This transcript has been edited for clarity.

David D. Stewart: Welcome to the podcast. I'm David Stewart, editor in chief of Tax Notes Today International. This week: Tariffs go to the Court.

The tariffs the Trump administration imposed under the International Emergency Economic Powers Act, or IEEPA, have had their highly anticipated day in Court. On November 5 the Supreme Court heard oral arguments in both cases under consideration: [Trump v. V.O.S. Selections] and Learning Resources Inc. v. Trump.

So what did we learn from the almost three-hour session? Tax Notes managing legal reporter Caitlin Mullaney joins us now to discuss the arguments and the justices' reactions. Caitlin, welcome back to the podcast.

Caitlin Mullaney: Hi, Dave. Thank you so much for having me on again. Last week was my first time ever going to the Supreme Court, and it was quite an interesting one, to say the least.

David D. Stewart: Well, let's start off with setting a baseline of the background. What happened that brought these cases to the Supreme Court?

Caitlin Mullaney: Absolutely. The basis for the cases were five executive orders that were issued by President Trump earlier this year, beginning in February. In these orders, he invoked the International Emergency Economic Powers Act, or IEEPA, that you previously mentioned, to impose tariffs on a lot of imported goods. The statute authorizes the president to regulate importation or exportation to deal with an external threat to the United States' national security, foreign policy, or economy, and a national emergency has also been declared. The crux of this case is whether the language of that statute includes authorization for the president to impose tariffs as he did.

The Supreme Court agreed to take up the case at the beginning of September on an expedited review after the Trump administration filed a petition for review of the U.S. Court of Appeals for the Federal Circuit's decision that Congress had not delegated the power to tariff to the president in the statute.

I think going into the hearings, it definitely felt like the wind was blowing against the favor of the government, and that hasn't changed following the arguments. I believe, actually, the last I checked, there was less than a 25 percent chance of the Supreme Court ruling in favor of the tariffs.

David D. Stewart: Well, let's get into that. Let's talk about what we heard from the Court at the oral arguments. What really did they focus in on?

Caitlin Mullaney: Yeah, it was a really interesting vibe in the room. Coming into it, there were actually rumors that Trump might make an appearance at the oral arguments, which obviously did not happen, making it a lot easier for security for those of us that did attend. However, we did see Secretary of Commerce Howard Lutnick and Secretary of Treasury Scott Bessent and a few other congresspeople in the gallery.

A fun fact: John Mulaney was randomly also in the gallery. He was allegedly there for research on a show that he is doing with Neal Katyal, the attorney representing the private businesses in the arguments.

Turning to the bench, overall, I would say the justices seem skeptical of the administration's argument that the power to tariff has been delegated to the president, presented by U.S. Solicitor General D. John Sauer. Sauer's main argument that was continuously repeated was that the phrase "regulate importation" in IEEPA plainly embraces tariffs, which are among the most traditional and direct methods of regulating importation.

We also saw Sauer contend that the major questions doctrine does not apply in this case for the commonsense reason that Congress would confer major powers on the president to deal with major foreign diplomatic emergencies. This point was particularly contentious with Justice Sotomayor, who questioned Sauer's argument's reliance on inherent Article II powers, whereas the power to impose tariffs is a quintessential taxation power that has not been delegated.

Later, Chief Justice Roberts brought it back to the major questions doctrine, questioning why it did not apply to the administration's argument. And you will now hear that exchange.

Chief Justice John Roberts: Counsel, sometime ago you dismissed the applicability of the major questions doctrine, and I want you to explain that a little bit more. I mean, it seems that it might be directly applicable. You have a claim source in IEEPA that had never before been used to justify tariffs. No one has argued that it does until this particular case.

Congress uses tariffs in other provisions but not here, and yet — and correct me on this if I'm not right about it — the justification is being used for power to impose tariffs on any product from any country, in any amount, for any length of time. I'm not suggesting it's not there, but it does seem like that's major authority, and the basis for the claim seems to be a misfit. So why doesn't it apply again?

Caitlin Mullaney: The major questions doctrine also came up later in the arguments when Justice Gorsuch questioned Katyal, the representative for the private companies, as to whether they needed it to have a success of their argument. And that clip is incoming now.

Justice Neil Gorsuch: The Constitution says that Congress gets to regulate commerce and everybody understood that that meant and included the power to tariff. Story, Madison. Okay. So that's sort of a problem, right? Regulate is a capacious verb. And then you've got the "otherwise" language as well, which we've sort of discussed. And just on the plain language, forget about the backdrop of major — do you need major questions to win? I kind of think you might.

