At the U.S. Supreme Court last week, the government’s lawyer argued that President Donald Trump’s emergency tariffs, issued under the International Emergency Economic Powers Act (IEEPA), aren’t really taxes at all. “The fact that they raise revenue is only incidental,” he told the Court. “The tariffs would be most effective … if no person ever paid them.”
That defense captures the problem with emergency economics: Tariffs that raise no revenue still raise uncertainty. They tax planning, investment, and trust. A tariff no one pays is self-defeating. It deters trade and investment without delivering even the limited fiscal benefit of real revenue. The result is slower growth, higher prices, and weaker supply chains.
Chief Justice John Roberts pressed that point, describing the government’s reasoning as “two-facing.” He noted that while tariffs may be tools of diplomacy, they are the “imposition of taxes on Americans,” one of Congress’, not the executive’s, core constitutional powers. The government’s attorney partly conceded, saying costs are “a mix,” paid by foreign producers and importers who “could be an American” or “a wholly owned American subsidiary of a foreign corporation.” He even said that “30 to 80 percent” of the burden falls on Americans.
That admission goes to the heart of the case. Washington calls tariffs leverage, but in practice they are taxes paid by the Americans the policy claims to defend. The costliest tariffs may be the threats and flip-flops that collect nothing. They show confusion, defer investment, and erode doubt about whether U.S. rules can be trusted from one administration to the next.
The case, V.O.S. Selections v. Trump, asks whether the president can use the IEEPA to impose sweeping import taxes on everything Americans buy from abroad. The statute was meant for genuine emergencies such as wars, hostage crises, or attacks on critical infrastructure, not as a permanent tariff power that bypasses Congress. What’s at stake is whether any president can raise taxes simply by declaring an “emergency.”
While economists are often accused of being out of touch, most agree with ordinary Americans on what counts as a tax. As Justice Sotomayor noted, “You want to say tariffs are not taxes, but that’s exactly what they are. They’re generating money from American citizens, revenue.”
Labeling them “regulatory,” as the government did in oral arguments, doesn’t change who pays or the instability they create. When U.S. importers face IEEPA tariffs of 10 percent or more, possibly rising to 100 percent overnight, they must either absorb the cost or pass it along. The government calls them tools for national security, but the money still comes from American producers and consumers.
In Southern California, where ports handle about 40 percent of U.S. container trade, these policies hit home. Emergency tariffs raise costs for every business that imports components, from aerospace suppliers in Orange County to small manufacturers in the Inland Empire. Importers post cash deposits with Customs, tying up capital they could otherwise use to expand or hire. Retailers pay higher prices for goods that take longer to clear.
Economic studies, including those cited in the economists’ amicus brief that I joined, show that Americans bear the vast majority of these costs.Recent research tracking 350,000 products shows how these effects appear in inflation data. The Consumer Price Index (CPI) inflation rate of 2.9 percent in August would have been about 2.2 percent without tariffs. Persistent inflation and uncertainty have already delayed expected Federal Reserve rate cuts.
The CPI captures averages, but the more visible effects appear in detailed data. Many imported goods are now more expensive or simply unavailable heading into the holiday season. The same research finds 5 to 13 percent increases on products Americans typically buy as gifts: clothing, glassware, tableware, furniture, tools, and household textiles. And if the dishwasher breaks the week of Thanksgiving, expect replacement parts to cost more, if they are even in stock.
Meanwhile, many goods on e-commerce platforms now carry tariff surcharges, revealing the complexity and confusion of emergency tariffs. These surcharges show how unpredictable the system has become for ordinary consumers as well as corporations, rippling through global supply chains and into household budgets. Ironically, eBay directs consumers to the same U.S. International Trade Commission page that large corporations use to check tariff rates — more than 10,000 in total, often with four separate emergency rates applying to one country.
Declaring “emergencies” as bargaining tactics only leads foreign partners to doubt U.S. commitments and causes firms to shorten their supply chains rather than risk future disruption. The United States has negotiated agreements with 20 countries without such leverage. My own research found those agreements act as insurance by anchoring expectations of market access and encouraging investment. When governments rely on improvisation rather than predictable rules, they slow growth and recovery when a real crisis hits.
If the Supreme Court strikes down the IEEPA tariffs, the result won’t be national collapse. Prices would fall modestly, certainty would improve, and Congress would reclaim its constitutional authority over trade. Ending emergency tariffs won’t make America weaker; it will restore the credibility that makes the U.S. economy strong in the first place.
Kyle Handley is professor of economics at the UC San Diego School of Global Policy and Strategy, an adjunct scholar at the Cato Institute, and director of the Center for Commerce and Diplomacy.