Several Supreme Court justices appeared skeptical Wednesday about the legality of President Donald Trump’s ability to impose sweeping tariffs, in a case partly brought by Vernon Hills-based companies Learning Resources and Hand2Mind.
Multiple lawsuits have been filed over tariffs with a case brought by a dozen states, including Illinois, and another from several small businesses such as Learning Resources and Hand2Mind, educational toy manufacturers run by the same fourth-generation family owners.
The groups are challenging Trump’s use of emergency powers outlined in the International Emergency Economic Powers Act of 1977, saying the act doesn’t even mention tariffs and no president before has used it to impose them.
Congress works with the president to set tariff policy “by authorizing the president to negotiate trade agreements and to adjust tariffs in certain circumstances,” according to the Congressional Research Service. But, in a first, the Trump administration argued that an emergency law allowing the president to regulate importation also includes imposing tariffs.
The arguments were about two sets of tariffs. The first came in February on imports from Canada, China and Mexico after Trump declared a national emergency over drug trafficking. The second involves the sweeping “reciprocal” tariffs on most countries that Trump announced in April.
Trump has made tariffs a central piece of his economic and foreign policy and said Wednesday it would be a “disaster” if the Supreme Court rules against him.
Three conservative justices raised questions about whether an emergency law gives Trump near-limitless power to set and change duties on imports.
The court’s three liberal justices also appeared dubious, so at least two conservative votes could limit Trump’s tariff power under the law. It likely would not end it altogether, however.
Chief Justice John Roberts raised questions about whether the emergency-power law allowed for tariffs on “any product, from any country, in any amount, for any length of time.”
Justice Amy Coney Barrett pressed the government on the broad range of Trump’s action. “Spain? France? I mean, I could see it with some countries but explain to me why as many countries needed to be subject to the reciprocal tariff policy.”
Although a ruling will likely take weeks or months, the case could be crucial for companies like Learning Resources, according to University of Illinois Chicago law professor Steven Schwinn.
“These tariffs are really debilitating for these businesses, and they have to make a hard choice,” Schwinn said. “Are they going to pass this on to consumers or eat part of it and have smaller profit margins that will make them extremely vulnerable going forward. This corporation, like so many, is in an extremely vulnerable position given the breadth and size of the tariffs.”
Learning Resources, the lead plaintiff in the lawsuit with 500 employees, has paid more than $14 million this year in tariffs, up from $2 million last year, according to a company spokesperson.
Learning Resources CEO Rick Woldenberg said in a statement: “We are grateful that the U.S. Supreme Court heard arguments today on this landmark case regarding the separation of powers. The issues raised in this case are of paramount importance to our country. … The IEEPA tariffs are a multi-trillion dollar tax on Americans, burdening the thousands of small- and medium-sized businesses, which make up the backbone of our economy. As three lower courts already have, we’re hopeful that the Supreme Court will uphold that the IEEPA tariffs are illegal.”
Schwinn said Trump may ultimately be able to impose tariffs by other means.
“It’s pretty likely that [Trump] has other authority under the Trade Act that would allow him to do much of what he’s already done, perhaps in a more circumscribed way,” Schwinn said.
He believes most corporations and small businesses are keeping a close eye on the case.
Among them are YouCopia, a Ravenswood-based maker of kitchen and organizational products that imports goods from China. Co-founder Lauren Greenwood felt hopeful after hearing of the justices skepticism on Wednesday.
“It does feel like even in the lead up to this case that there has been some pushback and momentum working against Trump and the administration on their tariff policy,” Greenwood said.
She said tariffs have forced the company to increase prices on consumers, and it expects less sales this holiday season.
“We’re fighting our way through. It certainly has not been easy,” Greenwood said.
Crystal Lake-based household goods company Widgeteer said tariffs forced the company to slow imports from countries like China, Taiwan and Brazil. And the import taxes were costly, founder Bill McHenry said.
The company weathered the financial hit by getting a few breaks from suppliers. It also raised prices, but as a result, sales have been down.
“It hasn’t been the greatest year. In January, we forecasted that we’d be 10% ahead of last year, but we were 90% off [because of tariffs],” McHenry said.
He said an attempt to diversify its sourcing away from China didn’t help.
“We had a container coming from India that we originally expected to pay a 3% tariff on, but while it was on the water, the tariff went up to 50%,” McHenry said. The sudden change meant taxes on $90,000 worth of goods ballooned from $2,700 to $45,000.
“It really hurt our cash flow,” he said.
Even if the Supreme Court rules against the Trump administration, McHenry said the president may still impose tariffs.
“My fear is that there will be another rule he can use, and it will just create more uneasiness,” he said. “American businesses are the ones paying for these tariffs.”
Contributing: AP