ICAS Trade ‘n Tech Dispatch (online ISSN 2837-3863, print ISSN 2837-3855) is published about every two weeks throughout the year at 1919 M St NW, Suite 310, Washington, DC 20036.
The online version of ICAS Trade ‘n Tech Dispatch can be found at chinaus-icas.org/icas-trade-technology-program/tnt-dispatch/.
Any week now, even any day, the U.S. Supreme Court will rule on the constitutionality of President Trump’s ‘reciprocal’ tariffs. The issue at hand is the president’s authority to levy tariffs of potentially unbounded scope based on his emergency authority to address a threat to the United States’ economic and national security during peacetime. If confirmed, the ruling would confer sweeping powers to the President over the U.S. economy via the tariff lever. If overruled, the President will have to withdraw his emergency (International Emergency Economic Powers Act – IEEPA) authority-based tariffs and scramble to find other delegated statutory authorities to impose equivalent tariffs or measures.
In One Sentence
Mark the Essentials
Keeping an Eye On…
The ongoing leaders-led détente in U.S.-China trade and technology ties notwithstanding, the structural decoupling of select advanced industries and technologies continues apace. The latest markers of this continuing drift towards selective decoupling are two key pieces of legislation, the BIOSECURE Act and the COINS Act, that were tucked into the latest defense spending bill (NDAA FY26) and signed by the president into law on December 18.
Per the BIOSECURE Act, the heads of U.S. executive agencies are to be barred from procuring biotechnology equipment and services from a “biotechnology company of concern”. This could include tools and digital components used for working with biological materials as well as a broader range of services (research, development, analysis, detection, etc.) linked to biological and genealogical materials. U.S. and other drugmakers are to be barred, too, from U.S. federal government contracts if they engage in transactions with a “biotechnology company of concern”. At this time, no specific Chinese biotech firms are listed as a “biotechnology company of concern”, unlike in the draft bill twelve months earlier which had specifically listed WuXi AppTec., WuXi Biologics, BGI, MGI and Complete Genomics.
Going forward, a list featuring such companies of concern is to be drawn up by the Office of Management and Budget (OMB) that is to include: (a) companies placed on the Pentagon’s Section 1260H list of “Chinese military companies” with a biotechnology nexus and (b) other entities involved with biotechnology equipment and services that are subject to the control of direction of a “foreign adversary” (China, Russia, Iran, North Korea) and pose a threat to U.S. national security. With Chinese biotech firms steadily moving up the value-added ladder from generic drug-making to actively supplying pharmaceutical ingredients, being primed for biotech manufacturing, and becoming advanced drug developers in their own right, expect a number of these companies to start populating the BIOSECURE Act’s company of concern list.
Meanwhile, the COINS Act codifies the Treasury Department’s Outbound Investment Security Program (OISP) that the Biden administration had established in January 2025, to implement the president’s outbound investment screening Executive Order of August 2023. The OISP had prohibited U.S. persons from undertaking or required notification to the Treasury Department regarding certain outbound investments in China’s semiconductors and microelectronics, quantum information technologies, and AI sectors. The COINS Act adds hypersonic systems and high-performance computing and supercomputing to this list of covered technologies, as well as Cuba, Iran, North Korea, Russia and Venezuela to the list of restricted states. Just as importantly, it lowers the threshold of a “covered foreign person” to include entities that are “subject to the direction or control” of a covered foreign person. Entities that have less than 50% ownership by a Chinese entity are also covered within the law’s ambit.
Finally, the COINS Act authorizes, although does not require, the Treasury Department to establish a publicly accessible database of covered parties engaged in prohibited or notifiable technologies. Looking ahead, the Treasury Department is expected to issue implementing regulations by March 2027, at which point in time the expanded provisions within the law on covered technologies, geographic scope, and entities will come into effect.
The U.S.’ outbound investment screening and security rules may be a shadow of its inbound investment screening rules, famously overseen via the CFIUS mechanism, given that the outbound security rules essentially prohibit equity or debt investment in the sanctioned entities. That does not mean however that the former is any less important or lacking in bite. Unlike the case of Japan and its rising appetite for U.S.-based acquisitions in the 1980s, this time around both inbound and outbound China-linked transactions are very much under scrutiny.
Expanded Reading
Legislative Developments
Hearings and Statements
Expanded Reading
Introduction
Any week now, even any day, the U.S. Supreme Court will rule on the constitutionality of President Trump’s ‘reciprocal’ tariffs. The issue at hand is the president’s authority to levy tariffs of potentially unbounded scope based on his emergency authority to address a threat to the United States’ economic and national security during peacetime. If confirmed, the ruling would confer sweeping powers to the President over the U.S. economy via the tariff lever. If overruled, the President will have to withdraw his emergency (International Emergency Economic Powers Act – IEEPA) authority-based tariffs and scramble to find other delegated statutory authorities to impose equivalent tariffs or measures.
Administration’s Argument Before the Court
Although potentially flawed, the administration’s argument is legally concise and internally watertight. The decades-long balance of payments deficits, which have now reached “a tipping point,” constitute an “unusual and extraordinary [foreign and security policy] threat.” This threat is not merely a trade policy matter, since the deficits have hollowed out the industrial base and has a national security dimension. In foreign policy matters, the president enjoys expansive emergency powers including tariff-imposition powers that are codified in IEEPA to address the threat after declaring a “national emergency”. Furthermore, the appropriate review authority is Congress, which can terminate the emergency. Other than validating this emergency powers-based tariff authority, the judiciary must hence stay out of the matter.
