Will the Federal Courts Ignite a Stock Market Rally by Nixing Trump’s Tariffs?

All these lawsuits share common legal arguments against President Trump’s tariffs. Most importantly, they all maintain that the tariffs are unconstitutional.

The U.S. Constitution grants Congress the exclusive right to levy tariffs. However, Congress has passed legislation in the past that delegates some of its authority to the president in certain circumstances. President Trump used one of those pieces of legislation, the International Emergency Economic Powers Act (IEEPA), as the basis of his executive order implementing steep reciprocal tariffs on most countries.

But the IEEPA grants the president only the power to take financial actions against other countries to “deal with an unusual and extraordinary threat” by declaring a national emergency. The Liberty Justice Law Center’s lawsuit argues that trade deficits, the justification used by President Trump to impose tariffs, are “neither an emergency nor an unusual or extraordinary threat.”

The organization argued that “Trade deficits have existed for decades, and do not constitute a national emergency or threat to security.” Its lawsuit noted that the Trump administration’s tariffs even apply to countries with which the U.S. doesn’t have a trade deficit, which further undermines the White House’s justification.

California is taking a similar approach. The state’s lawsuit argues that the president is misusing the emergency powers granted by the IEEPA and that Congress must approve the type of tariffs the White House is levying.

The New Civil Liberties Alliance’s lawsuit doesn’t challenge the president’s power to declare a national emergency. Instead, it argues that the IEEPA doesn’t mention tariffs and that the Trump administration can’t demonstrate that tariffs are necessary to address the “emergency” on which they’re based.

Could these lawsuits really reverse the Trump administration’s tariffs? Again, it’s a definite maybe.

George Mason University law professor Ilya Somin wrote in Reason magazine earlier this year (before the various lawsuits were filed) that the constitutional arguments against using the IEEPA to impose tariffs “are strong.” Somin said that the Supreme Court’s “major questions” doctrine requires Congress to “speak clearly” when it empowers the executive branch to make decisions that have a major economic and political impact. Since the IEEPA doesn’t specifically grant the president the power to levy tariffs, this argument could be compelling to the federal courts.

Ultimately, the Supreme Court will probably have to determine whether President Trump’s tariffs are constitutional. If at least five justices decide the administration has gone beyond its authority, the tariffs will go away. And the stock market will almost certainly take off again.

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Will the Federal Courts Ignite a Stock Market Rally by Nixing Trump’s Tariffs? was originally published by The Motley Fool