Learning Resources, Inc. v. Trump, President of U.S.

President Trump's administration argued that the International Emergency Economic Powers Act (IEEPA) gives the president the authority to set tariffs by declaring a national emergency. Challengers, including the company Learning Resources, claim this is an unconstitutional overreach, arguing that only Congress has the power to tax. The conflict centers on whether the law's phrase allowing the president to "regulate... importation" is a broad enough grant of power to include tariffs, which function as a tax on goods.

The government contends that tariffs are a classic tool of foreign policy and a form of regulation. They claim it would be illogical for Congress to grant the President extreme powers like a total trade embargo but withhold the more moderate tool of a tariff. During arguments, Justice Elena Kagan pushed back on this, framing the issue around the separation of powers. She described setting tariffs as a "quintessential" power of Congress under Article I of the Constitution and questioned what independent presidential power could justify such a move.

The challengers counter that Congress never delegates its core taxing power without using extremely clear and specific language, which they argue IEEPA lacks. The case forces the Supreme Court to decide if a broad statute aimed at foreign emergencies can be used to fundamentally alter the constitutional balance of power between the President and Congress on major economic issues.

This apparent contradiction was raised by Justice Brett Kavanaugh, who called it an "odd donut hole" in the law. He challenged the lawyer for Learning Resources, asking why a "rational Congress" would authorize the President to take the drastic step of a full embargo but not the more flexible, lesser step of imposing a 1% tariff. This question captures the core of the government's argument: that the power to "regulate importation" must logically include tariffs to avoid an absurd result.

In response, the attorney for Learning Resources, Mr. Gutman, offered a memorable retort: "It's not a donut hole; it's a different kind of pastry." His point was that banning trade and taxing trade are not merely different degrees of the same power—they are fundamentally different kinds of powers. An embargo is a tool of prohibition, while a tariff is a form of taxation. He argued that the International Emergency Economic Powers Act (IEEPA) authorized the former but not the latter, as the power to tax is one Congress guards closely and did not implicitly give away.

This concern was articulated by Justice Neil Gorsuch, who warned of a "one-way ratchet" that transfers power permanently from the legislative branch to the executive. He argued that once Congress delegates a significant power to the President, it becomes nearly impossible to take it back. A President who benefits from that power can simply veto any bill Congress passes to reclaim it, requiring a two-thirds supermajority to override—a high bar in a polarized political climate.

This argument looks beyond the specific text of the International Emergency Economic Powers Act (IEEPA) to the long-term structural consequences of the Court's decision. Justice Gorsuch's point is that power, once given to the executive, tends to stay there, progressively weakening Congress's role as envisioned by the Constitution. He views this potential ruling as a dangerous step toward concentrating too much economic and foreign policy authority in the hands of a single person.

The government's position is that this is a political problem for Congress to solve, not a legal one for the courts. They argue that Congress wrote a broad law and if they dislike how a president uses it, they retain the power to amend or repeal it. The "ratchet" concern, however, suggests that the practical reality of politics makes it much harder for Congress to claw back power than to give it away in the first place.

This exact question of where the line is drawn was a central focus of the Supreme Court's hearing. Justice Sonia Sotomayor posed a pointed hypothetical about whether a president could use a "foreign-facing" threat like global warming to enact what is essentially a domestic policy, thereby bypassing Congress. This highlighted the fear that a broad interpretation of the International Emergency Economic Powers Act (IEEPA) would give presidents a powerful tool to achieve their policy goals without legislation.

The government’s lawyer, Attorney Sauer, provided a crucial and potentially damaging answer to a similar question from Justice Gorsuch. When asked if a president could impose a tariff on gas-powered cars to fight climate change, the lawyer conceded, "It's very likely that that could be done." This admission seemed to confirm the fears of several justices that the government’s legal theory contained no meaningful limiting principle.

This exchange revealed the high stakes of the case. A decision in favor of the President could empower future administrations to use the declaration of a foreign-related emergency as a pretext for implementing sweeping economic, environmental, or social policies. Challengers argue this would undermine the democratic process by allowing the President to unilaterally make laws that are constitutionally reserved for Congress.

The government argues that the tariffs it imposed under the International Emergency Economic Powers Act (IEEPA) are not taxes in the traditional sense. Instead, they are "regulatory tariffs" intended to pressure other countries to change their behavior on issues like trade imbalances. The goal, they claim, is not to raise revenue for the U.S. government but to achieve a foreign policy objective. The government’s lawyer argued a regulatory tariff is most successful when it collects zero dollars, because this would mean the foreign nation has already changed its harmful policies.

Under this view, the tariff is a legitimate tool for regulating foreign commerce, a power granted to the President by IEEPA during a national emergency. It falls under the President’s broad authority in foreign affairs, not Congress's exclusive power to lay and collect taxes found in Article I of the Constitution.

Challengers, like the company Learning Resources, reject this distinction. They argue that regardless of its stated purpose, a tariff functions as a tax on American businesses and consumers who import goods. They maintain that the Constitution does not make a distinction between "regulatory" and "revenue-raising" tariffs; the power to set their rates and decide which goods they apply to is a core legislative function. Allowing the President to relabel a tax as a regulatory tool, they warn, would create a loophole allowing the executive branch to usurp one of Congress's most fundamental powers.