It Could All Come Down To The Word ‘tax’ — And Other Takeaways From The Tariff Arguments

President Donald Trump’s signature tariff policy faced some serious static at the Supreme Court Wednesday as both conservative and liberal justices expressed doubts about whether Congress meant to give the president such sweeping power — and whether it could even if it wanted to.

The two-and-a-half hour argument session was closely watched by American businesses and foreign leaders for signs about whether the justices will allow Trump to press on with his use of tariffs as a club to coerce U.S. allies and competitors into trade concessions they have resisted for decades.

The justices, for their part, spent much of the argument discussing arcane legal theories and pressing both sides on whether a tariff is a tax — all while Treasury Secretary Scott Bessent and other Trump administration officials watched from the audience.

While a ruling could be weeks or even months away, many legal analysts said a majority of the court appears likely to invalidate Trump’s unprecedented use of a 48-year-old economic sanctions law to slap tariffs on nearly every U.S. trading partner in response to a claimed emergency involving trade deficits.

Here are POLITICO’s key takeaways from the much-anticipated high-court showdown:

Are tariffs taxes?

The whole fight over Trump’s tariff policy could come down to one crucial question of nomenclature: Are tariffs taxes?

If the justices see them that way, Trump’s policy seems doomed. For a court obsessed with what the founders thought, the key role unfair taxation played in the American Revolution clearly makes the justices wary of letting presidents impose taxes at will.

So, the lawyers challenging the tariffs insisted they are obviously taxes, while the administration insisted they are not.

“Tariffs are taxes. They take dollars from Americans' pockets and deposit them in the U.S. Treasury,” said Neal Katyal, a former Obama administration acting solicitor general who argued on behalf of private companies challenging the tariffs. “Our founders gave that taxing power to Congress alone. … This is obviously revenue-raising. Their own brief to the Court says it's going to raise $4 trillion,” Katyal said.

Ben Gutman, who argued on behalf of blue states challenging the tariffs, added: “Actions that bring in revenue from the pockets of taxpayers to the Treasury pose a different set of concerns. Our framers were very concerned about that.”

Solicitor General D. John Sauer was equally adamant that the fees imposed on imports are not taxes and the money they bring in is just a by-product. “They're clearly regulatory tariffs, not taxes,” he said, contending that Trump wants them to change foreign governments’ policies, not fill the U.S. government’s coffers. “They're not an exercise of the power to tax.”

No one mentioned it in court Wednesday, but one of the biggest Supreme Court decisions in recent decades — the 2012 ruling upholding Obamacare’s individual mandate — turned on Roberts’ decision to construe the penalty at issue there as a tax. It could happen again.

Conservatives see an opening to advance key legal theories

While Trump seeks to advance his trade agenda, some conservative justices appeared eager to advance an agenda of their own. Members of the court’s GOP-appointed majority sharply questioned the administration’s tariffs using a pair of legal doctrines important to conservatives’ long-running battle to rein in the so-called administrative state.

Conservatives have used or tried to use both theories — “the major questions doctrine” and “non-delegation doctrine” — to rein in government actions that the business community views as overreach. The major questions doctrine says courts should insist on extra clarity when the executive branch uses a federal law to justify an action likely to have broad impact on the economy. The non-delegation doctrine says Congress can’t completely cede any of its powers to the executive.

Justice Neil Gorsuch seemed particularly eager to frame the case through those precepts. “You're admitting that there is some non-delegation principle at play here and, therefore, major questions, as well, is that right?” Gorsuch asked Sauer.

Sauer gave a mushy answer, saying those doctrines might be applied, but because the tariffs relate to foreign policy, the justices should be “very, very deferential” to Trump’s actions.

Chief Justice John Roberts also said the major questions theory “might be directly applicable,” and Trump’s attempt to implement global tariffs “seems to be a misfit” with the law he’s invoking.

Gorsuch also pushed opponents of the Trump tariffs to salute the two conservative principles.

“The major questions/non-delegation — whatever you want to describe it, isn't that what's really animating your argument today?” Gorsuch asked Gutman.

