Earlier this year, President Donald Trump declared America’s persistent trade deficit a national emergency and used the International Emergency Economic Powers Act (IEEPA) to levy tariffs on nearly all United States (US) trading partners. Passed in 1977, IEEPA allows the president to regulate economic activity during a national emergency, giving the executive branch broad authority to act without waiting for Congress.

Tariffs are taxes on imported goods, typically calculated as a percentage of their value and paid by the importing companies.

The US trade deficit in goods and services stood at $122.7 billion in February 2025. At 3.9% of gross domestic product, the deficit has grown from 3.3% in 2023, reflecting rising imports amid strong domestic demand and a firm dollar.

While the US continues to post surpluses in services such as finance, technology, and travel, economists say the imbalance largely reflects a chronic gap between national saving and investment rather than any single trade policy.

Trump’s legal team argues that the tariffs could reduce the US deficit by $2.8 trillion over the next decade. But small businesses, several states, and the US Chamber of Commerce have challenged the measures, calling them unlawful and economically damaging.

“The irreparable harms already suffered by American businesses large and small underscore the vast economic consequences of the president’s tariffs,” the Chamber said in a statement.

The case began in April 2025 at the US Court of International Trade, which ruled a month later that many of the tariffs were illegal. Trump appealed, but the US Court of Appeals largely upheld the lower court’s decision. The Supreme Court hearing on November 5 will likely mark the final step in determining whether Trump’s use of emergency tariff powers was lawful.

As of 2025, the US government has collected roughly $165–195 billion in tariffs, more than doubling the previous year’s revenue. If the Supreme Court rules that the tariffs imposed under the emergency powers are illegal, a substantial portion of that revenue, potentially around $90 billion, could be refunded or eliminated, though tariffs enacted under other statutes would remain.

Trump has described the upcoming ruling as: “one of the most important decisions in the history of the country.” But even if the court rules against him, experts say he has other tools at his disposal.