Bessent expects Supreme Court to uphold legality of Trump's tariffs but eyes Plan B

Bessent told Reuters he was preparing a legal brief for the U.S. solicitor general, who will oversee the government's appeal to the Supreme Court, that will underscore the urgency of addressing decades of trade imbalances and stopping the flow of deadly fentanyl into the United States.

A divided U.S. appeals court ruled on Friday that most of Donald Trump's tariffs are illegal, undercutting the Republican president's use of the levies as a key economic policy tool. The court allowed the tariffs to remain in place through October 14 to give the Trump administration a chance to file an appeal with the Supreme Court.

The 7-4 decision by the U.S. Court of Appeals for the Federal Circuit in Washington, D.C., addressed the legality of what Trump calls "reciprocal" tariffs imposed as part of his trade war in April, as well as a separate set of tariffs imposed in February against China, Canada and Mexico aimed at halting imports of fentanyl.

The court's decision does not affect tariffs issued under other legal authority, such as Trump's tariffs on steel and aluminum imports.

Trump justified both sets of tariffs - as well as more recent levies - under the 1977 International Emergency Economic Powers Act. IEEPA gives the president the power to address "unusual and extraordinary" threats during national emergencies.

"I'm confident the Supreme Court will uphold it - will uphold the president's authority to use IEEPA. And there are lots of other authorities that can be used - not as efficient, not as powerful," Bessent said. He spoke to Reuters during a visit to a diner in the Washington suburbs.

One of those authorities, he added, could be Section 338 of the Smoot-Hawley Tariff Act of 1930, which allows the president to impose tariffs of up to 50% for five months against imports from countries that are found to discriminate against U.S. commerce.

FENTANYL INFLUX

Bessent said the influx of deadly fentanyl, linked to some 70,000 deaths a year in the United States, was a legitimate reason to call an emergency.

"If this is not a national emergency, what is?" Bessent said, referring to thousands of drug overdoses linked to fentanyl. "When can you use IEEPA if not for fentanyl?"

He said the brief, to be submitted Tuesday or Wednesday, would focus on the idea that U.S. trade deficits with other countries had been expanding for years and were reaching a tipping point that could lead to far greater consequences.

"We've had these trade deficits for years, but they keep getting bigger and bigger," he said. "We are approaching a tipping point ... so preventing a calamity is an emergency."

Bessent noted that action by then-President George W. Bush on mortgages might have averted the global financial crisis of 2008-2009, which was triggered by excessive speculation on property values by both homeowners and financial institutions.

Bessent played down the notion that Trump's tariffs were bringing countries like Russia, China and India closer together, dismissing a China-hosted gathering in Shanghai of 20 leaders from non-Western countries as "performative."

"It happens every year for the Shanghai Cooperation Organization," he said. "It's more of the same. And look, these are bad actors ... India is fueling the Russian war machine, China is fueling the Russian war machine ... I think at a point we and the allies are going to step up."

He said the U.S. was making headway in convincing Europe to join Washington's crackdown on India over its purchases of Russian oil through a 25% additional tariff, but did not comment on whether the U.S. would use similar pressure on China.

China, he said, would struggle to find sufficient markets for its goods outside the United States, Europe, and other English-speaking countries. "They don't have a high enough per capita income in these other countries," he said.