Small businesses and states ask court to uphold orders striking down Trump’s tariffs

Lawyers for small businesses and states challenging President Donald Trump’s authority to impose sweeping tariffs on almost all goods imported into the United States urged the Supreme Court on Monday to leave in place rulings by lower courts that struck down most of the tariffs. One group of small businesses told the justices that the tariffs “have equated to the largest peacetime tax increase in American history,” while another contends that the tariffs “upend[] a century of trade law.”

Trump imposed the tariffs in a series of executive orders beginning in February. They can be categorized in two groups. One group, known as the “trafficking” tariffs, apply to goods from three countries – Canada, China, and Mexico – that Trump believes have not made sufficient efforts to stop the flow of fentanyl into the United States. The second group, known as the “reciprocal” tariffs, impose tariffs ranging from 10% to 50% on products from virtually all countries.

Trump’s executive orders relied on a federal law, the International Emergency Economic Powers Act, that gives the president the power to take action to “deal with any unusual and extraordinary threat, which has its source in whole or substantial part outside the United States, to the national security, foreign policy, or economy of the United States” if he declares a national emergency “with respect to such threat.” When there is a national emergency, the president under IEEPA can “regulate . . . importation” of “property in which any foreign country or national thereof has any interest.”

In Washington, D.C., a pair of small businesses that make educational toys and products went to federal court to challenge the tariffs. The companies, Learning Resources and hand2mind, contend that the tariffs will cost them $100 million this year – nearly 45 times as much as they paid during 2024.

U.S. District Judge Rudolph Contreras agreed with Learning Resources and hand2mind that the tariffs exceeded Trump’s power under IEEPA. The companies then came directly to the Supreme Court in June, asking the justices to weigh in without waiting for the U.S. Court of Appeals for the District of Columbia Circuit to decide the government’s appeal.

Two other lawsuits were filed in the Court of International Trade: one by a different group of five small businesses and the second by a group of 12 states, led by Oregon. That court also agreed with the challengers that IEEPA did not give Trump the power to impose the tariffs.

The Trump administration appealed to the U.S. Court of Appeals for the Federal Circuit, which hears appeals from the Court of International Trade. By a vote of 7-4, the Federal Circuit agreed that IEEPA did not give Trump the power to impose the trafficking or reciprocal tariffs. It explained that Trump’s “use of tariffs qualifies as a decision of vast economic and political significance,” which required the government to “‘point to clear congressional authorization’” – which, the majority wrote, the government could not do.

The Trump administration on Sept. 3 asked the justices to review both lower courts’ decisions. Six days later, the court agreed to do so, fast-tracking the briefing and scheduling oral arguments for the justices’ November argument session.

In a brief filed on Sept. 19, the Trump administration defended the tariffs. U.S. Solicitor General D. John Sauer argued that Trump had the power to impose the tariffs under IEEPA because, as a “traditional and commonplace way to regulate imports,” tariffs fall squarely within the president’s power to “regulate importation.” This is true, Sauer added, even if IEEPA does not explicitly refer to tariffs.

In their briefs on Monday, the challengers offered a range of arguments for why the court should strike down the trafficking and reciprocal tariffs. First, they pointed to the text of IEEPA. As Learning Resources and hand2mind observed, “[u]nlike every actual tariff statute, IEEPA nowhere mentions ‘tariffs,’ ‘duties,’ or any other revenue-raising mechanism.”

Second, they continued, the phrase “regulate importation” is not normally understood to include the power to tax or impose tariffs. Learning Resources and hand2mind emphasized that “the Government cannot find a single other example where Congress delegated taxing authority through the word ‘regulate,’ much less the phrase ‘regulate … importation or exportation.” The other group of small businesses, led by V.O.S. Selections, added that “[h]undreds 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.”

Moreover, the states argued, even if the phrase “regulate … importation” did include the power to impose tariffs, the overall scheme of the trade laws still leads to the conclusion that IEEPA did not give Trump the power to impose the tariffs. In another law, Section 122, they wrote, “Congress specifically provided authority to address large and serious trade deficits, the purported impetus for the trade tariffs. Section 122 sets limits on those tariffs, and those specific limits control over IEEPA’s general grant of authority.”

Third, the challengers reiterated that the tariffs are precluded by the “major questions” doctrine – the idea that when Congress wants to give the executive branch the authority to make decisions with “vast economic and political significance,” it must clearly say so. Learning Solutions and hand2mind argued that “Congress does not (and could not) use such vague terminology to grant the Executive virtually unconstrained taxing power of such staggering economic effect—literally trillions of dollars—shouldered by American businesses and consumers.” The challengers resisted the government’s argument that the major questions doctrine should not apply to the president’s tariffs because of their national-security and foreign-policy implications. Congress, they stressed, not the president, has the power to tax.

Fourth, the challengers contended, the tariffs violate the nondelegation doctrine – the principle that Congress cannot delegate its lawmaking powers to other institutions. The states acknowledged that “Congress has delegated authority to the President to adjust tariff rates in response to discrete, specifically enumerated circumstances. But it always has done so explicitly and subject to intelligible principles that cabin the President’s authority.” Here, by contrast, they wrote, the Trump administration has interpreted IEEPA “as delegating the entirety of Congress’s tariffing authority to the President’s ‘essentially judicially unreviewable’ discretion, with no intelligible principles guiding the amount or duration of the tariffs.”