Supreme Court's Tariff Ruling: What It Means for Energy

**Richard Nephew** (0:04)
Ultimately, the president's ability to still use sanctions tools to target and to weaponize energy resources haven't changed a bit. It's just that the mechanism now is much more straightforward. And again, in my opinion, a much more targeted way of doing business in any event, because then you're imposing costs on the one that you think needs to have costs, as opposed to an entire country.

**Jason Bordoff** (0:23)
President Trump has aggressively used tariffs as an economic tool. But the US Supreme Court decision on Friday that struck down his sweeping tariffs now brings new uncertainty. The court in a 6-3 decision ruled that the president had exceeded his authority when he imposed tariffs on nearly every US trading partner last year. While the ruling eliminated his primary tool for imposing tariffs, President Trump moved to work around the court by imposing levies using other trade powers. On Saturday, Trump said that he would raise the new global tariff rate to 15% using a provision in a law never before invoked by a president that allows him to impose an across-the-board tariff, but only for 150 days unless Congress agrees to extend it. Trump also said he would use the act to investigate other countries' unfair trade practices, possibly resulting in yet additional tariffs. So what does this ruling mean for the president's tariff policy and, more broadly, his ability to wheel tariffs for geopolitical pressure? How will this impact the US trading partners and existing trade deals? And what about the impact on the energy sector, from oil and gas to clean energy? This is Columbia Energy Exchange, a podcast from the Center on Global Energy Policy at Columbia University. I'm Jason Bordoff.
Today on the show, Trevor Sutton and Richard Nephew. They are both researchers here at the Center on Global Energy Policy. Trevor focuses on the intersection of trade, climate and industrial policy. He leads the center's program on trade and the clean energy transition. Trevor previously served as research director at the Remaking Global Trade for a Sustainable Future project. Richard formerly served as the US deputy special envoy for Iran under the Biden administration, where he played a key role in negotiations over the Iran nuclear deal. Trevor and Richard, join me to unpack the court's decision. I hope you enjoy the conversation. Trevor Sutton, Richard Nephew, welcome back to Columbia Energy Exchange. Great to talk to you guys on this snowy day here in the Northeast about the big news on Friday. I guess everyone listening knows a major Supreme Court ruling, I think, but tell me what you think. Trevor, I'll start with you, widely seen as a major setback for a huge piece of President Trump's agenda, which was wide spread, seemingly unrestrained authority to impose tariffs on other countries. So can you just remind everyone listening? It's a couple of days, so I think most people saw the news. What did the Supreme Court decide on Friday?

**Trevor Sutton** (3:03)
Sure, so this is possibly the most highly anticipated decision of the Supreme Court's term, the October 2025 term. It may be the most consequential Supreme Court decision of both of Trump's presidencies, although there are some serious competitors there. But David French of the New York Times said it might be the most important Supreme Court decision of the century, which again may be hyperbolic, but I do think gives you a sense of the scale of the defeat for the administration.
So having heard all that, you might be surprised to learn that the subject of the ruling was tariffs, right? I mean, prior to Trump's first term, tariffs were a relatively sleepy subject.
Trade policy had largely been settled in the 1990s and 2000s. But since he was first elected in 2017, Trump has been, I think it's fair to say, overhauling the foundations of US trade policy, US trade diplomacy, and with it, the functioning of the global trade system, and even how some of our partners are thinking about trade. Of course, tariffs have been the centerpiece of this effort. Trump has said that tariff is one of his favorite words, maybe his favorite word. He has been using tariffs in ways no recent president has used other than President Biden between the first and second Trump administrations. In the first Trump administration, he used tariffs in ways that would have been familiar, at least, to previous presidents using provisions of laws that were passed related to trade, had trade in the name of the law, using more or less the usual process. In the second term, though, he took a much bolder approach to tariffs. He used a statute that many of us who certainly work in national security issues are familiar with, the International Emergency Economic Powers Act, International Economic Emergency Powers Act. Richard, you can connect me about which he goes first. Now, he used that statute, which previously had been used to apply financial sections to apply tariffs. No president in 50 years since the act was passed had ever used it to create tariffs. Trump did not claim it allowed him to use tariffs in one narrow set of circumstances, or even a small set of circumstances, but pretty much without restraint. Tariffs on any country, on any product, for any amount of time, at any rate that the president deemed necessary. And this is the most important part to me, with almost no rationalization, unlike other tariffs in which there is an administrative process, hundreds if not thousands of pages of records generated. This required the president to issue a declaration of emergency, and then that would allow him to impose tariffs. So this case was a little bit of a sleeper initially, I think because there's so much going on in the first year of the second Trump administration. But after the Court of International Trade and then the Federal Circuit both ruled against the administration, all of a sudden it was viewed as high stakes. Because while Trump continued to use some of those other trade laws I just mentioned, really the centerpiece of his trade policy and indeed, one of the anchors of his foreign policy was the freewheeling and often coercive use of tariffs under IEPA. He was so, I suppose, aggressive or assertive in using these tariffs that they've become a hundred multi-billion dollar source of revenue to the US Treasury as well. So that was also part of why the stakes were so high. I don't think there's been a time since the 19th century in which tariffs had a truly meaningful sort of influence on the federal budget. And so the stakes were high and a number of people, myself included, thought that maybe the Supreme Court would try to thread the needle because they have been pretty deferential to the president on a lot of issues, particularly where his executive authority is concerned. They might find a way to strike down these tariffs, but not the idea that the president could use tariffs under IEPA. In fact, it was about his crushing defeat as the president could have feared. They said simply that the statute does not allow the president to authorize tariffs, and that the president had effectively arrogated to himself the Congress's power to regulate trade and set tariffs. There was really no opening for the president to spin this in a way that he had come out on top. Some pretty big reverberations, and one of the biggest questions, what happens to all the money that companies have already paid to comply with a tariff that is unconstitutional? They did not decide that. They remanded that to lower courts. And so it's a drama that is not over yet.