Washington — A divided Supreme Court on Wednesday appeared skeptical of President Trump’s authority to unilaterally impose tariffs on nearly every country under a federal emergency powers law, as the justices tested a centerpiece of his economic agenda and the limits of presidential powers. 

The dispute over Mr. Trump’s sweeping tariffs marks the first in which the Supreme Court weighed the legal merits of one of the president’s signature policies implemented in his second term. Arguments spanned nearly three hours, with the justices asking probing questions of lawyers for the Trump administration and a group of small businesses challenging the legality of the president’s tariffs.

But several of the justices appeared uncomfortable with the breadth of power Mr. Trump is asserting without Congress clearly authorizing him to levy broad tariffs on nearly every U.S. trading partner.

Several justices noted that the International Emergency Economic Powers Act, known as IEEPA, which the president has relied on to impose the duties, does not mention the word “tariff,” and has never before been used by a president to justify the levies, until now. The Trump administration has argued that the phrase “regulate importation” in the law gives the president authority to set import taxes.

But Justice Amy Coney Barrett asked Solicitor General D. John Sauer to identity any other provision of the U.S. code where the phrase “regulate importation” has been used to confer an authority to impose tariffs, while Chief Justice John Roberts said that Mr. Trump is claiming “major authority” to levy duties on any product from any country at any rate for any length of time.

“The statute doesn’t use the word tariffs,” Roberts said, adding that while the duties deal with foreign powers, “the vehicle is imposition of taxes on Americans, and that has always been a core power of Congress.”

Justice Neil Gorsuch, meanwhile, raised separation-of-powers concerns and questioned the administration’s assertion that Congress, through IEEPA, granted the president broad emergency authority over a foreign-affairs matter. What would stop Congress from “abdicating all responsibility to regulate foreign commerce” or declare war and give that power to the president?” he asked.

Once Congress delegates its authority to the president, it’s difficult to reclaim, Gorsuch said, warning that the administration’s theory marked a “one-way ratchet toward the gradual but continual accretion of power in the executive branch and away from the people’s representatives.”

Justice Brett Kavanaugh appeared sympathetic to the Trump administration’s argument. He argued that Congress enacted a statute that gave the president an array of tools for responding to an emergency, and questioned why the law would allow for the imposition of a trade embargo, which may be viewed as an extreme step, as opposed to tariffs, a more targeted punishment.

“You’re forcing the president to respond to an emergency … and you’re taking away the president’s suite of tools when the one is much more extreme that is authorized,” he said. “That just seems a bit unusual.”

Kavanaugh pointed to Mr. Trump’s tariffs on goods from India over its purchase of Russian oil, which the president is using to pressure Moscow to end the war in Ukraine.

“If that’s gone, that’s a tool that’s designed — talk about foreign-facing, the most serious crisis in the world,” he said. “And that’s out the window.”

Trump’s tariffs

Three lower courts have concluded that most of the president’s tariffs are illegal, and a ruling from the Supreme Court upholding those decisions would deal a blow to Mr. Trump’s plans to use tariffs as leverage to push U.S. trading partners to negotiate better trade deals. The president has also claimed that tariffs help to boost domestic manufacturing.

At issue in the case are two sets of duties that Mr. Trump rolled out through a series of executive orders earlier this year. The president has relied on IEEPA to impose the tariffs.

The first tranche set a baseline rate of 10% on nearly every U.S. trading partner, as well as higher reciprocal tariffs on dozens of countries in response to what he said are “large and persistent” trade deficits. The second targeted China, Canada and Mexico with tariffs of varying rates for what he asserted was their failure to stop the flow of fentanyl and other illegal drugs into the U.S.

In his executive orders, the president declared trade imbalances and the trafficking of drugs across U.S. borders as national emergencies, which unlocked IEEPA’s powers. The law authorizes the president to “regulate … importation” to deal with “any unusual and extraordinary threat” to national security, foreign policy or the U.S. economy. Mr. Trump has argued that trade deficits and the failure to curtail the flow of illicit drugs into the country qualify as such a threat. 

