Supreme Court Can't Halt All Trump Tariffs, Officials Say

The Impact of Trump's Tariffs on U.S. Manufacturing

U.S. factory equipment maker OTC Industrial Technologies has long relied on low-cost countries to supply components, initially sourcing from China and later shifting to India. However, the implementation of President Donald Trump's tariffs on numerous trade partners has disrupted this supply chain strategy for CEO Bill Canady.

"We moved things out of China and went to some of those other countries, and now the tariffs on those are as bad or worse," Canady explained. "We just have to hang on and navigate our way through this so we don't all go broke in the short run." This challenge is not unique to OTC; it is resonating across companies, foreign trade ministries, trade lawyers, and economists as the U.S. Supreme Court deliberates on the legality of Trump's global tariffs, with arguments scheduled for Wednesday. It is anticipated that these tariffs will remain in place for the long term under one legal authority or another.

Lower Courts Rule Against Trump

The court, which has a 6-3 conservative majority and has supported Trump in several major decisions this year, is hearing the administration's appeal after lower courts ruled that the president overstepped his authority in imposing sweeping tariffs under a federal law meant for emergencies. A ruling that strikes down Trump's use of the 1977 International Emergency Economic Powers Act (IEEPA) to impose broad global tariffs would also remove a key tool used to punish countries that draw his ire on non-trade political matters. These include actions like Brazil's prosecution of former president Jair Bolsonaro and India's purchases of Russian oil that support Russia's war in Ukraine.

"If we don't have tariffs, we don't have national security, and the rest of the world would laugh at us because they've used tariffs against us for years and took advantage of us," Trump stated during an appearance on Air Force One. He emphasized that he would not attend Wednesday's arguments but Treasury Secretary Scott Bessent would be present to "emphasize that this is an economic emergency."

Trump is the first president to invoke this statute, which is typically used to apply punitive economic sanctions to adversaries, to impose tariffs. The law provides a president broad authority to regulate various economic transactions when a national emergency is declared. In this case, Trump cited a $1.2 trillion U.S. goods trade deficit in 2024 as a national emergency, even though the United States has experienced trade deficits every year since 1975, and also mentioned the issue of fentanyl overdoses.

Bessent told The News Pulse that he expects the Supreme Court to uphold the IEEPA-based tariffs. If the court rules against them, Bessent said, the administration will switch to other tariff authorities, including Section 122 of the Trade Act of 1974, which allows broad 15% tariffs for 150 days to address trade imbalances. He also mentioned that Trump could invoke Section 338 of the Tariff Act of 1930, which permits tariffs up to 50% on countries that discriminate against U.S. commerce.

"You should assume that they're here to stay," Bessent said of Trump's tariffs. For countries that have negotiated tariff-lowering trade deals with Trump, "you should honor your agreement," Bessent added. "Those of you who got a good deal should stick with it."

Negotiating Power

Trump administration officials have highlighted the tariffs as a means to push major trading partners such as Japan and the European Union to negotiate concessions that help reduce the U.S. trade deficit. They argue that these concessions will endure regardless of any Supreme Court ruling. U.S. trade partners are not waiting for a Supreme Court decision before taking action. The U.S. Trade Representative's office has finalized framework trade deals with Vietnam, Malaysia, Thailand, and Cambodia, setting tariff rates between 19% and 20%. South Korea agreed to terms on a $350 billion investment plan, unlocking a 15% tariff for its cars and other goods.

Negotiations with China have been more challenging due to its willingness to retaliate against the United States and cut off supplies of rare earth minerals and magnets essential for U.S. high-tech manufacturing. Instead of major concessions, Trump's administration has had to settle for extensions of a delicate truce under which American and Chinese tariffs were reduced to keep the rare earths flowing.

In South Korea last Thursday, Trump agreed in talks with Chinese President Xi Jinping to halve the U.S. tariff rate on Chinese goods related to fentanyl to 10% and to delay tighter technology export controls for a year in exchange for China's year-long pause on its tough licensing requirements for global rare-earth exports. Xi agreed to resume purchases of American soybeans that China had halted for months, while Trump paused new U.S. port fees for China-linked ships for a year.

Revenue and Investment Concerns

Some investors have expressed concerns that financial markets, which have become accustomed to the Trump tariff status quo, could face turmoil if the Supreme Court strikes down the IEEPA tariffs. A major concern is the risk of refunding more than $100 billion in IEEPA tariff collections and forgoing hundreds of billions of dollars of revenue annually. The IEEPA tariffs collected so far this year make up the biggest portion of a $118 billion increase in net customs receipts in the 2025 fiscal year that ended on September 30. That helped offset rising healthcare, Social Security, interest, and military outlays, helping shrink the U.S. deficit slightly to $1.715 trillion.

"It's a significant political economy risk that we get addicted to tariff revenue," said Ernie Tedeschi, a senior fellow at the Yale University Budget Lab, adding that makes it harder for any future presidential administration to lower the duties. Getting the money back also would be difficult, as a tariff reversal "is unprecedented at this scale" for U.S. Customs and Border Protection, said Angela Lewis, global head of customs at freight forwarder and customs broker Flexport.

The onus could be on individual importers to apply for "post-summary corrections" with the agency, a messy process that could take years and not be worthwhile for some smaller firms, Lewis said. For those getting refunds, U.S. taxpayers also would be on the hook for 6% annual interest costs compounded daily.

Inflation Timing

The biggest dilemma is managing costs. Importers for the most part have eaten the tariffs, according to academic studies and comments from executives, reducing profit margins but limiting higher consumer prices and protecting market share. While this has dampened the inflationary impact so far, cost pass-throughs are broadening through clothing and other goods prices, according to Oxford Economics, which estimated that tariffs added 0.4 percentage point to September's Consumer Price Index annual rate of 3.0%, keeping inflation well above the Federal Reserve target.

Corporate earnings have taken the biggest hit, with global companies flagging more than $35 billion in tariff-related costs so far heading into third-quarter earnings season.

Ohio-based OTC designs and builds factory production lines and automation systems. Soon, CEO Canady said, companies like his will have to "place their bets" on where to shift production for a more sustainable cost base. That may mean back to U.S. shores for high-end products, and to Mexico for lower-value parts.

"I think the new normal is going to be 15%," Canady said of Trump's tariffs, regardless of the legal authority he invokes. "They're going call it whatever they need to call it so that it is not challengeable."