Tag: Supreme Court of the United States

Washington — For Lindsay Hagerman, the past few months have felt tumultuous.

As the co-owner of the Pennsylvania-based RainCaper, which sells art-inspired travel accessories and gifts, Hagerman has found herself questioning her pricing strategy while watching tariffs on goods imported from China see-saw from 10% to 20% to 145% — and then back down again.

“Is it temporary? Is this the new normal? You’re struggling with how do we price — do we change prices now? Wait? I don’t want to gouge people,” Hagerman told CBS News. “That’s not how you do good business. But I also need to cover expenses.”

RainCaper, which Hagerman founded with her mother nearly a decade ago, sells rain capes, travel accessories, umbrellas, scarves, shawls and drinkware to boutiques, museum stores, retailers and directly to consumers through its website.

Her company imports umbrellas and rain capes made from a waterproof fabric from China, and neither can be made in the U.S., Hagerman said. As a result, RainCaper has found itself on the front lines of President Trump’s trade war, which relies heavily on tariffs.

But Hagerman and small business owners across the U.S. could see some stability in the coming weeks, with the Supreme Court set to consider Wednesday whether Mr. Trump has the authority to unilaterally impose tariffs on nearly every country under a federal emergency powers law.

Lower courts have ruled his most sweeping duties are illegal, and a decision from the Supreme Court upholding those decisions could deal a blow to the president’s efforts to use tariffs as leverage in negotiations with foreign countries and to pressure U.S. companies to invest in domestic manufacturing. But a ruling from the high court against Mr. Trump, who appointed three of the justices, could also have significant implications for presidential power.

Since he announced the sweeping global tariffs earlier this year, many small businesses have had to devote time and resources to keeping up with the fast-changing fluctuations in the tariff rates and countries targeted, all while making determinations about how to respond to the increased costs of importing the components needed for their products.

At RainCaper, Hagerman has trimmed expenses and laid off two of its seven employees who were working in operations and customer service, she said.

She also explored manufacturing outside of China because of the levies, though Hagerman ultimately decided against it in part because of the significant investment it would require. And as a military spouse whose husband is out of state, she said making trips to countries like Bangladesh and Cambodia to look at other potential facilities wasn’t possible.

“When the administration is saying we’re bringing trillions into the economy and saying China is paying these tariffs, Brazil is paying these tariffs, it’s just not true,” Hagerman said. “Tariffs are borne by the importer. I’m the importer.”

A “stark choice” for the Supreme Court

Mr. Trump has invoked a federal law called the International Emergency Economic Powers Act, or IEEPA to impose two different sets of tariffs through a series of executive orders. The first set a baseline rate of 10% on nearly every U.S. trading partner, as well as higher reciprocal tariffs on more than 50 countries; and the second targeted China, Canada and Mexico with tariffs of varying rates.

In his executive orders, the president declared trade deficits and the flood of fentanyl and other illegal drugs into the U.S. 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, which he said trade imbalances and drug trafficking constitute. 

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

But soon after the president announced the tariffs, two sets of small businesses and a group of 12 states filed lawsuits arguing that IEEPA doesn’t authorize the sweeping duties. Lower courts have ruled against the administration, finding that IEEPA doesn’t give the president the power to unilaterally impose the global and trafficking tariffs.

In one of the cases, involving a group of five small businesses and Democratic officials from 12 states, the U.S. Court of Appeals for the Federal Circuit ruled 7-4 that many of the president’s levies are illegal. But the Federal Circuit set aside a lower court’s injunction, which has allowed the Trump administration to keep collecting the global and trafficking tariffs for now.

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 exempt, 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 then announced last week after a meeting with Chinese President Xi Jinping that he would be reducing the tariffs on goods imported from China.

The Trump administration is urging the Supreme Court to uphold the levies, arguing that Congress has long given the president broad authority to impose tariffs to address emergencies. Solicitor General D. John Sauer wrote in a filing that IEEPA is a continuation of that tradition because it gives the president the power to “regulate … importation.”

Sauer also asserted that the tariffs are an exercise of Mr. Trump’s power over national security and foreign affairs, and argued 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, he said, 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,” Sauer wrote.

Mr. Trump has called the case “one of the most important in the history of the country” and had said he planned to attend 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.”

Lawyers for the small businesses told the high court in 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.

No president has used IEEPA to levy tariffs — until now — and the law makes no mention of that word or others like it. Neal Katyal, who will argue on behalf of the small businesses before the Supreme Court, warned in filings that the Trump administration’s interpretation of IEEPA is a “breathtaking assertion” of power that requires explicit authorization from Congress.

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 government’s theory is really that the president has the ability to impose sales taxes, property taxes, use taxes, essentially a wealth tax under IEEPA,” Timothy Meyer, an expert in international law at Duke Law, told CBS News. “The justices are going to have to confront this really extraordinary breadth of the government’s argument.”

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.

“The reason that President Trump likes IEEPA is because unlike every other statute that delegates to the president the authority to impose tariffs, IEEPA requires no process before the president can act, requires no investigation, no fact-finding other than an unreviewable declaration of a national emergency, and it places no limits on what the president can do in terms of the amount of the duty or the length of time that they can remain in place,” Meyer said.

He continued: “The reason it doesn’t do any of those things is because it doesn’t mention duties at all, so it seems pretty likely that Congress did not intend to include substantial power to impose tariffs in the statute.”

