TOKYO - The U.S. Supreme Court ruled that the tariff measures President Donald Trump invoked under the International Emergency Economic Powers Act were illegal, a decision that matched expectations after even conservative justices had voiced doubts during deliberations. The court's makeup is six conservatives and three liberals, and six justices, including three conservatives, joined the illegality finding.
The ruling, however, was less about ideology than about separation of powers, as the court said the Constitution vests taxing authority in Congress and that the IEEPA does not explicitly grant the president tariff-setting power. It was a reasonable decision that faithfully takes into account the constitutionally defined division of roles between the president and Congress.
The decision, however, applies only to tariffs imposed under the IEEPA, leaving three issues likely to come into focus.
First is whether tariffs paid under IEEPA will be refunded. The Supreme Court did not specify, and confusion may persist. The tariffs were contested at the U.S. Court of International Trade, and the Justice Department had said during the proceedings that refunds would be issued if the measures were found to be illegal.
After the ruling, Trump said, "We'll end up being in court" over the next several years, suggesting the government is unlikely to issue immediate refunds. Japanese companies may need to work with their U.S. subsidiaries, which would be the refund recipients, to tally payments, with filing suit at the Court of International Trade also an option.
Second, Trump has moved to an alternative under Section 122 of the Trade Act, invoking an additional 10 percent global tariff and also mentioning a possible increase to 15 percent. Unlike IEEPA, imposing tariffs under Section 122 has a legal basis, and a president can invoke them if conditions such as a "serious balance-of-payments deficit" are met. But it expires after 150 days unless Congress approves an extension. Reimposing a similar measure immediately after expiration could be deemed illegal.
The administration appears to be considering tariffs under Sections 301 and 232. But as those require prior investigations, a question remains whether probes can be completed before any Section 122 tariff lapses.
Third, while agreements Trump extracted from countries by using IEEPA-based tariffs as leverage would not automatically become void because of the ruling, their legitimacy will be scrutinized. Japan has already decided on a first round of investment and financing projects in the United States, and the government is said to plan to carry out the agreement.
The upcoming midterm elections and the 2028 presidential election may prove more important. If Democrats win a House majority in the midterms, Trump may increasingly rely on executive orders that could face court challenges.
The outcome of the presidential election could significantly alter the assumptions underpinning tariffs, making it essential for governments and companies abroad to closely watch U.S. politics and respond accordingly.
(Naomi Koshi is a lawyer who earned a master's degree in law from Hokkaido University and completed Harvard Law School. She is admitted to practice in Japan, as well as the U.S. states of New York and California. She served as mayor of Otsu from 2012 to 2020 and is now a partner at Miura & Partners in Tokyo, specializing in Japan-U.S. cross-border transactions.)
