The US Supreme Court's Tariff Ruling is Imminent, With Trump Issuing Frequent Warnings, Could He Be on the Verge of Losing?

Original Title: "US Supreme Court Tariff Ruling Looms, Trump Warns Frequently, Does He Sense Defeat?"

Original Author: Long Yue, Wall Street News

The fate of the Trump administration's iconic tariff policy is hanging on a key ruling by the US Supreme Court. Despite senior US officials attempting to downplay the potential legal setback, President Trump's increasingly anxious remarks, combined with market and analysts' widespread predictions, all point to an increasingly clear possibility: the government may lose this lawsuit, and the subsequent remedial measures will be far more complex than officials have depicted.

This ruling, expected to be announced in January next year, revolves around determining whether the government has the right to impose broad-based "mirror tariffs" under the International Emergency Economic Powers Act (IEEPA). Recently, Trump has been vocal on social media, stating that "evil, America-hating forces are battling against us in the Supreme Court," and urging the justices to "do the right thing for America." This rare statement has been interpreted by the market as his deep concerns about his policies being overturned.

On November 6 this year, Trump also told reporters that if he loses this litigation in the Supreme Court, it would "deal a devastating blow to our country." Trump said, "If that's the case, then we'll have to come up with a second plan."

In contrast to Trump's anxiety, cabinet members have shown a confident attitude. Treasury Secretary Benson warned on Tuesday (December 16) that overturning the tariffs would "harm national security" because "economic security is national security." However, he also stated that the government has "many other ways to increase revenue."

Approaching Risk of Defeat: Anxious President vs. "Calm" Cabinet

Currently, the market does not have a high level of confidence in the Trump administration winning the tariff lawsuit. According to a report released by Goldman Sachs on December 16, based on questions from justices during the oral argument in November, the Supreme Court is "highly likely" to rule most of this year's imposed tariffs as unlawful in early next year. This view is also reflected in the widespread expectations of the prediction markets.

The two core cases currently before the Supreme Court, "Learning Resources Inc. v. Trump" and "V.O.S. Selections Inc. v. Trump," challenge the core issue of whether the President has crossed constitutional boundaries by using the IEEPA to exercise Congress's exclusive taxing power.

Facing the looming risk of defeat, the public statements within the White House show a stark contrast. Trump's rhetoric is filled with urgency, while officials like Treasury Secretary Benson are trying to convey a message to the outside world: even in a worst-case scenario, the government still has contingency plans.

While emphasizing national security, the Bezent government also acknowledges the existence of alternative solutions, implying that the government is prepared for a possible setback. However, this publicly calm stance, in contrast to its claim in court filings that overturning tariffs would trigger a "financial disaster," is striking.

The Challenge of the "B Plan": Alternative Solutions Face Legal Hurdles

Despite government officials claiming they could easily shift to other trade regulations to rebuild the tariff system, legal experts and analysts point out that this path is fraught with thorns. According to Politico, any alternative solution would face new legal and political obstacles, making the process far from smooth sailing.

Two main legal tools the government might resort to have significant limitations:

Section 122 of the Trade Act of 1974: This provision authorizes the president to impose a maximum 15% tariff in response to a "serious threat to the national security, international relations, or the balance of international payments." This could temporarily replace the current 10% baseline tariff, but the issue is that, first, the tariff must be "nondiscriminatory," which contradicts the Trump administration's practice of reaching exemption agreements with specific countries; and second, its effective period is only 150 days unless extended by Congress, which is almost impossible in the current political environment.

Section 338 of the Tariff Act of 1930: This provision allows the president to impose a maximum 50% tariff on countries that discriminate against U.S. trade. However, this provision has never been used since its enactment, and its legal issues have not been tested in court. A key dispute is whether the president must first have an investigation by the U.S. International Trade Commission (ITC) before taking action. If an investigation is required, it will take a significant amount of time, making immediate tariff replacement unfeasible.

Law professor Timothy Meyer told Politico that although the U.S. International Trade Court typically defers to the executive branch in interpreting tariff law, every step taken to implement these alternative solutions could trigger new litigation.

Goldman Sachs Prediction: Tariff Rates May Fall, Long Road to Billion-Dollar Refunds

For investors, the most direct impact is the change in tariff costs. Goldman Sachs' report predicts that if the IEEPA tariffs are overturned, the risk will "tilt toward lower tariff rates."

The bank's analyst, Alec Phillips, points out that even if the government turns to Section 122 as a temporary measure, the 15% tariff ceiling means that the higher tariffs imposed on certain trading partners (such as India, with rates as high as 50%) will have to be lowered. Furthermore, conducting time-consuming and complex investigations to levy higher tariffs on specific countries through Section 301, making comprehensive investigations on all trading partners unfeasible in practice.

Goldman Sachs anticipates that by the end of 2026, the effective tariff rate in the United States will decrease by approximately 2 percentage points from its current level.

Additionally, a legal defeat would also trigger a significant issue regarding tariff refunds. Goldman Sachs estimates that the government has collected around $130 billion in tariffs through IEEPA and is still increasing at a pace of about $20 billion per month. Companies (such as Costco) have filed lawsuits to ensure they receive refunds. However, the refund process could be lengthy and require further legal action. According to Politico, the government is intensifying its efforts to deposit tariff revenue into the U.S. Treasury, seen as a move to make it more difficult for businesses to obtain refunds.

Political and Diplomatic Reputation Dual Test

A legal failure will also pose serious political and diplomatic consequences for the Trump administration.

On the diplomatic front, many "trade agreements" reached under the threat of IEEPA tariffs are not legally binding themselves. Once the tariff foundation is shaken, foreign governments may demand renegotiation, retract previous concessions, testing the government's negotiation ability and credibility.

Domestically, government officials' credibility will suffer. Several officials, including [name], previously claimed in court documents that overturning the tariffs would lead the U.S. into "domestic and international turmoil." If such a scenario does not materialize after the defeat, they will face accusations of misleading the court and the public. This will also put Republican lawmakers in an awkward position before the 2026 midterm elections, having to make a tough choice between supporting an unpopular tariff policy (opposed by about two-thirds of Americans) and distancing themselves from Trump.

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