Natalie Shermanbusiness reporter
The biggest battle in Donald Trump’s trade war is about to begin.
The Trump administration heads to the U.S. Supreme Court on Wednesday to take on small businesses and several states who say many of the tariffs he has imposed are illegal and should be repealed.
If the court agrees with their arguments, President Trump’s trade strategy, including the sweeping global tariffs first announced in April, will be overturned. The government will also likely have to refund some of the billions of dollars it collected through tariffs, taxes on imported goods.
The judge’s final decision will come after months of considering arguments and discussing the merits of the case. In the end, they get to vote.
Trump described the fight in epic terms, warning that the loss would tie his hands in trade negotiations and put national security at risk.
On Sunday, the president said he would not attend the hearing in person because he did not want to be a distraction.
“I wanted to go so bad… I don’t want to do anything to detract from the importance of that decision,” he said. “This is not about me, this is about our country.”
President Trump previously said that if he does not win the case, the United States will be ‘weakened’ and plunged into ‘financial chaos’ for years to come.
The stakes are equally high for many companies in the U.S. and abroad who are being swayed by rapidly changing policies and are paying the price.
Trump’s tariffs will cost Learning Resources, a seller of American toys mostly made overseas and one of the companies suing the government, $14 million (£10.66 million) this year. That’s seven times the amount spent on tariffs in 2024, according to CEO Rick Woldenberg.
“They have caused incredible disruption to our business,” he said, noting that the company has had to shift manufacturing of hundreds of items since January.
But few companies expect to win in court.
“We’re hoping this will be ruled illegal, but we’re working to get it ready to go,” said Bill Harris, co-founder of Georgia-based Cooperative Coffees.
His cooperative, which imports coffee from more than a dozen countries, has already paid about $1.3 million in tariffs since April.
President Trump’s test of power
In deciding this case, the Supreme Court will have to address a broader question: How far does the president’s power extend?
Legal analysts said it was difficult to predict the justices’ response, but a ruling siding with Trump would have greater impact on him and future White House occupants.
Specifically, the case concerns tariffs imposed by the Trump administration using the International Emergency Economic Powers Act (IEEPA) of 1977, which the White House accepted for reasons of speed and flexibility. By declaring an emergency, the law allows Trump to issue immediate orders and bypass longer, more established procedures.
President Trump first introduced legislation in February to levy taxes on products from China, Mexico and Canada, calling drug trafficking from those countries an emergency.
He reintroduced it in April, ordering levies ranging from 10 to 50 percent on the following products: Almost every country in the world. This time, he said, the U.S. trade deficit posed a “special and unusual threat,” with more imports than exports.
These tariffs began in fits and starts this summer as the United States pressured countries to reach a “deal.”
Opponents argued that although the law gave the president the power to regulate trade, it never mentioned the word “tariff” and that only Congress could set taxes under the U.S. Constitution.
They also questioned the issues the White House cited, particularly whether the trade deficit was an emergency.
Members of Congress from both parties have argued that the Constitution also gives them responsibility for creating tariffs, tariffs, and taxes.
More than 200 Democrats in both houses of Congress and Sen. Lisa Murkowski, a Republican, filed a brief with the Supreme Court, arguing that the emergency law does not give the president the authority to use tariffs as a tool to gain leverage in trade negotiations.
Meanwhile, the Senate last week made a symbolic, bipartisan move to pass three resolutions rejecting Trump’s tariffs, including one to end the national emergency he declared. It is not expected to be approved by the House of Representatives.
Still, business groups said they hoped the criticism would send a message to the judges.
‘Energy leak like you’ve never seen before’
Three lower courts ruled against the administration. The Supreme Court is expected to hear arguments Wednesday and then issue a decision by June, but most expect a decision by January.
Whatever decision is made will impact about $90 billion in import duties already paid, according to analysts at Wells Fargo. This represents about half of the tariff revenue the United States collected through September this year.
Trump officials have warned that the figure could rise to $1 trillion if courts hear the case by June.
If the government were forced to issue a refund, Cooperative Coffees would “absolutely” try to recoup the money, Mr Harris said. But that won’t make up for all the confusion.
His business had to secure additional lines of credit, raise prices, and find ways to survive on lower profits.
“This is an energy drain like I’ve never seen before,” said Mr. Harris, who is also CFO of Cafe Campesino, one of 23 roasteries that own Cooperative Coffees. “It dominates every conversation and takes your life.”
What could happen next?
The White House has said that if it loses, it will seek to impose tariffs through other means, including legislation that would allow the president to impose tariffs of up to 15% for 150 days.
Ted Murphy, a trade lawyer at Sidley Austin, said businesses will feel some relief because other methods require time and deliberation, with steps such as issuing formal notices.
“This isn’t just about money,” he said. “The President announced the tariffs on Sunday, effective Wednesday, without prior notice or actual process.”
“I think that’s the bigger issue of this event for businesses, whether it’s going to happen in our future or not,” he added.
There is no clear indication of how the court will rule.
In recent years, major policies, such as student loan forgiveness during the Biden era, have been pressured by the White House’s excessive approach.
However, the nine Supreme Court justices, six of whom were appointed by Republicans, including three by President Trump, It has paid tribute to the president in other recent conflicts and has historically given the White House leeway on national security issues.
“I think the Supreme Court could take the discussion in a variety of directions,” said Greta Peisch, a partner at Wiley and a former trade lawyer in the Biden administration.
Adam White, a senior fellow at the American Enterprise Institute, said he expects the court to strike down the tariffs but should avoid questions such as what constitutes a national emergency.
The incident has already complicated the White House’s trade deals, such as the one it reached with the European Union in July.
The European Parliament is currently considering ratification of an agreement that would set U.S. tariffs on European goods at 15% in return for promises that include allowing for more U.S. agricultural products.
“They’re not going to act on this until they see the outcome of the Supreme Court ruling,” said John Clark, former European Commission international trade director.
In Switzerland, which recently downgraded its economic growth forecasts due to a 39% US tariff on its products, chocolate maker Daniel Bloch said he welcomed the ruling against the Trump administration.
His business, Chocolats Camille Bloch, is absorbing about a third of the cost of new tariffs on the kosher chocolate his company has exported to the U.S. for decades to blunt price increases and maintain sales. He said the decision wiped out the company’s profits and was not sustainable.
He hoped President Trump would completely reconsider the tariffs. Because that would be the easiest.
“If the court removes the tariffs, we would see that as a positive sign,” he said. “But we don’t believe it will bring a solution.”
