The Trump administration is trying to pick up the pieces of its global tariff agenda after a major Supreme Court rebuke this term. That might not be as easy as administration officials hoped, judging by Thursday’s ruling from the U.S. Court of International Trade that the president’s substitute border taxes are also illegal.

The Supreme Court ruled 6-3 in February that the president lacked authority under the International Emergency Economic Powers Act of 1977 to impose unlimited tariffs on a whim. He responded by invoking a new authority, Section 122 of the Trade Act of 1974, to replace the taxes the court had struck down.

No dice, the trade court said in a 2-1 decision. Section 122 authorizes the president to impose a tariff of up to 15 percent for up to 150 days to address “large and serious United States balance-of-payments deficits.” The two judges in the majority, both appointees of President Barack Obama, said the trade deficits that preoccupy President Donald Trump don’t qualify as balance-of-payments deficits under the meaning of Section 122.

It’s a somewhat technical distinction. The U.S. has a trade deficit because it imports more than it exports. Balance of payments is a broader measure capturing all flows of capital and money in and out of the U.S.

That measure had a greater significance in the mid-20th century. Back then the U.S. dollar was pegged to gold, and foreign currencies were pegged to the U.S. dollar. The supply of gold was limited, so too many dollars flowing out of the United States threatened the international financial system.

President Richard M. Nixon imposed temporary tariffs in 1971 to address this. Congress wrote the 1974 law with Nixon’s action in mind. But now the gold standard is gone and the dollar “floats” against other currencies. That means the flow of money in and out of the U.S. equalizes on its own. “It is unlikely,” the majority opinion says, “that ‘large and serious balance-of-payments deficits’ within the meaning of Section 122 could occur today.”

The dissenting judge, appointed by President George W. Bush, would give the president more leeway to define what constitutes a balance-of-payments deficit under modern financial conditions. Trade deficits are at least a part of the country’s balance of payments.

How much leeway should a president get in deciding when and how much to tax Americans? The Constitution gives Congress alone the power to levy taxes, and that’s a crucial check on the power of government. The court in this case took a strict reading of the law Congress passed.

On appeal, some judges might be inclined to a more flexible reading. Regardless, the legal gap between the Trump administration and tariffs plaintiffs is shrinking. With his “Liberation Day” tariffs, Trump claimed virtually unlimited power to impose tariffs of any amount and for any duration based on a law that didn’t even mention tariffs.

The law now in question specifically contemplates tariffs, and Trump concedes that it limits his tariff power to 150 days at a 15 percent rate. Lawyers are merely debating a specialized economic term — balance of payments — to decide whether the conditions for tariffs have been met.

Whatever happens on appeal, the trade court’s ruling should go into effect immediately. In the tariffs litigation beginning in 2025, Trump lost at every stage, but the rulings were stayed until the Supreme Court could weigh in this year. That meant the duties stayed in effect for months longer than necessary, leading to more economic distortion and larger refunds.

The price increases from tariffs have damaged Trump politically. He campaigned in 2024 on lowering prices, but he won’t back off this key part of his economic agenda. Perhaps some of his political advisers secretly hope that the courts will hold the line.

— Washington Post