Since Mr. Trump announced the import taxes in February and April — on what he called “Liberation Day” — the administration has reached trade deals with at least 10 countries and the European Union, and said it is “actively negotiating” with other nations. 

But after the rollout of the new levies, two sets of small businesses and a group of 12 states filed lawsuits arguing that IEEPA doesn’t authorize the president’s sweeping action. The first case was brought in Washington, D.C., by a pair of Illinois-based educational toy companies. The others, filed in the U.S. Court of International Trade, came from a group of five small businesses and Democratic officials from 12 states.

The U.S. district court in Washington and the Court of International Trade separately ruled against the administration, concluding that IEEPA doesn’t give the president the authority to impose his global and trafficking-related tariffs.

The U.S. Court of Appeals for the Federal Circuit, which reviewed the trade court’s decision in cases from the five small businesses and states, ruled 7-4 that many of the president’s levies are illegal. The appeals court found that while IEEPA may authorize some tariffs, the law didn’t allow for those “of the magnitude” of Mr. Trump’s.

Still, it allowed the Trump administration to continue collecting the sweeping tariffs while the legal battles play out.

Mr. Trump has also continued to rely on IEEPA to impose new levies or tweak existing rates, including raising Canadian tariffs to 35% (though many of its goods are subject to exemptions), imposing an additional 40% duty on Brazil and threatening China with an additional 100% duty, though the president has since walked that back. Mr. Trump announced last week following a meeting with Chinese President Xi Jinping that he would be reducing the tariffs on goods imported from China.

The Supreme Court is hearing the dispute over Mr. Trump’s tariffs on an extremely fast timeline, having agreed in September to decide the cases, and could move quickly to issue a ruling.

A key issue in the case may be how the justices view the tariffs: whether they’re an exercise of the president’s power over foreign affairs or a tax on American consumers. 

Neal Katyal, representing the businesses challenging the tariffs, opened his arguments by saying, “Tariffs are taxes” and noting that Constitution vested that power in Congress. Echoing Gorsuch, Katyal said that if Congress were to delegate tariffing power to the president, it would be “a one-way ratchet.”

“We will never get this power back if the government wins this case,” he said.

But Sauer told the high court that they are a tool to regulate foreign commerce.

Roberts acknowledged the tension between the powers at issue, saying “tariffs are a tax, and that’s a core power of Congress.” But the chief justice also described the levies as a “foreign-facing tax,” which involves foreign affairs, a core power of the executive.

“One thing is quite clear, is that the foreign-facing tariffs have in several situations, were quite effective in achieving a particular objective. So I don’t think you can just separate it,” he told Katyal. “When you say, well, this is a tax, Congress’s power, it implicates very directly the president’s foreign affairs power.”

If the Supreme Court finds the tariffs to be illegal, as lower courts have done, one question is how potential reimbursements would be handled. Barrett was the only justice to ask about that process, noting that some have said the refunds of tariffs collected from U.S. importers would be “a mess.” Katyal said he was only representing five companies, not a class action, and the government would refund the tariffs they paid. He said there was a specialized body of case law to address refunds, though “it’s difficult.” He suggested the court could offer prospective relief, but there are “a lot of possibilities.”

Trump administration argues for presidential powers

In urging the high court to uphold the duties, the Trump administration has argued that Congress has long given the president broad authority to impose tariffs to address emergencies. IEEPA, Sauer wrote in a filing, is a continuation of that tradition because it gives the president the power to “regulate … importation.”

Sauer also said that the tariffs are an exercise of Mr. Trump’s power over national security and foreign affairs, and courts should give deference to his determination that the duties are best suited for addressing national emergencies arising from trade deficits and drug-trafficking.

Invalidating those levies, Sauer wrote, would have “catastrophic consequences” for national security, foreign policy and the economy.

