A simple Supreme Court test unravels Trump’s entire tariff scheme

Since the 1930s, the Supreme Court has set its lowest bar for constitutional review to economic regulation. The court’s rational-basis test doesn’t require policymakers to be wise, or even reasonable. It requires only rationality— an acceptable policy goal combined with rational actions to achieve that goal.

Yet even that deferential standard has limits. And the reasons for those limits — grounded both in history and modern economic theory—have particular force in the modern political climate. While court challenges to these tariffs have primarily relied on statutory limits to presidential authority — including a lawsuit filed this week by a dozen states — rational-basis review has a significant role to play in that litigation because it complements and clarifies why Congress imposed such statutory requirements in the first place.

As economic regulations, the constitutionality of the tariffs is reviewed by courts under the rational-basis standard. And the standards face severe problems under that test, for at least three reasons.

First, the tariff-calculation methodology remains inexplicable. The administration’s tariff “formula,” based on total American imports of goods from a country, ignores services — an area where the United States consistently excels. It also attributes 100% of that (incorrectly measured) trade deficit to foreign tariffs, ignoring structural factors such as consumer preferences, capital flows, and the U.S. dollar’s global reserve currency status. The American Enterprise Institute — no bastion of liberal thought — has bluntly pointed out the administration’s “formula” has “no foundation in either economic theory or trade law.”

Second, while the administration touts tariffs as a revenue generator from foreign manufacturers, the reality is that tariffs inevitably become taxes on American consumers. One of the plaintiffs in the current litigation, a small Florida company, says that the tariffs force it to lay off employees, raise prices, and as a result, lose business to the point of insolvency. Multiply these effects nationwide, especially in response to tariffs exceeding 100% on Chinese imports, and the claimed revenue benefit quickly becomes a widespread economic burden on vulnerable Americans.

Third, no rational economic basis has been provided for singling out China with tariffs more than tenfold higher than those imposed on any other trading partner—while also excluding phones and computers, which are China’s main exports. These stark disparities are signs of arbitrary action, not rational policymaking.

Even under the century-old, highly deferential rational-basis test, the Constitution demands rationality for economic regulation. The U.S. Court of Appeals for the Fifth Circuit — again, no stronghold of liberalism—powerfully illustrated this point in its 2013 decision of St. Joseph Abbey v. Castille.

In that case, Louisiana regulators prevented monks from selling handmade caskets without demonstrating any legitimate public interest in health, safety, or consumer protection. The court struck down that law, asserting: “The great deference due state economic regulation does not demand judicial blindness to the history of a challenged rule or the context of its adoption nor does it require courts to accept nonsensical explanations for regulation.”

Similarly, the statutes cited by President Trump in support of present tariffs require genuine findings of national security threats or violations of trade agreements. These laws are not congressional whim—they arise from and embody the Constitution’s baseline requirement that the political branches act rationally when they make major economic decisions.

That baseline requirement has a solid foundation in both history and modern economic thought. Historically, the driving motivation for the framers of the Constitution was to create a fair system of government to replace the arbitrary whims of King George. While “rationality” is a low baseline, it was foundational to the framers’ conception of the new country that they were creating with the Constitution.

Fast forward to the present day, and modern neoclassical economic thought. With some exceptions in the field of consumer-choice theory, modern economic theory is grounded in the concept of markets driven by rational actors. In those markets, as famously illustrated by Adam Smith’s “invisible hand,” thoughtful buyers and sellers create efficient outcomes as a result of their pursuit of personal profit. To abandon that baseline requirement of rationality is to abandon economics, period.

The judiciary should not accept incoherent justifications merely because they originate from the White House. If policy rests upon transparently flawed economic reasoning or arbitrary distinctions lacking rational explanation, courts not only have the authority but also the constitutional duty to intervene. The augmentation of that constitutional baseline by statute is not congressional overreach—rather, it is implementation and enforcement of that baseline. And that baseline, grounded both in Constitutional history and modern economic theory, is a fundamental requirement of a just society.