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Executive Summary: The U.S. Supreme Court is deliberating the legality of President Trump’s use of tariffs under the International Emergency Economic Powers Act (IEEPA), raising constitutional questions about the separation of powers. IEEPA allows the President to regulate international economic transactions during national emergencies, but critics argue that imposing tariffs—a form of taxation—encroaches on Congress's authority. The Court's initial questioning highlights concerns about Congress's role in tariff decisions and the President's constitutional authority in foreign affairs. If the tariffs are struck down, complexities arise regarding refunds for importers and potential alternative tariff measures. Businesses are advised to proactively file protests, audit customs entries, and align tariff strategies with broader operational plans to mitigate risks and capitalize on potential recovery opportunities. 

Expansive use of tariffs has been a cornerstone of President Donald Trump’s economic platform—and its approach to foreign policy. But some have questioned whether the Administration is overstepping its authority by enacting tariffs under the International Emergency Economic Powers Act (IEEPA).

So it seemed inevitable that the U.S. Supreme Court would need to weigh in on the legality of President Trump’s IEEPA tariffs. Oral argument took place in early November, and while the Court has rendered no judgment, the Justices’ opening questions offer clues as to what they may be considering.

 

What’s at Stake?

One of those questions is the Constitutional concern related to the Separation of Powers. IEEPA is a 1977 U.S. law that grants the President authority to regulate international economic transactions during a declared national emergency. But does IEEPA delegate to the President the power to use tariffs (i.e., a form of taxation)? 

More broadly, the Constitution grants the authority to levy and collect taxes to the Legislative branch. Is Congress skirting this Constitutional responsibility by allowing the Executive Branch to levy tariffs without explicit approval by Congress? 

The Justices asked questions along these lines. Several questions probed the differences between tariffs versus quotas, licenses, embargoes, and other regulatory instruments. 

The Trump Administration, represented at the oral argument by U.S. Solicitor General D. John Sauer, argued that President Trump’s actions under IEEPA are primarily intended to regulate commerce, not raise revenue.

The Administration’s best chance for success may rest on a 1978 Supreme Court decision. In Federal Energy Administration v. Algonquin SNG, Inc., the Supreme Court ruled that the President has the authority to impose license fees on imported oil to protect national security under the Trade Expansion Act of 1962. This decision affirmed the President's power to use various methods to control imports threatening national security.

Moreover, the Constitution gives the Executive Branch the lion’s share of responsibility for foreign relations. Some Justices expressed concerns about not stepping on the President’s Constitutional authority to conduct foreign affairs. They asked questions about whether levying tariffs falls within the President’s Constitutional powers regarding foreign affairs.

However, several Justices expressed their skepticism that the President has authority to issue tariffs under the statute. For example, Justice Neil Gorsuch, a Trump appointee, described these tariffs as “a one-way ratchet toward the gradual but continual accretion of power in the executive branch and away from the people’s elected representatives.”

So what happens if the Court strikes down the tariffs entirely or limits them? What would that mean for importers who have already paid the IEEPA tariffs? Would the government pay back tariffs already collected (and if so, how would that work)? Or would the government only be prohibited from collecting future tariffs?

Former Acting U.S. Solicitor General Neal Katyal, who addressed the Court representing a group of small business plaintiffs, suggested only companies directly involved in the case before the Court would automatically receive refunds. Other companies would have to go through a separate challenge process if they were to get refunds. Justice Amy Coney Barrett described such an outcome as “a mess.”

Companies also need to consider what the Trump Administration’s next steps will be should it lose the case. Will the Administration expand the use of the more limited Section 122 tariff authority (allowing the President to impose tariffs of up to 15% for a maximum of 150 days to address trade imbalances) and/or Section 338 tariff authority (allowing the President to impose tariffs of up to 50% on countries that engage in discriminatory practices against U.S. commerce)? Will we see continued and expanded use of Section 232 national security tariffs or Section 301 tariffs targeting specific foreign countries’ unfair trade practices? This remains to be seen, but such approaches will be on the table for discussion.

