Trump's dream of using tariffs as source of revenue in the doldrums

This has the makings of a classic David v. Goliath story. In April 2025, soon after Trump's 'Liberation Day' drama, a few little-known US companies gathered the courage to take on the president. Ten months later, they succeeded in dismantling his signature tariff regime.

The timing could hardly have been more striking. When the lawsuit was filed last year, Trump loomed large on the national and international stage. CEOs of major tech companies, bank executives and corporate leaders appeared eager to remain in his good graces, offering gifts and making large commitments, while remaining reticent in offering opinions on Trump's policies.

Leading US law firms distanced themselves from lawyers who opposed the regime, and Ivy League universities made concessions to protect their multibillion-dollar federal grants. Global leaders also paid obeisance at the Trump court with gifts, promises and symbolic gestures, including nominations for the Nobel Peace Prize.


But companies such as Learning Resources, hand2mind and VOS Selections decided to challenge tariffs and demand refunds. They argued that the gov stretched its authority and claimed powers the Constitution does not grant it to impose and collect tariffs.

By January, many more companies, including some larger names, joined legal actions against the government, hoping that if tariff refunds were eventually ordered, they would not be left out. In less than 10 mths, Trump suffered three defeats. First in the US Court of International Trade. Then, in the US Court of Appeals for the Federal Circuit. And, finally, most decisively, in the Supreme Court.

Central to this victory was an independent judiciary prepared to confront the executive branch. In recent years, public confidence in the top court has been strained, with critics - particularly among Democrats - arguing that it had become partisan and inclined to favour Republican administrations.

The tariff ruling suggests that such fears were overstated. Indeed, the courts appear to have been more assertive on tariffs than Congress, whose authority had been sidelined when Trump imposed tariffs without seeking its approval. By striking down a high-profile presidential policy, the apex court reaffirmed its role as an independent arbiter of the law. Notably, two conservative justices - Neil Gorsuch and Amy Coney Barrett - who joined Chief Justice John Roberts and three liberal justices in the majority were Trump appointees.

The top court did not rule on whether high tariffs are good or bad policy, nor on whether the president should negotiate trade arrangements outside WTO.
Instead, it focused on a narrower - yet crucial - constitutional question: whether the president had the authority to impose sweeping tariffs without clear approval from Congress.

The majority opinion was unequivocal, as Roberts wrote: 'The president asserts the extraordinary power to unilaterally impose tariffs of unlimited amount,
duration, and scope. In light of the breadth, history, and constitutional context of that asserted authority, he must identify clear congressional authorisation to exercise it.'

None of this means Trump is finished with tariffs. He responded to the ruling by declaring that he would rely on other statutes to rebuild a 'tariff wall'. Soon after, he announced a broad 15% duty under Section 122 of the Trade Act of 1974. Even so, Trump will have to live with the new reality that he can no longer impose 50% or 100% tariffs at will. Even the 15% tariff, the maximum under this law, requires congressional approval within 150 days.

Trump's dream of using tariffs as an ultimate source of revenue, in place of income and corporate taxes, is crushed. His promise to send large cheques to Americans from the tariff revenue collected last year, which is now claimed by US corporations, is in the doldrums.

The top court's decision leaves considerable uncertainty. Yet, countries negotiating trade deals with the US will take note that Congress remains supreme when it comes to tariffs. In practice, this means that any trade deal, whether Trump likes it or not, and even if he claims otherwise, will require congressional backing.

American companies and consumers can, and will, challenge tariffs in court if they are not properly authorised. Dramatic tariff announcements will now face greater legal scrutiny unless supported by Congress. Countries negotiating with the US should feel less compelled to respond with urgency or fear to such threats.