David D. Stewart: So there's a lot of discussion here about tariffs and like a regulatory power. Was there any discussion about the nature of the tariffs and the revenue-raising aspect of that, whether it's a tax or something different?

Caitlin Mullaney: There actually was a good amount of conversation about whether tariffs should be considered taxation. That was actually the lead for Katyal's argument going into it, that tariffs are essentially taxation: It is a charge to the American people and to American businesses.

At one point, it was actually questioned by Justice Barrett to Katyal on what the reimbursement scheme would look like if his argument was successful. I thought that was interesting, not only that she was questioning that, but that she would ask him to create the argument. So I definitely think that plays to the skepticism of the conservative justices that was present on the Court that day. And going back to delegation, that was a big principle as well for Katyal's argument, was that this was just a power that was never delegated to the president.

This goes back to Justice Gorsuch's questioning of Sauer about the delegation powers and Congress's delegating powers to the president and basically how it's a one-way street: You're never getting those powers back. Yes, Congress technically can take powers back, but they're not going to. A president is not going to give back powers to Congress, which would be included in that process. And where does the line draw? How much power goes to the president and how much is delegated?

And that was a lot of his skepticism showing with the questioning, in that the delegation — which is the argument present in this case — in that delegation has been given to the president through IEEPA and he has the power to tariff.

Justice Neil Gorsuch: You say that we shouldn't be so concerned in the area of foreign affairs because of the president's inherent powers. That's the gist of it, as I understand it, why we should disregard both major questions and nondelegation. So could Congress delegate to the president the power to regulate commerce with foreign nations as he sees fit, to lay and collect duties as he sees fit?

Solicitor General D. John Sauer: We don't assert that here. That would be a much harder case. Now, in 1790 —

Justice Neil Gorsuch: Isn't that the logic of your view though?

Solicitor General D. John Sauer: I don't think so, because we're dealing with a statute that was a carefully crafted compromise. It does have all the limitations that I just talked about —

Justice Neil Gorsuch: But you're saying we shouldn't vote because we shouldn't be concerned — I want it explained to me how you draw the line, because you say we shouldn't be concerned because this is foreign affairs and the president has inherent authority, and so delegation off the books, more or less, and if that's true, what would prohibit Congress from just abdicating all responsibility to regulate foreign commerce — for that matter, declare war — to the president?

Solicitor General D. John Sauer: We don't contend that he could do that. If it didn't —

Justice Neil Gorsuch: Why not?

Solicitor General D. John Sauer: Well, because we're dealing with the statute, again, that has a whole —

Justice Neil Gorsuch: I'm not asking about the statute. General, I'm not asking about the statute, I'm asking for your theory of the Constitution and why the major questions and nondelegation, what bite it would have in that case.

Solicitor General D. John Sauer: Yes, I would say by then you would move from the area where there's enormous deference to the president, actually both the political branches, where here there's inherent authority, and piled on top of that there's a broad delegation. You'd be —

Justice Neil Gorsuch: You're saying there's inherent authority in foreign affairs, all foreign affairs? So regulate commerce, duties, and tariffs, and war. It's inherent authority all the way down, you say. Fine. Congress decides tomorrow, "Well, we're tired of this legislating business. We're just going to hand it all off to the president." What would stop Congress from doing that?

Solicitor General D. John Sauer: That would be different than a situation where there are metes and bounds, so to speak. It would be a wholesale application —

Justice Neil Gorsuch: But you say we are not here to judge metes and bounds when it's the foreign affairs. That's what I'm struggling with. You'd have to have some test, and if it isn't the intelligible principle test or something with more bite than that, you're saying it's something less. What is that less?

Solicitor General D. John Sauer: I think what the Court has said in its opinions is just that it applies with much less force, more limited application in this context. So perhaps the right way to approach it is a very, very deferential application of the intelligible principle test, that sort of wholesale abdication of —

Justice Neil Gorsuch: Alright, so now you're admitting there is some nondelegation principle at play here, and therefore, major questions as well. Is that right?

Solicitor General D. John Sauer: It's still very limited. Very, very deferential, limited, is what — and again, the phrase that Justice Jackson uses, it just does not apply, at least —

Justice Neil Gorsuch: I know, but that's where you started off, and now you've retreated from that as I understand it.

Solicitor General D. John Sauer: Well, I think we would, as our front-line position, assert the stronger position, but if the Court doesn't accept it, then if there is a highly deferential —

Justice Neil Gorsuch: Can you give me a reason to accept it though? That's what I'm struggling and waiting for. What's the reason to accept the notion that Congress can hand off the power to declare war to the president?

Solicitor General D. John Sauer: Well, we don't contend that. Again, that would be —

Justice Neil Gorsuch: Well, you do. You say it's unreviewable, there's no manageable standard, nothing to be done. Tell me if I'm wrong, you've backed off that position.

