Esmond Birnie: The US Supreme Court reins in Trump Tariffs - a victory for common sense and the original intent of the US Constitution, but much will remain uncertain for some time
The much awaited verdict of the US Supreme Court Justices has come through. Their verdict is that president Trump cannot use legislation from the late 1970s to provide a sufficient legal basis for the widespread tariffs introduced since April 2025.
The wording of the US constitution might appear fairly clear as to the original intent of the ‘Founding Fathers’. Taxation was a matter for Congress and not the president. Whatever Trump may have claimed, tariffs are a tax.
This provision in the constitution was yet another part of the wise and generally beneficial emphasis on division of powers.
What Trump had done was use legislation from the 1970s giving his office power to act in the context of national emergency. He framed the substantial US bilateral trade deficits with many countries, notably China but not only China, as some sort of national security emergency. This, he argued, demanded his executive action.
Now the Supreme Court Justices, most of whom it is worth remembering were appointed by Republican presidents, have ruled that such an important part of national economic policy cannot be framed and decided in large part by presidential emergency powers.
This is a positive result from the point of view of encouraging good government and good governance in the US. It confirms how the office of the president is under the law and constrained by the constitution.
Arguably it takes us back to what was originally intended in the 1780s by reaffirming the division of powers. After all, wasn’t the 1776 “project” all about avoiding arbitrary government by a despotic king or any one man?
In terms of the narrower economics, this is almost certainly a good result as well. It is true that as 2025 went there was a lot of evidence that the US economy was accelerating.
Trump, of course, took credit for this boom and claimed that the tariffs were good for US economic growth. It is very unlikely that was the case.
What may have happened is that other factors, notably a massive and continuing boom in spending on AI was disguising the harm done by tariffs.
In the long run US tariffs would have hurt US households (particularly poorer households) as well as stunting the efficiency and inventiveness of US businesses. Now there is at least the hope that the US may begin to shift back towards freer trade.
That all said, the problem is that some of the harm done by the Trump tariffs may be lasting. For example, to relations between the US and its allies. Also expect a period of turbulence to follow last week’s court ruling.
The president may attempt to find some expedients to reintroduce some of his tariffs. And, significantly, the ruling relates only to some of the tariffs. Those applied to cars, steel and aluminium (based on a 1960s piece of legislation) remain in place.
There is a further, interesting, unintended economic consequence. The ruling may require the US Federal Government to make compensation payments to some of those American individuals or companies which had to pay the Trump tariffs from the summer of 2025 onwards. If that happens this will lead to extra government spending.
At least in the short run that would give a further boost to what seems to be a booming economy. But a cause for concern is that this will simply add to what is already a very large and probably unsustainable US Federal Budget deficit.
l Dr Esmond Birnie is senior economist at Ulster University Business School