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The Supreme Court heard nearly three hours of argument yesterday in the consolidated challenge to President Trump’s International Emergency Economic Powers Act tariffs. The Court heard the case on an expedited basis, at the request of the administration, following rulings over the summer by the Federal Circuit and the D.C. District Court striking down the tariffs.

• U.S. Solicitor General John Sauer argued first on behalf of the government. Seasoned SCOTUS advocate Neal Katyal of Milbank LLP argued for the small business plaintiffs challenging the tariffs. And finally, Oregon Solicitor General Benjamin Gutman argued for the state plaintiffs.

The argument: The argument focused on two central questions: (1) whether the text of IEEPA authorizes the president to impose tariffs at all; and (2) whether Congress can lawfully delegate tariff authority to the president. The justices avoided wading into the legitimacy of the purported emergencies or whether the tariffs actually “deal with” those emergencies.

Questioning: According to the NAM’s trade and legal experts, Justices Sonia Sotomayor, Elena Kagan and Ketanji Jackson are likely to side with the challengers, while Justices Clarence Thomas, Samuel Alito and Brett Kavanaugh seem to agree with the government.

• It is more difficult to predict where the other three—Chief Justice John Roberts and Justices Neil Gorsuch and Amy Barrett—will land, although it was clear that Gorsuch had serious concerns about the vast delegation of power the administration is claiming under IEEPA and whether that power could ever be constrained.

What’s next: A decision is expected before the end of the year, though that could slip to January if there are numerous concurring opinions and/or dissents.

Looking ahead: The Supreme Court ruling could constrain the administration’s use of IEEPA to impose tariffs. However, the administration will consider increased use of trade statutes to effectively replace the IEEPA tariffs. These statutes include:

• Section 232 national security tariffs;
• Section 301 investigations, which enable the use of tariffs to address discriminatory trade practices;
• Section 122 of the Trade Act of 1974, which authorizes the president to impose tariffs of up to 15% for 150 days to address “large and serious” balance of payments deficits; and
• Section 338 of the Tariff Act of 1930, which authorizes the president to impose retaliatory tariffs of up to 50% on a country engaged in “unreasonable” or “discriminatory” practices against the U.S.

Refunds? Today’s argument only very briefly touched on relief with the small business advocate conceding that issuing refunds here would be “difficult.” If the challengers are successful, a hard-fought battle over refunds is likely.

• The Court of International Trade in July ordered Customs and Border Protection to “vacate” the IEEPA tariffs collected so far, but the U.S. government received a stay of enforcement—relieving the government of the obligation to issue refunds—pending appeal.

Negotiations and deals: Aside from any agreement to retain most-favored nation status for some products, the U.S. tariff rate in newly agreed deals with the U.K., Japan and Vietnam, for example, are IEEPA rates.

• It is unclear whether these governments will agree to uphold those deals should the administration lose its case, but this will be a political decision since the deals also contain commitments to preferential Section 232 tariff rates and other elements.