The justices of the U.S. Supreme Court appeared skeptical of claims that the president has the authority to impose broad and sweeping tariffs under the International Emergency Economic Powers Act during oral arguments Nov. 5 for two consolidated cases, Learning Resources, Inc. v Trump, and Trump v V.O.S. Selections.
Construction groups have already begun to see impacts from various tariffs – some imposed under different laws than the IEEPA— for steel, aluminum and other materials even though most have only been in effect for a few months at most, industry groups say.
“Constant changes in tariff rates, effective dates, and other provisions have made it difficult for contractors to price projects and have likely led owners to postpone going forward until they know their input costs and demand or need for structures,” said Ken Simonson, chief economist for the Associated General Contractors of America, in an email.
Slowdowns are being seen in architectural billing, a leading indicator for the strength of downstream construction markets, and materials prices have spiked at a time when construction spending is contracting, although the data center and energy sector markets are softening the contraction to some extent, said Anirban Basu, chief economist for the Associated Builders and Contractors in an interview with ENR.
The justices did not seem inclined to agree with the Trump administration’s core argument, offered by Justice Dept. Solicitor General John Sauer, that language in the federal law giving the president the authority to “regulate importation” can be interpreted to mean that the president also has the authority to impose tariffs during a national emergency. Sauer said Trump concluded earlier this year that “exploding trade deficits” and the trafficking of fentanyl and other opioids have created a national emergency because they are threats to national and economic security.
But several of the justices—even from the court’s conservative majority—were skeptical. Associate Justice Amy Coney Barrett asked Sauer, “Is it your contention that every country needed to be tariffed because of threats to the defense and industrial base? I mean, Spain, France? I could see it with some countries, but explain to me why as many countries needed to be subject to the reciprocal tariff policy as are.”
Sauer’s arguments relied heavily on the fact that President Richard Nixon imposed across-the-board tariffs on all major trading partners in 1971 as a negotiation tool. Two years later, Congress enacted the International Emergency Economic Powers Act with the words “regulate importation,” which Sauer said was a codification of Nixon’s actions.
Chief Justice John Roberts said, “You have claimed a source in IEEPA that had never before been used to justify tariffs. No one has argued that it does until this particular case. Congress uses tariffs in other provisions but not here.”
Associate Justice Brett Kavanaugh said, “One problem you have is that presidents since IEEPA have not done this. Your primary answer, or one of your many answers to that, is the Nixon example.”
Neal Katyal, arguing on behalf of the private companies in the cases, said the IEEPA is the wrong vehicle to impose tariffs, because tariffs are essentially taxes. “IEEPA is a sanction statute. It’s not a tax statute where Congress gave away the store,” he said, adding, “Even though presidents have used IEPPA to impose economic sanctions thousands of times, no president in IEEPA’s 50-year lifetime has tried to impose tariffs,” and that the president bypassed statutes that do directly authorize tariffs that provide guardrails and caps.
ABC economist Basu notes that even if the Supreme Court rejects the administration’s arguments, it’s difficult to know how the construction sector will be affected because it’s nearly impossible to predict how the president will respond. “If, in fact, the Trump administration simply authorizes new tariffs based on new sections of the code, then there really isn’t much change at all economically [for contractors],” he says. But: “If the Trump administration decides that it can’t respond that way because the court has made a judgment that makes it difficult for the Trump administration to replace those tariffs using other mechanisms, then that means some forward-looking relief for contractors buying inputs to construction.”