Solicitor General D. John Sauer: Maybe that's fair to say.

Justice Neil Gorsuch: Okay.

David D. Stewart: So what did the government emphasize in their case trying to support the idea that this power does belong to the president?

Caitlin Mullaney: Sauer's main argument was that the power to tariff is included in that power of regulation. He harped very strongly on the language in IEEPA that it was to regulate importation and exportation and that the only way that those can be regulated is through the tariffs. He brought up a formal case with [President] Nixon where [Nixon] applied a licensing fee as a regulation tactic, and that was one that he basically was saying there is no difference.

And later, coming up, Katyal, his argument was, it's just not in the language. The language of the statute does not include tariffs, and if Congress wanted them to, they would.

So one interesting thing is, Sauer, he makes very light of the revenue-raising aspect of a tariff. He, basically in defense of the administration's component of it, that it doesn't matter that these are revenue-raising and that the revenue is coming from American citizens and American businesses. So he kind of lowered that.

Another point of skepticism came from, actually, Justice Barrett, and she asked whether there were any other places in the code or any other time that he could think of the term "regulate importation" being used to confer a tariff-imposing authority. The only two examples that he could provide were the Trading With the Enemy Act of 1917, which eventually morphed into IEEPA, and was also interpreted by [United States v. Yoshida International, Inc.], which was the predominant case that he used for the basis of his argument. And you can actually hear [Justice] Alito pushing back on that position in this upcoming clip.

Justice Samuel Alito: The [Court of Customs and Patent Appeals] said things in Yoshida that are helpful to your position, but it also said some other things. It said that future surcharges "must of course comply with section 122 of the Trade Act of 1974," and it said that the Trading With the Enemy Act did not authorize the president to "fix rates of duty at will without regard to statutory rates prescribed by Congress." So do you think that, to the extent Congress had that decision in mind and relied on it, do you think it also relied on those statements in the opinion?

David D. Stewart: Is it a bit inconsistent, the position that Sauer is taking in front of the Supreme Court that the revenue is not a major factor in this, while at the same time the administration is making a very large deal about it in public that the revenue being raised by these tariffs is going to do many things?

Caitlin Mullaney: It's actually an extremely inconsistent opinion, and it's one that has been brought up by the businesses and the states that are going against these tariffs. And one that continues to go after the arguments have already taken place, and the effect that not having these revenues would have when there wasn't supposed to be a benefit of the revenue that they were raising.

David D. Stewart: So what sort of arguments did we hear from Learning Resources and the states challenging these tariffs?

Caitlin Mullaney: We heard a number of arguments, far fewer arguments than we heard from the administration, but arguments that, from the questions given by the justices, seemed to hold a lot more water.

The main one that came from Katyal, who was, as I said, speaking for the private businesses, was the one that he opened his argument with — that tariffs are a tax. They are paid by the American people, they are paid by American businesses, and that power has not been delegated to the president by Congress under IEEPA. And those executive orders should be rescinded because they are now illegally raising revenue from American people, and that is money that they should not be paying.

Another case that we saw brought up by both Justice Barrett and Justice Kavanaugh was the [Federal Energy Administration v. Algonquin SNG, Inc.] case. In that case, the Court held that the president was allowed to regulate commerce through a license fee. Katyal argued back with that, that he was not allowed to regulate through a license fee, but rather a license. And that was the difference, similar to here, because a license fee becomes revenue-raising, whereas just a license allows for regulation. And you can hear some of Kavanaugh's back and forth in this upcoming clip.

Justice Brett Kavanaugh: Your argument here is that the statute has to use the word tariffs, I think basically, and we went through Nixon and Yoshida. But then Algonquin, the statute for [section] 232 does not use the word "tariffs," it uses "adjust imports." And President Ford had imposed, again, a pretty significant tariff on oil imports.

It was challenged, it got to this Court. The attorneys standing where you are stood up and said, "The license fee now before the Court involves the broadest exercise of the tariff power in the history of the American republic. In fact, we would have to go back to George III's stamp tax to determine as broad an executive power as claimed in this case. The statute is a simple one. It does not mention the tariff on its face." The argument there was, the word "tariff" was not mentioned. Used "adjust imports."

The Court, obviously 9-0, rejects that argument, in part because as others have pointed out, the Court does a lot of questioning, what's the difference between a quota and a tariff? And what's the difference between an embargo and a tariff? And so when the Court writes the opinion, it says, "We find no support in the language of the statute," the language, "for respondent's contention that the authorization of the president to adjust imports should be written to encompass only quantitative methods, i.e., quotas, as opposed to monetary methods, i.e., license fees of effecting such adjustments." So on your basic point that you need the word "tariff," Algonquin says you don't need the word "tariff."

