Trump’s Trade Gambit in Legal Crossfire — How It Could Shake the US Economy

Tariff Update: President Donald Trump's bold tariff move has now made its way to the courts—and threatens to seriously impact the government's fiscal plan. Recent data show customs duties are set to reach $165–183 billion in fiscal 2025, providing a temporary reprieve for the Treasury, but an appeals court has questioned the legality of the move.

Court threat: Fear of refunds looms

A federal appeals court has cast doubt on the president's use of the IEEPA (International Emergency Economic Powers Act), and the case could go all the way to the Supreme Court. Treasury Secretary Scott Bessant has warned that if the court rules the ongoing tariffs illegal, the government could be forced to make massive refunds—a huge blow to the treasury.

Revenue surge—but will it last?

Tariff policies have led to a sharp jump in tariff revenue this year—data cited by Bloomberg and other reports show that customs collections in this sensitive year have risen significantly compared to last year. But economists say this income could be temporary, and the court's decision could dry up this source.

Economists worry: Deficit a big question

Experts estimate that tariffs could generate additional revenue of $300 billion or more annually—roughly 1% of US GDP—but it's also true that the federal deficit is currently above 6%. If the court strikes down tariffs, the government will have to rely on growth and productivity, and this could increase uncertainty in markets.

Effect on businesses: Companies' costs increased

Many US businesses are already feeling the burden of tariff hikes. Shipping and input costs have increased for some enterprises, which has affected production costs. Organizations like the Yale Budget Lab have warned that trillions of dollars in revenue could disappear over the long term if IEEPA-based tariffs are lifted.

Government options and way forward

The Treasury and the White House have a few options if the Supreme Court decision halts the tariffs—recasting policy using different legal powers (Sections 232, 301, etc.) or introducing new financial policies. Bessant has indicated that the administration is working on a backup plan, but experts say any alternative path could be complex and costly.