up 192% versus the prior year. (Richmond Fed). That reduced the deficit 2.7%, one of the only brakes on skyrocketing U.S. debt, which was forecast to hit $64 trillion by 2036 before this ruling.

6. The 2026 SOTU Is Now Must See TV

President Trump aggressively attacked the Supreme Court justices who ruled against him on IEEPA — “fools & lapdogs” — and he may continue such broadsides in person, in his State of the Union address Tuesday night. Previous Presidents have excoriated prior Court decisions with which they disagreed, whether to score political points with their base or “work the refs” for future rulings. Indeed, some in the Administration worry the IEEPA decision could be the first in a series of 2026 SCOTUS rulings that constrain core elements of the Trump 2.0 agenda (eg Impoundment, firing Fed’s Cook, use of National Guard, etc.).

VIDEO

Extraordinary recent conversation with former Senator Ben Sasse, reflecting great insight & perspective: “You can play a lot of basketball in the last 60 seconds.” Worth your time! (Ben also just launched his own new podcast, “Not Dead Yet”)