As the US Supreme Court heard oral arguments in the case challenging Donald Trump’s sweeping use of emergency tariffs, there were a few things that seem to be getting clearer after the nearly three-hour hearing in Learning Resources v. Trump — the case challenging the legality of Trump’s tariffs.One, that most of the nine justices, given their sharp questioning, seem to doubt the legality of the imposition of these tariffs for one reason or another. An adverse verdict could potentially have major knock-on implications for the American president’s tariff agenda and global trade.Two, the measures being challenged by a number of small businesses and a group of American states, which have raised the contention that the president has overstepped his authority in imposing the levies, seem to have some basis. Trump has increasingly taken an expansive view of presidential power, given that he likes pushing the limits on everything. This, however, poses some pertinent legal questions when it comes to tariffs, since under the American constitution, the US Congress has the right to impose taxes. So, the key question here is: are tariffs tantamount to a tax and, consequently, are Trump’s tariffs legal? The early line of questioning by the judges seems to suggest that they think tariffs are clearly taxes, which are paid by American businesses and citizens.Third, the International Emergency Economic Powers Act (IEEPA), passed way back in 1977, has been broadly interpreted as according US presidents some emergency powers. But do the reasons cited by John Sauer, the US solicitor-general, before the judges as grounds for invocation of these tariffs under IEEPA – addressing the fentanyl crisis and tackling trade deficits – constitute a genuine emergency trigger. The fentanyl crisis, for instance, has impacted the US for the better part of the last couple of decades while America has had a trade deficit with most trading partners since the late 1970s. So, where’s the emergency trigger? The broad inference after the oral hearing seems to be that there could be an element of executive overreach in the use of IEEPA.First big legal testAmerica’s top court – which has a 6-3 conservative majority – usually takes several months to reach a decision in big cases, but the expectation is that SCOTUS will move faster in this case, which is also seen as the first major test of the Trump administration’s push to expand presidential power. This is seen as his first big showdown with the American judiciary, even though Trump did face a pushback last month when the US SC allowed Lisa Cook — one of the members of the Board of Governors of the Federal Reserve System — to continue in her job for at least a few months until it heard arguments in a case over whether the President can sack her.On the tariffs issue, while all three liberal judges — Justices Ketanji Brown Jackson, Sonia Sotomayor and Elena Kagan — expressed clear signs of scepticism, the big concern for Trump is that three conservatives too have openly expressed some doubts. Justice Amy Coney Barrett pushed Sauer to name “any other time in history” when the salient phrase in IEEPA, allowing a president to “regulate…importation”, was inferred as referring to tariffs. Justice Neil Gorsuch countered Sauer’s assertion that the ‘major-questions doctrine’– a US legal principle stating that if an agency action has major economic or political significance, it must be based on “explicit and clear” authorisation from the US Congress and not just a broad or implied delegation of power – does not apply in the context of foreign affairs. Both Barrett and Gorsuch were appointed to the US top court by Trump in his last term. Chief Justice John Roberts too alluded to the American top court’s general disinclination to clear executive actions that have not been expressly authorised by US Congress and, during the course of his questioning, asserted that that it may be quite a stretch for the President to assume that the law (IEEPA) entitles him to levy tariffs “on any product, from any country, in any amount, for any length of time”. The other three conservative justices—Samuel Alito, Brett Kavanaugh and Clarence Thomas—seemed more accommodative of Sauer’s arguments in defence of Trump’s tariffs.Story continues below this adThe White House’s justification for these import tariffs, especially the so-called reciprocal tariffs, has been that they are necessary to restore America’s manufacturing base and fix its trade imbalance. And that it is in the realm of foreign policy and there is the need for emergency action. Trump’s legal case really hinges on this idea that the IEEPA, which he has invoked for the so-called reciprocal tariffs, allows him to undertake a huge range of actions against foreign powers. The consistent line of arguments by Sauer seems to be that IEEPA confers major powers to the US President, and that he is the most major actor in the realm of foreign affairs, and not any other player (implying the US Congress).The counter from Neal Katyal, an Indian-American attorney who is among those arguing against President Trump’s authority to impose sweeping tariffs under IEEPA, is a firm reiteration of tariffs being taxes and that America’s founding fathers gave that taxation power to the US Congress alone. And in this case, President Trump has effectively “bypassed Congress and imposed one of the largest tax increases in our lifetimes”. What could be slightly tricky for the administration is that Trump himself has often used the words tariff and tax interchangeably.While, generally speaking, American courts have placed more deference to the US President when the actions are in the realm of foreign affairs, there is a clear judicial view that the power to tax and impose duties is unquestionably with the US Congress. That’s what Chief Justice Roberts alluded to.At the end of the nearly three hour hearing, given that a majority of the Supreme Court justices appeared skeptical about the legality of Trump’s tariffs, they might, in a few weeks or months, move to strike them down, as every lower American court has done so far. Three lower courts had earlier ruled against the Trump administration on this issue: the case was first heard in the US District Court for the Northern District of Illinois, which in April rejected the government’s argument; the US Court of International Trade in June also held that IEEPA does not authorise the president to levy general tariffs; and the US Court of Appeals for the Federal Circuit in August ruled that Congress had never delegated such sweeping authority to the executive branch. Trump’s other legal options Story continues below this adIf that same trend were to unfold in the SC, the Trump administration has predicted “a catastrophe”. Eliminating all the tariffs could knock the overall effective rate from nearly 18 per cent currently to about 9 per cent, according to the Yale Budget Lab. But if Trump were to lose the IEEPA authority, chances are that the US administration could probably use Section 122, a provision allowing the president to impose tariffs of up to 15 per cent for up to 150 days. The United States Trade Representative and the US Department of Commerce could resort to Section 301 and Section 232, which grant the American president the ability to slap focused tariffs on targeted countries and select industries. Recent levies on aluminium and steel and other sectors have been issued through Section 232.The outcome of the case could have some consequences for the multiple trade deals signed by the US since early this year, as well as for India, which is currently the hardest-hit alongside Brazil due to 50 per cent cumulative tariffs. India’s shipments to the US, its largest export destination, fell 12 per cent in September, and exporters have been seeking relief measures.“If the Supreme Court strikes down Trump’s use of emergency powers, forcing the withdrawal of his ‘Liberation Day’ tariffs, the ruling would reverberate far beyond US borders. The decision would unravel the foundation of several recently negotiated trade arrangements with key partners such as the EU, Japan, South Korea and the UK—all of which were struck under the shadow of those tariffs and premised on reciprocal concessions. It would also disrupt ongoing talks with India, where tariff leverage has shaped Washington’s negotiating position,” Delhi-based think tank GTRI said in a report.Story continues below this adAlso, if the US administration were to lose the case and the reciprocal tariffs will be declared invalid, the Trump administration will have to initiate refunds to the tune of $100 billion to US importers. According to an estimate by PwC, total tariff collections by the end of October stood at $108 billion, with China having the biggest share at $34 billion. In the case of India, the comparable figure stood at $487 million, according to PwC estimates. “If the Supreme Court strikes down the Trump administration’s IEEPA tariff scheme entirely, the decision could declare the challenged tariffs invalid, requiring US Customs and Border Protection to cease collection and unwind the existing tariff structure. At the same time, importers could face the complex question of how to obtain refunds, as invalidation of the IEEPA tariffs may open the door to potential reimbursement of tariffs paid,” PwC said in a report.