“I think it's a huge piece of what's animating our argument,” Gutman said.

Katyal focused on the idea that Congress can’t just turn over its tariff powers to the president. The court’s conservatives took notice.

Justice Samuel Alito ribbed the liberal attorney for embracing the concept the court used to strike down parts of the New Deal almost a century ago.

“I wonder if you ever thought that your legacy as a constitutional advocate would be the man who revived the non-delegation argument,” Alito said.

“Heck, yes,” Katyal replied.

May I see your (import) license?

Opponents of Trump’s tariff policy have harped on the fact that the law he’s used to justify his broadest tariffs, the International Emergency Economic Powers Act, never explicitly mentions tariffs.

However, Justice Amy Coney Barrett noted that the law does give the president the power to issue licenses — and governments often charge fees for licenses. She suggested that could be either a workaround for Trump or a reason to think the law might intend to authorize tariffs as well.

“If this license fee is raising revenue, then it actually functions as a tariff,” Barrett said. “This license thing is important to me.”

“Maybe the President could simply recharacterize these tariffs as licenses or rejigger the scheme so that they are licenses,” Gorsuch said.

Sauer noted that, during the Civil War, President Abraham Lincoln imposed a four-cents-per-pound license fee on cotton shipped into the union from rebelling states.

Katyal ultimately told the justices that charging fees for licenses under IEEPA would be permissible, as long as the fee is just to cover the cost to the government.

“If the licensing fee is just to recoup the cost to government services, I think that may be okay,” he said, adding, “I don't think you need to get into it.”

Trump didn’t show — but his VIPs did

While Trump took a pass on attending Wednesday’s arguments, his posse appeared in some force. Bessent, Commerce Secretary Howard Lutnick and U.S. Trade Representative Jamieson Greer sat through more than two and a half hours of argument.

In an interview on Fox News last week, just after Trump backed away from his earlier suggestions he would go, Bessent made much of the fact he would be in the front row. Indeed, he was, sort of. He and the other VIPs sat in the front of the public section, in seats sometimes used by members of Congress. However, those seats are about halfway back in the courtroom.

Most of the lawmakers who showed up sat in another section of the same row, including Sens. Amy Klobuchar and Mike Lee, who exchanged brief greetings with the Trump appointees.

At least two justices, Kagan and Brett Kavanaugh appeared to take note of the guests.

Lutnick presumably appeared in his Commerce capacity, but his ears surely perked up at one hypothetical about the potential use of tariffs to rescue Americans held hostage abroad. Lutnick played a key role in work to free Americans and Israelis who were captured by Hamas in Gaza.

“If one of our major trading partners, for example, China, held a U.S. citizen hostage, could the president, short of embargoing or setting quotas, say the most effective way to gain leverage is to impose a tariff for the purpose of leveraging his position to recover our hostage?” Justice Clarence Thomas asked.

Katyal said that tool isn’t in the president’s toolbox, even in that extreme circumstance, because of the revenue-raising nature of a tariff.

Will the tariff case spoil Trump’s winning streak?

If Trump suffers a defeat in the tariffs case, it will be a significant departure from the string of victories the administration has racked up in recent months in appeals brought to the justices on an emergency basis.

Sauer and his team have prevailed in about 80 percent of those rulings, allowing the president to cancel billions of dollars in federal grants and contracts, fire numerous federal agency leadersand revoke deportation protections for hundreds of thousands of people.

While Trump’s ominous warnings about the implications of a loss suggest a major outburst from him is all but certain if his tariffs are ruled illegal, it seems unlikely a loss would signal a major shift by the court. It’s still a lopsided 6-3 conservative majority, with half the GOP appointees named by Trump himself.

But such a defeat may indicate that Trump’s actions will face more friction from the court when it digs into the legal issues in depth, notwithstanding the emergency rulings it has issued.

At a judges’ conference in September, Sauer semi-jokingly described as “terrifying” the prospect of full arguments on all the emergency cases Trump has brought to the high court.

“Who’s going to argue all these cases…?” he asked.