What are Tariffs?
Tariffs are taxes paid by importers of goods from other countries. While tariffs are a potential source of revenue for governments, over the last 50 years, many nations, including the U.S., have agreed to reduce or eliminate tariffs, in part to allow the importation of cheaper foreign goods and to increase exports to other countries. The argument is that increased economic growth from cheaper imports and higher exports outweighs the losses as people buy imported goods rather than domestically produced goods.
The Trump Administration reversed this trend. As foreign policy, President Trump has used tariffs and the threat of tariffs to negotiate new trade deals with other countries or trading blocs. As part of domestic policy, President Trump has leaned heavily on tariff revenue to offset the tax cuts enacted under his One Big Beautiful Bill in 2025.
As shown in the figure below, one effect of this policy change was to dramatically increase the government’s revenue from tariffs.
Revenue from tariffs was under $50 billion each year until 2018, when President Trump’s first-term tariffs took hold. President Biden’s revenues from tariffs remained around the same, hitting $77 billion of revenue in 2024, or around 1.5% of the total federal budget. In the first year of President Trump’s second term, however, $274 billion, or around 4% of the total federal budget, was raised from tariff revenue.

Which branch of government has the power to impose tariffs?
Article 1, Section 8 gives Congress the “Power to lay and collect Taxes, Duties, Imposts, and Excises…” For most of the 19th Century, tariffs (duties) were the major source of revenue for the federal government, so Congress regularly passed large tariff bills. However, with the introduction of income taxes under the 16th Amendment and the moves toward free trade after World War II, tariffs became less and less of a focus as a revenue-collection mechanism.
The Trump Administration initially imposed tariffs under the 1977 International Emergency Economic Powers Act (IEEPA), which gives the President the authority to impose economic sanctions on countries or entities that the President deems pose an emergent threat. This law was passed during the Cold War Era to allow these sanctions to be imposed quickly in response to emergent threats.
As shown below, under previous Presidents, IEEPA authority was used sparingly, while President Trump has used this authority extensively. Furthermore, IEEPA was only used to impose sanctions until President Trump’s tariffs on Canada in 2025.

What did the Supreme Court say?
A variety of lawsuits were filed in 2025 by states and small businesses arguing that IEEPA does not authorize the specific tariffs imposed by the Trump Administration. (In essence, the claim was that an emergency as defined in IEEPA did not exist.) In a landmark 2026 decision, Learning Resources Inc. v. Trump, the Supreme Court agreed with the plaintiffs, eliminating all of the IEEPA tariffs.
What is the response to the Supreme Court ruling?
Immediately following the Supreme Court Ruling, the Trump Administration moved to impose a 10% global tariff on all imports under the Trade Act of 1974. According to an analysis by a member of the Council on Foreign Relations, the overall tariff rate paid by importers under these new tariffs is only somewhat lower than under the IEEPA tariffs.

However, it is important to remember that these new tariffs do not affect all countries equally. After the IEEPA tariffs were imposed, some countries, including Taiwan and Korea, negotiated lower tariffs for their companies by agreeing to reduce their own import tariffs and committing to future investments in U.S. companies and projects. Under the new tariffs imposed under the Trade Act of 1974, imports from these countries are subject to the same tariffs as everyone else, but the other parts of the respective deals remain in place if not otherwise renegotiated.
There is potential for disagreement among the Supreme Court justices about the legality of these new tariffs. The Court’s IEEPA decision focused narrowly on the President’s authority under IEEPA, and not on broader questions of the Constitutionality of such laws in the first place. Justice Gorsuch, for example, has indicated that laws that cede tariff authority from Congress to the President may be unconstitutional delegations of authority. A future Supreme Court decision will likely resolve this issue.
The Takeaway
The Constitution vests tariff authority with Congress, but Congress has passed laws granting the President some power to impose tariffs on their own, including the IEEPA law. The Trump Administration used this authority to vastly increase tariffs on imports.
The Supreme Court recently struck down the President’s tariff authority under the IEEPA, but the Trump administration issued new tariffs under the authority of the Trade Act of 1974.
These events illustrate that even after almost 240 years since the Founding of the U.S., the lines of congressional and presidential authority are not always well-defined, requiring Court decisions to resolve conflicts by clarifying each branch’s powers.
























































































































































































