 

Top 11 Observations on the Supreme Court’s Deliberations & the Future of Tariffs

  1. Refund Scenarios Are Complex and Uncertain—Justice Barrett’s comments suggest the potential for prospective relief only or, if applied retroactively, relief only for importers who have diligently preserved their right to claim refunds thru administrative and judicial proceedings. Importers should therefore consider filing protests as entries are liquidated to preserve rights to claim refunds of duties ruled to have been unlawfully applied.  Exhausting such administrative remedies will be a jurisdictional prerequisite to seeking judicial relief as needed.
  2. Stay on Top of Unliquidated Entries and CBP Protest Windows— The U.S. Customs and Border Protection (CBP) protest window is 180 days, starting from the date of the entry's liquidation or a similar final decision. This deadline applies to most protests, which must be filed electronically, on paper, or using CBP Form 19, and are used to challenge CBP decisions regarding tariffs and other import-related issues. Most entries affected by the IEEPA tariffs remain well within the 180-day protest window, and Clients should assess which entries may be eligible for challenge. For entries that have not yet liquidated, submitting Post Summary Corrections to CBP remains an appropriate recovery course of action.
  3. Client Communications and Preparedness—Institutions may face waves of refund requests, depending on what happens on the tariff front. So companies are well-advised to develop internal protocols and client-facing FAQs should they be faced with refund requests.
  4. Plaintiff Bar Activity Is Rising—Companies that import face a growing threat of private litigation. There is increased interest in supply chain litigation theories. Businesses should prepare for defensive postures against novel arguments.
  5. Customs Hygiene Is More Critical Than Ever—Companies should revisit HTS classifications, country of origin determinations, and recordkeeping to better ensure compliance to avoid future scrutiny.
  6. International Tax Strategy Alignment—Consider how tariff changes may affect transfer pricing, VAT recovery, and cross-border structuring.
  7. Import Policy Diversification—Watch for increased use of §301, §232, §122, and §338 as alternative tariff tools and be prepared to comment to advocate for your company before the Department of Commerce and with relevant Congressional Committees. Prepare for shifting enforcement landscapes.
  8. U.S. Trading Partners’ Perspective: Derivative Claims and Treaty Implications—For U.S. trading partners like the UK and others, note the potential for indirect claims (e.g., insurance payouts, insolvency recoveries). Also, consider Vienna Convention considerations for countries that made concessions under prior deals.
  9. Supply Chain Resilience Planning—Tariffs have companies taking long looks at their supply chains, and this can be a great opportunity to assess any weaknesses. Consider your sourcing strategies and supplier diversification. Also, look at regional trade agreements and tariff engineering.
  10. Litigation and Insolvency Impacts—Who benefits from refunds in cases of insolvency or ownership change? Prepare for claims administration and issues of entitlement to refunds.
  11. Next Steps—Legal counsel should expect that a decision to strike down the tariffs will likely mean that alternative tariff measures are put in place. Clients should consult legal counsel on what these might be and how such measures will affect their business.

 

What Companies Can Do Now

With tariff uncertainty continuing to impact global trade, companies should take proactive steps to mitigate risk and identify potential recovery opportunities. First, file protective protests where applicable to preserve rights for future refunds. Next, audit customs entries and tariff exposure to ensure accuracy and uncover areas of overpayment or compliance gaps. Engaging experienced trade counsel to model refund scenarios can help quantify potential financial benefits and guide strategic decisions.

Beyond legal measures, it’s critical to coordinate with tax and supply chain teams to align tariff strategies with broader operational and financial planning. Finally, monitor regulatory developments and prepare for alternative enforcement mechanisms, as shifts in trade policy or enforcement priorities can create new obligations—or opportunities—for businesses. Acting now positions companies to reduce costs, maintain compliance, and stay agile in a rapidly changing trade environment.

 

Looking Ahead

While the Supreme Court’s decision remains pending, businesses should act now to mitigate risk, preserve rights, and strengthen operational resilience. Womble Bond Dickinson’s cross-border team is available to assist with tailored strategies to help companies navigate the rapidly shifting world of global trade.