If the Supreme Court Nixes Trump’s Tariffs, Could a Carbon Duty Save Him?

Donald Trump’s administration may soon discover that trade wars are easier to start than to sustain, let alone win. Any day now, the Supreme Court is expected to rule on the legality of Trump’s “Liberation Day” tariffs. Issued in April, the sweeping tariffs on allies and adversaries shook markets and, while Trump eased some of them, he still insists that they are necessary to address market abuses and trade deficits.  

He used the International Emergency Economic Powers Act (IEEPA) to justify his actions. The president took advantage of the law’s broad authority to regulate international economic transactions during a declared national emergency. But lower courts have found that Trump overstepped his authority by wielding IEEPA as a general tariff statute, and the Supreme Court, which has sided with Trump in any number of cases involving executive authority, seems likely to balk at this bit of audaciousness. At oral arguments in November, conservative and liberal justices expressed skepticism that the law permits the president to tax imports at will.  

A ruling against Trump would not only vindicate Congress’s authority over tariffs but also force the administration to look elsewhere to build a legal scaffolding to support its tariffs. Treasury Secretary Scott Bessent has stated that if a loss occurs, the administration has options under Section 301 of the Trade Act of 1974 and Section 232 of the Trade Expansion Act of 1962. Even Section 122, a rarely used balance-of-payments statute, has been floated. But the administration’s aversion to all things green is closing its eyes to a precise and durable bipartisan tool for protecting U.S. industry and getting the president out of his legal jam: carbon tariffs. 

Section 301 of the Trade Act of 1974 is the most obvious fallback. It authorizes the executive branch to impose tariffs in response to unfair foreign trade practices, including intellectual property theft, forced technology transfer, and discriminatory regulations. Trump relied heavily on Section 301 during his first term to justify levies on Chinese imports, and Joe Biden’s administration retained those duties after completing the statute’s required four-year review.  

Section 232 of the Trade Expansion Act of 1962 is another familiar instrument. It allows the president to restrict imports that threaten U.S. national security, a concept Trump stretched to cover steel and aluminum in 2018. President Biden didn’t dismantle the Trump-era Section 232 regime. Instead, his administration converted tariffs on major allies into tariff-rate quotas, leaving the underlying authority intact. 

Section 122 of the Trade Act of 1974 is rarely used. It authorizes the president to impose temporary across-the-board tariffs or quotas to address balance-of-payments emergencies, such as when the U.S. can’t pay for imports or when the dollar’s value collapses. The primary example is President Richard Nixon’s 10-percent import surcharge during the 1971 “Nixon Shock,” a response to monetary instability. But today’s trade deficits bear little resemblance to that crisis, making Section 122 legally fragile.  

While these actions offer a framework for sustaining Trump’s policies and addressing U.S. trade challenges, they do nothing to address a key disadvantage for the U.S.: carbon-intensive production abroad, uneven environmental standards, and industrial competition distorted by pollution. That is precisely why carbon border adjustment mechanisms stand out as a fundamentally overlooked answer to the trade issues ailing the U.S.  

On Capitol Hill, a broad coalition of lawmakers has floated carbon border adjustments to address foreign trade abuses. Several bills in Congress would allow the U.S. to implement such a trade regime. Two Democrats, Senator Chris Coons and Representative Scott Peters, introduced the FAIR Transition and Competition Act to levy a fee on carbon-intensive imports such as steel, cement, aluminum, and fossil fuels. By imposing tariffs on dirty imports, the bill aims to “level the playing field for U.S. manufacturers.” Additionally, the FAIR Act “stops short of imposing a domestic carbon tax,” focusing only on imports, to protect U.S. firms without hiking costs on American-made goods.  

It’s not only Democrats pushing carbon border policies. Republican lawmakers have advanced proposals, most notably Senator Bill Cassidy’s Foreign Pollution Fee Act. Introduced in late 2023, it would impose carbon-based fees on a wide range of imported products, from aluminum and fertilizer to fuels, based on the emissions gap between foreign producers and U.S. benchmarks. Notably, the proposal avoids any new domestic carbon tax, framing the policy as a penalty on foreign polluters. 

This growing bipartisan recognition that unpriced pollution distorts trade and disadvantages U.S. industry suggests that carbon border adjustments could be a rare area of consensus, particularly as competition with carbon-intensive industrial exporters intensifies. Watching the Supreme Court gut its tariff regimen might just be enough to get the Trump administration to take carbon-related tariffs seriously.

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