The administration’s argument has come up short within the court system so far: 3-0 against, in the U.S. Court of International Trade in May and 7-4 against, in the Federal Appeals Court in August. But with a Supreme Court stacked with six Republican leaning justices, the administration is banking on a more favorable ruling.
Stripped to its bare essentials, two pivotal questions that touch on constitutional law are at issue.
Does the president enjoy the authority to levy tariffs under IEEPA?
Congress, after all, is vested by Article 1 of the U.S. Constitution with the power to regulate trade with foreign nations. The administration argues that IEEPA’s predecessor law, the Trading With the Enemy Act, contained identical language on “regulating … importation” that was utilized by President Nixon to impose balance of payments-related tariffs, which were subsequently upheld by an Appeals Court (Yoshida II) in the mid-1970s. Plaintiffs argue that the president’s power to “regulate … importation” extends only so far as non-monetary measures, such as embargoes. The power to tariff, which is a form of taxing power, is distinct from the power to regulate and the former is not always incident to the latter.
Given the Yoshida II ruling, and a Supreme Court ruling in the separate mid-1970s Algonquin case, which had found that it was the trade policy impact – not instrument – that was key to interpreting the intent of statutory text, the administration appears to have an upper hand on this point of argument.
An expected follow up of this question is that even if the President enjoys the authority to levy tariffs, does the President enjoy the authority to levy the tariffs on an emergency basis for balance-of-payments purposes? The history of the enactment of the IEEPA suggests that Congress, when writing this successor law to the Trading with the Enemy Act, had explicitly cabined the President’s authority to impose tariffs in response to balance-of-payments deficits through Section 122 of the Trade Act of 1974, a non-emergency statute that was specific, narrower, and time-limited. On the other hand, the administration argues that Section 122 does not displace the president’s emergency powers-based tariff authority and that the president could impose tariffs under both IEEPA and Section 122 authorities.
If the Supreme Court agrees with the administration’s earlier point that the president enjoys the power to impose tariffs under emergency authority, it will be hard to fault the administration’s argument that the two statutes can coexist in their own spheres.
Does the President have the authority to levy tariffs unbounded in scope, amount, and duration?
Even if he enjoys the authority on an emergency basis for balance-of-payments purposes, would this unboundedness amount to an unconstitutional delegation of legislative authority to the President? It is on this point that the administration stands on legal quicksand. Tariff power is a form of taxing power, revenue-raising power, which is part-and-parcel of the legislative domain. Unbounded tariffs without clear congressional authorization amount to a gigantic backdoor revenue-raising measure that is to be borne by Americans – importers and consumers alike. Just as importantly, the power to regulate trade with foreign nations resides constitutionally with Congress. Unbounded tariffs utilizing emergency authority overrides this prerogative as well as grants sweeping authority over the economy far beyond what Congress could have plausibly contemplated. The administration argues that the tariffs implicate the president’s foreign policy powers which are expansive, and that the tariffs are regulatory tariffs, not revenue raising taxes. Still, this distinction is irrelevant.
Finally, the court’s acceptance of the emergency balance-of payments Nixon tariffs via Yoshida II was premised on their limits in terms of scope, amount and duration. The Trump emergency tariffs, by contrast, are open-ended.
What’s Next?
If the Supreme Court rules against the IEEPA-based tariffs, especially with three (swing) conservative justices expressing skepticism, the Trump administration will be able to recreate in short order most but not all of the tariffs using other non-emergency trade policy authorities delegated by Congress. The two primary ones being eyed are:
The Trump administration could apply these Section 122 and 301 tariffs retroactively too, dating back to the timings of their IEEPA-based impositions. The legal basis for retroactive imposition is unclear though. The Supreme Court disfavors it, Congress should be the party to authorize it, and neither Section 122 nor Section 301 contains clear authorization for retroactive imposition. The administration may also be tempted to apply Section 338 of the Tariff Act of 1930 (that included the infamous “Smoot-Hawley” provisions), which permits the president to impose duties of up to 50% whenever a foreign nation “places any burden or disadvantage upon the commerce of the United States.” Section 338 authority has never been utilized to impose tariffs, and its last use as a threat dates back to the 1930-1940s. In any case, Congress has twice enacted later-in-time statutes that effectively cover the same enforcement ground as Section 338.
Conclusion
Trump v. V.O.S. Selections is potentially the most important trade policy case ever on the Supreme Court’s docket. Along with the cases on birthright citizenship and the president’s right to fire independent agency heads at will (the Fed included), it is among a handful of landmark cases being heard by the Supreme Court in 2026 that will test the bounds of executive authority within the bounds of U.S. constitutional law. Its implications are momentous, from potentially shaping the boundaries of executive v. legislative power to setting down precedents for emergency actions by future presidents that could have major economy-wide effects.
This issue’s Spotlight was written by Sourabh Gupta, Senior Fellow at ICAS.
The Institute for China-America Studies is an independent nonprofit, nonpartisan research organization dedicated to strengthening the understanding of U.S.-China relations through expert analysis and practical policy solutions.
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