Supreme Court steps in: Trump's emergency tariffs struck down

The pharma industry has spent much of the last year navigating the Trump administration's tariff threats, but with a seismic Supreme Court ruling Friday, the president's emergency import taxes have been upended.

The court ruled 6-3 that President Donald Trump's use of the International Emergency Economic Powers Act (IEEPA) to unilaterally impose tariffs is improper.

In authoring the ruling, Chief Justice John Roberts said the president overstepped his authority to use the law. Under the U.S. Constitution, Congress has the "power of the purse," or authority over fiscal matters, the chief justice wrote.

Whenever the legislative branch "has delegated its tariff powers, it has done so in explicit terms and subject to strict limits," Roberts wrote.

"Against that backdrop of clear and limited delegations, the Government reads IEEPA to give the President power to unilaterally impose unbounded tariffs and change them at will," the ruling reads. "That view would represent a transformative expansion of the President’s authority over tariff policy."

When the White House started posturing around tariffs last year, the issues said to necessitate a strong response from the administration involved “illegal aliens and drugs” coming in from foreign countries, rather than strictly economic matters. A year ago, the president said he’d impose tariffs on Canada, Mexico and China, starting a lengthy process in which new threats were levied and sometimes walked back depending on various factors. 

In a particularly striking case, the president last month threatened tariffs on European allies—even after striking a trade deal with the European Union—as part of his desire for the U.S. to control Greenland. That threat was called off days later. 

Against this unsteady tariff backdrop, the U.S. has struck trade deals in recent months with the European Union, as well as individual countries like the United Kingdom, Switzerland and Japan, which have cast the future of their U.S. trade relationships in more certain terms.

Those deals have generally included a 15% tariff cap on many imports into the U.S., including pharmaceuticals, and they have largely exempted generic drugs from trade duties. For its part, the U.K. secured a complete tariff exemption on its pharmaceuticals, drug ingredients and medical technology.

Now, many of those countries are likely seeking clarity on where their deals stand. In a statement reported by the BBC, the U.K. noted that “[w]e expect our privileged trading position with the US to continue.” 

Notably, the Friday ruling affects tariffs deployed under IEEPA, not those levied under the industry-specific Section 232 of the Trade Expansion Act, according to the BBC. The administration has started a Section 232 investigation for the pharmaceutical industry, but the probe has yet to yield taxes on drug imports.  

Still, IEEPA was the mechanism employed for the notorious "Liberation Day" tariffs that the president used to threaten many countries around the globe. Thankfully for the biopharma industry, that tariff rollout spared pharmaceuticals.

Trump refuses to back down

Trump issued a sharp rebuke of the decision during a Friday press conference, calling it "deeply disappointing" and pledging to use a different legal mechanism to tax imports. In response to the SCOTUS finding, the president promised to impose a new 15% global tariff in place of the invalidated levies.

The president further called the justices in the majority "unpatriotic and disloyal to our Constitution" and said he's "ashamed" of certain members of the court. He praised Justice Brett M. Kavanaugh, who penned a dissent, calling him a "genius."

The Supreme Court decision will likely send shockwaves throughout the American and global economies, though its exact impact on the pharmaceutical industry is tough to immediately assess. 

Over the last year, drug companies have pledged hundreds of billions of dollars in U.S. investments to ameliorate the administration's tariff threats. A recent tally by IQVIA put the total at $600 billion between 17 top drugmakers. Many of those projects are already in the groundbreaking, construction and development phases.

The SCOTUS ruling may also imperil Trump's "most favored nation" drug pricing push, since tariff threats were a key lever for the administration to extract concessions from large drugmakers. But the Trump administration has already struck pricing deals with more than a dozen pharma giants, so it remains to be seen exactly how that initiative might play out in the long run.

Fraiser Kansteiner contributed reporting.