Jeffrey Bialos, a partner at Eversheds Sutherland who specializes in international law, predicted that if Mr. Trump prevails before the Supreme Court, future administrations would likely use IEEPA’s authority to set out broad tariffs rather than look to other authorities that are more narrow and impose certain requirements.

“This isn’t foreign affairs. It’s a question of what is permissible to delegate under Article I Section 8, and what kind of authority you need,” Bialos said. “Did Congress intend to allow the president to throw out the entire tariff code of the United States? That’s the import of what was done here.”

A test of presidential authority

Mr. Trump has spent his first months back in the White House flexing his presidential authority in other ways, including through his firings of executive branch officials and the withholding of $4 billion in foreign aid approved by Congress.

When those cases made their way to the Supreme Court in their early stages, the conservative justices have in most instances allowed the Trump administration to temporarily enforce certain policies while proceedings in the lower courts continue.

In the dispute over Mr. Trump’s tariffs, the Supreme Court will weigh the legal merits of the case, something it has not yet done in the others. But the court battle, like those others, could have implications for the power the president is seeking to assert.

“What the Supreme Court is really deciding here is whether or not to give the administration a free pass any time it’s able to connect some sort of policy initiative to some sort of international dimension,” Meyer said. “If you create a system in which you get deference if you can characterize something as a foreign affairs issue, but there’s no deference if it’s done by an administrative agency pursuing sort sort of statutory delegation, then the administration will just do as much as it can through emergency and international affairs powers.”

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. 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.

“Taxing American citizens is not national security or foreign policy, and the tariffs are paid by Emily Ley and other ordinary Americans,” said Mark Chenoweth, president and chief legal officer at the New Civil Liberties Alliance. The organization is representing a Pensacola-based stationary company and its CEO, Emily Ley, in a different challenge to Mr. Trump’s tariffs. That case is not before the Supreme Court.

“To argue that unilateral taxation of American citizens is national security or foreign policy is incorrect,” Chenoweth said. “We fought a Revolutionary War over the idea of taxation without representation, and that’s what this would be if the president can unilaterally raise taxes on American citizens.”

A “mass extinction” of small businesses

While lower courts have agreed that Mr. Trump’s global and trafficking tariffs are illegal, the government has continued to collect the duties as the Supreme Court weighs the cases.

For Julie Robbins, CEO of EarthQuaker Devices, that has meant paying nearly $40,000 in levies through the end of October.

The family-owned company makes guitar pedals and manufactures its products in Akron, Ohio. EarthQuaker’s product line includes 50 pedals that require more than 900 unique components that it sources from 15 different countries, including Mexico, Portugal, Poland, Ukraine and several in Asia.

To assist with logistics, Robbins said EarthQuaker works with wholesalers that vet overseas manufacturers and source the mechanical and electrical components needed for its pedals. The wholesalers are paying the tariffs when the items arrive at U.S. ports and then pass along a portion of the duties to EarthQuaker, she said.

Upon hearing Mr. Trump would be imposing his sweeping levies, one of Robbins’ first moves was to search for domestic suppliers. She ultimately found they either don’t exist for the parts that go into EarthQuaker’s guitar pedals or they charge significantly more than her international sources.

Plus, breaking off long-held relationships with overseas suppliers would be risky and disrupt a supply chain that took years to perfect, she said, since there were no guarantees other manufacturers or their products would be reliable.

“It’s taken us 20 years to develop this supply chain,” she said. “It’s not something that happened overnight and so in order to redo it, I can’t see it happening.”

Robbins said EarthQuaker could save money by having their pedals made in-full overseas, rather than having the parts shipped to the U.S. and the pedals assembled at its production facilities in Ohio. But doing that wouldn’t align with the company’s values of keeping well-paying jobs in Akron, a city that was once known as the “Rubber Capital of the World” for its production of rubber products.

“When people try to oversimplify and say you should be manufacturing in the United States, we are manufacturing in the United States, but you can’t make the raw materials in the U.S.,” Robbins said.

EarthQuaker doesn’t have deep-pocketed investors and has eroded its cash cushion as it has navigated the whiplash of changing tariff rates, she said. The company also opted not to replace employees that have left in recent months, and it pulled two open positions. 

“My concern is there’s just going to be this mass extinction of small business,” Robbins said. “It’s not sustainable.”

Cephalofair Games, a California-based company that designs and publishes board games, has paid more than $144,000 in new tariffs over the past few months, according to its chief operating officer, Price Johnson.

In July, Cephalofair informed its customers it would be adding “tariff surcharges” as a result of the import taxes and has increased the prices of its products. It has also reduced the salaries of staff and furloughed workers.

The company manufactures its games in China and has had to make adjustments to product runs in response to the tariffs. Johnson told CBS News that a run of 7,000 units is nearly completed, but instead of bringing it into the U.S., the company will instead send its games to Europe, the United Kingdom and Australia.

In the meantime, Johnson said the company continues to design and develop new games, but is waiting to hear from the Supreme Court before moving forward with manufacturing.

Cephalofair wasn’t impacted by tariffs during the first administration and had been preparing for tariffs on Chinese imports of between 10% and 15%, Johnson said. But these days, he and his colleagues have taken to watching Mr. Trump’s social media feed for tariff-related announcements.

The uncertainty has “removed any ability for us to plan or rely on what we as importers can operate on,” Johnson said. “We have to plan on not being able to plan or trust what U.S. policy is surrounding trade.”