This week, the Supreme Court announced it will decide whether the International Emergency Economic Powers Act (IEEPA), a statute designed as an emergency foreign policy tool, authorizes the across-the-board tariffs imposed by the White House. The outcome of this case could significantly reshape the balance of power between Congress and the president, thereby affecting the stability of U.S. tax and trade policy.
The volatility inherent in tax policy determined by executive action rather than through the legislative process is evident in the tariffs imposed by the Trump administration under IEEPA. The effective combined tariff rate, which was 2.4% before President Trump took office, has fluctuated dramatically. It peaked at 28% under IEEPA and currently stands at 18.6%, a level not seen since the Great Depression, all within a matter of months. This volatility is exacerbated when the tariffs are based on untested legal claims. Businesses and consumers must navigate not only the rapid shifts in policy from the White House but also the progress of court challenges to those changes. This instability is more than an inconvenience; it raises costs, complicates long-term planning, and undermines business and consumer confidence in the stability of current rules.
Enacted in 1977, IEEPA grants the president authority to regulate certain economic activities during a national emergency. It replaced the Trading With the Enemy Act (TWEA) with more restricted wartime-style powers, while allowing the executive branch the flexibility to impose quick executive actions in foreign policy and economic crises. Under IEEPA, once the president declares a national emergency, the administration can freeze assets, block transactions, or impose economic restrictions. These tools are designed for immediate crisis response by the executive branch, rather than the long-term economic policymaking undertaken by Congress.
On February 1, 2025, President Trump declared a national emergency under IEEPA in response to fentanyl trafficking and immigration concerns, imposing tariffs ranging between 20% and 25% on Mexican, Canadian, and Chinese imports. Then, on April 2, President Trump declared a separate national emergency in response to persistent U.S. trade deficits. This executive order imposed a 10% broad-based tariff on nearly all imports, along with higher “reciprocal” tariffs on countries with which the U.S. has large trade imbalances.
It is Congress, not the president, that has the exclusive constitutional authority to set taxes, including tariffs. However, over the last century, lawmakers have gradually delegated portions of this authority to the executive branch through a series of trade acts. For example, the Trade Expansion Act of 1962 and the Trade Act of 1974 gave presidents the authority to raise or lower tariffs in response to national security threats or unfair trade practices. These delegations were intended to make U.S. trade policy more nimble, aligning with the president’s role as head of state and chief trade negotiator. Importantly, tariffs imposed under these authorities were generally subject to departmental reviews, findings, public input, and limits on duration and magnitude. These checks are absent from the open-ended tariffs now being tested under IEEPA.
The legality and constitutionality of IEEPA tariffs are being litigated along two tracks, both of which raise fundamental questions about how IEEPA can be used. One track involves a fentanyl trafficking case where the emergency declaration is not central; instead, the fight is over whether IEEPA authorizes tariffs as a remedy. This harkens back to questions surrounding President Trump’s 2019 threats to impose tariffs on Mexico over border issues. The second track involves the “Liberation Day” case, which contests both elements: whether a chronic trade deficit constitutes a “national emergency” and, if so, whether IEEPA permits broad, revenue-raising tariffs in response.
Together, these two cases raise the same fundamental question: Can a law designed for freezing assets and blocking transactions be stretched to let the president unilaterally impose open-ended, broad tariffs? For tax policy, the stakes are high. If the courts uphold either of the IEEPA tariffs, they would dramatically expand presidential authority to impose what amount to broad-based taxes under the banner of emergency powers. If they strike them down, they would curb executive discretion but might leave unanswered thorny questions about where the boundaries of taxing authority under IEEPA truly lie.
These questions contribute to a broader trend: The Court’s growing role in tax law is not only shifting the balance of authority among branches of government but also injecting more volatility into a system that depends on stability for businesses, workers, and households. The IEEPA cases now before the Court bring this dynamic into sharp relief. A law crafted for imposing economic sanctions is being tested as a foundation for sweeping tariffs, with consequences that reach well beyond trade. Until the boundaries of emergency declarations and the powers they unlock are clarified, volatility will remain the defining feature of tariff policy—and, by extension, of the tax system itself.
