Key Takeaways
- The Supreme Court is scheduled to hear at least two cases in its upcoming term that have major implications for the economy.
- One case will determine whether Trump’s far-reaching campaign to raise import taxes is legal.
- Another case will determine Trump’s ability to remove leaders at the Federal Reserve, and therefore the extent of his influence on the central bank’s monetary policy.
The Supreme Court is scheduled to hear at least two cases in its upcoming term that will have major implications for the economy.
The high court will decide the fate of the sweeping import taxes President Donald Trump imposed this year, and will determine his ability to influence the Federal Reserve, the U.S. central bank that plays a crucial role in the country’s financial system.
In addition to these, other potentially economically significant cases are being argued in lower courts. The Supreme Court could ultimately hear those cases, but they have not yet reached that stage.
For example, State Department vs. Aids Vaccine Advocacy Coalition concerns whether the president can cancel funding already appropriated by Congress. In that case, the Supreme Court issued a temporary injunction last week allowing Trump to cancel $4 billion in foreign aid, but said the temporary ruling was not final.
In the upcoming term, the court will hear oral arguments on mornings between October and June or early July, and then issue rulings and opinions explaining their reasoning as early as June.
How This Affects The Economy
Trump has sought to expand the executive branch’s power to reshape the economy. These Court rulings could permanently change the scope of America’s presidential power.
Tariffs
Many of President Donald Trump’s tariffs are at stake in the case of Learning Resources Inc. vs. Trump, which the court will hear on Nov. 5.
The case, brought by several companies that make educational products affected by the import taxes, challenges Trump’s authority to impose tariffs without Congressional approval. Specifically, the case challenges the tariffs imposed by Trump under the International Emergency Economic Powers Act. Those include his “reciprocal” tariffs, which are double-digit import taxes against most countries in the world, but not tariffs affecting specific products like steel and automobiles. UBS estimates about 75% of Trump’s tariffs were authorized by IEEPA.
The plaintiffs contend that the law Trump used to declare a trade “emergency” and impose the tariffs does not permit him to create new import taxes.
The case is unlikely to deal a death blow to Trump’s trade policies, since he could re-impose tariffs using powers granted by other laws, experts have said. However, it introduces yet another element of uncertainty into the chaotic trade wars. There is even a possibility that the administration would have to refund billions of dollars of tariffs already collected.
Invalidating the tariffs would “literally destroy the United States of America,” Trump posted on social media in August.
Control Of The Fed
Control of the Federal Reserve is at stake in the case of Cook vs. Trump, which will determine whether the president can fire a member of the seven-person board that controls the central bank.
In August, Trump sought to fire Cook, who former President Joe Biden had appointed to serve a 14-year term as a Fed governor. Trump said he was dismissing Cook because of an allegation that she listed two houses as her primary residence on a mortgage application she submitted before she was on the Fed. Cook has disputed the accusation, as well as Trump’s authority to remove her from the Fed.
In October, the court sided with Cook for the time being, allowing her to stay on the job at least until January, when the Supreme Court will hear oral arguments as to whether Trump is firing Cook for a legitimate “cause” as the law requires.
The Fed is, by design, not meant to be controlled by any sitting president. Its members serve long terms and are appointed by the president at staggered intervals, so usually, no commander in chief can nominate more than a handful during their time in office.
The Fed was intended to be independent from the President so it can make decisions about the nation’s monetary policy with the good of the economy in mind, rather than the short-term popularity of the president. The Fed is tasked with controlling inflation by adjusting its benchmark fed funds rate, which sets the rate at which banks borrow money from one another, and influences borrowing costs on all kinds of loans.
The Fed typically keeps interest rates high to counteract inflation, and lowers them when the economy is slowing down and needs a boost. Numerous policy experts and economists have warned that the Fed’s independence from the White House is critical to its ability to control inflation. Otherwise, presidents may be tempted to cut interest rates too much, giving the economy a short-term sugar rush at the risk of setting off high inflation.
Trump has pushed the Fed to sharply lower interest rates, but Fed policymakers have taken a more cautious approach.
If Trump wins this case, it will be much easier for him to put compliant board members on the Fed, which makes its decisions by a vote of a 12-member committee. That could mean lower interest rates and higher inflation down the road.