“To the President, these cases present a stark choice: With tariffs, we are a rich nation; without tariffs, we are a poor nation,” he said.

Mr. Trump is highly invested in the case, calling it “one of the most important in the history of the country.” The president floated attending the arguments in person, but he reversed course Sunday, writing on social media that he did “not want to distract from the importance of this decision.”

Underscoring the importance of the case to the Trump administration, three members of Mr. Trump’s Cabinet were in attendance: Treasury Secretary Scot Bessent, Commerce Secretary Howard Lutnick and U.S. Trade Representative Jamieson Greer.

Asked about the arguments later Wednesday, Mr. Trump told Fox News’ Bret Baier a loss would be “devastating for our country,” calling it “one of the most important cases in the history of our country.”

Businesses warn of economic impact

On the other side, the small businesses warned in court papers that Mr. Trump’s tariffs have significant economic consequences. An analysis from the Tax Foundation found the duties will impose $1.7 trillion in new taxes on Americans by 2035, reduce GDP growth by 0.7% per year, and reduce income by 1.1% in 2026.

Katyal, who argued on behalf of the companies before the Supreme Court, said the Trump administration’s interpretation of IEEPA is a “breathtaking assertion” of power that requires explicit authorization from Congress. IEEPA, he said, doesn’t even mention the word tariff or duty, and no president has understood the law to authorize them.

If the Supreme Court agrees with Mr. Trump that the power to tax is found in IEEPA through the phrase “regulate … importation,” then “the president, empowered by a supercharged U.S. Code, could tax everything from autos to zoos,” Katyal wrote in a filing.

The plaintiffs also argued that trade deficits hardly constitute an “unusual and extraordinary threat,” as imbalances have lasted for five decades, and Mr. Trump himself has described them as “persistent.”

Additionally, the power to levy taxes and duties rests squarely with Congress, and any delegations of that power have been “explicit and strictly limited,” they said. And indeed, there are numerous other statutes in which Congress has delegated its tariffing power — some of which have been used by Mr. Trump — though they put constraints on the president.

Testing the boundaries of presidential authority

The dispute over Mr. Trump’s efforts to use IEEPA to impose his sweeping tariffs comes as he has tested the boundaries of his presidential authority, including through his firings of independent agency officials, the withholding of $4 billion in foreign aid approved by Congress and his efforts to overhaul the executive branch.

Those cases have already been before the Supreme Court, though at earlier stages than the challenges to Mr. Trump’s tariffs. In most of those emergency appeals, the conservative justices have allowed the Trump administration to temporarily enforce its policies while proceedings in the lower courts continue.

Like those other cases, the dispute over whether Mr. Trump has the authority to impose duties on nearly every country under IEEPA without Congress could have significant implications for presidential power.

The Supreme Court has been skeptical of broad assertions of executive authority on issues of major political and economic significance when Congress has not spoken clearly, invoking what’s called the major questions doctrine to invalidate former President Joe Biden’s plan to wipe away more than $400 billion in student loan debt and block an eviction moratorium during the COVID-19 pandemic.

That legal principle is raised in the battle over his tariffs, though the Trump administration argues that it doesn’t apply to matters of national security and foreign policy. 

“Judges lack the institutional competence to determine when foreign affairs pose an unusual and extraordinary threat that requires an emergency response; that is a task for the political Branches,” Sauer wrote.

But lawyers for the small businesses counter that tariffs are a tax on the American people, and the Constitution has vested the taxing power in Congress.

“The Framers understood that taxation is a potent power that can destroy the taxed as it fills the sovereign’s coffers. The Constitution vests that extraordinary power exclusively in the branch of government considered most responsive to the citizenry: Congress,” lawyers for the Illinois companies wrote in a filing. “This Court should not lightly assume that Congress abdicated its core taxing power to permit the President to tax Americans with virtually no limits.”