David D. Stewart: So as I understand it, they got pretty deep into the weeds on the terminology being used here, licensing, license fees. So what really became of that?

Caitlin Mullaney: Yes, similar to the license, license fees, there was a lot of discussion about language. Earlier in the case, there was actually a discussion about verbs and actual parts of language, which was unexpected but not unprecedented in a Supreme Court case. There was one point here where [Justice] Thomas asked Katyal if tariff power cannot be delegated, if his argument on nondelegation would also have to apply to embargoes and quotas. And Katyal disagreed with his argument that tariffs are uniquely revenue-raising, and they impose unique concerns because of that. And he does not believe that that would apply to embargoes, and that you can go back to our founding as a nation with that concern. You can hear about that in this upcoming clip.

Neal Katyal: Embargoes stop the shipment, tariffs start the tax bill. They are, first and foremost, ways of regulating revenue, as some of your own opinions said. This is the way we actually chiefly got revenue for the first 100 years of our republic. Tariffs are constitutionally special because our founders feared revenue-raising, unlike embargoes. There was no Boston Embargo Party, but there was certainly a Boston Tea Party.

Caitlin Mullaney: Hearkening back to the arguments of language and the delegation powers, the Oregon Solicitor General, Benjamin Gutman, who argued on behalf of the state plaintiffs, he had an interesting couple of exchanges with Justice Barrett, where Barrett basically asked him if he believes that under the wording of the statue of IEEPA, that the president could essentially just shut down trade with another nation but would not have the power to impose a minuscule tariff. Her example was a 1 percent tariff.

And Gutman, his response was they would not have the power to do the tariff. The president could shut down trade, but because of the revenue-raising aspect and the delegation powers, he could not impose that 1 percent tariff despite her argument that if it was a lesser medicine.

Kavanaugh followed up on Barrett's line of questioning regarding the acts of a rational Congress and one that would give the president the power to completely end trade with another country, but not impose a minimal tariff, which led to an entertaining exchange between the two, which you can hear now.

Justice Brett Kavanaugh: Your interpretation of the statute, as she pointed out, would allow the president to shut down all trade with every other country in the world, or to impose some significant quota on imports from every other country in the world, but would not allow a 1 percent tariff. And that leaves, in the government's words in this brief, "an odd doughnut hole in the statute."

Why would a rational Congress say, "Yeah, we're going to give the president the power to shut down trade?" I mean, think about the effects. But you're admitting that power's in there —

Benjamin Gutman: Yeah.

Justice Brett Kavanaugh: — but can't do a 1 percent tariff. That doesn't seem — but I want to get your answer — to have a lot of common sense behind it.

Benjamin Gutman: I think it absolutely does because it's a fundamentally different power. It's not a doughnut hole, it's a different kind of pastry.

Justice Brett Kavanaugh: And on that power — that's a good one.

David D. Stewart: The Court heard this case on an expedited basis. Are we expecting to have an opinion in an expedited way?

Caitlin Mullaney: I believe that we are expecting an expedited opinion in this one. Based on the writing on the walls, this is a problem that continues to happen. Tariffs are ever-present, and like they said, they're affecting Americans, they're affecting small businesses in America. It was one that they were quick to get in front of the Court. It's also one that we're continuously hearing about a lot still from the parties. You can see the administration is constantly talking about it. Organizations are coming out and talking about it. So I definitely think the Supreme Court is looking to get this one done and off their plate a lot quicker.

David D. Stewart: Have we gotten any sense of timing for when we can expect this opinion?

Caitlin Mullaney: I haven't heard anything about when we can actually expect it. If I was to just take an educated guess, it would be before the end of the year, because it would make sense going into all of the new things that affect our economic system at the start of the year.

David D. Stewart: So since we're already in a predicting mode, do we have any sense of how this case might actually come out?

Caitlin Mullaney: I think that hearkens back to how I opened this up, and in a full-circle moment, I think it's going to lean in the favor of the private parties. I think just the skepticism of the judges that have previously voted in favor of this. I know one example that was brought back a lot was decisions that were made under [President] Biden and under similar situations, student loan relief, different things like that. And if the Court continues to vote in that way, then I definitely think we could see something against the tariffs.

David D. Stewart: Well, it certainly sounds like we have some interesting times ahead, and thank you so much for walking us through all of what we've heard so far, and we'll definitely have you back when we have an answer.

Caitlin Mullaney: I can't wait to come back and talk about that, because I'm sure, if anything, it will be an interesting opinion.