Donald Trump’s most tangible weapon against America’s ballooning deficits, his trademark tariff hikes, now risks being dismantled by the judiciary. In other words, the one revenue stream he could actually point to might soon be ruled unconstitutional, leaving US finances even more precarious than before.

Treasury Secretary Scott Bessent insists that borrowing needs will fall in the years ahead thanks to Republican tax cuts, deregulation and a wave of foreign and corporate investment supposedly about to flood the US economy. Economists, ever the spoilsports, remain sceptical. But even they concede one thing: tariffs bring in hard cash. Customs duties have already hit $165 billion this fiscal year, nearly double last year’s take. That’s a lot of Lego sets and yoga mats being taxed into oblivion.

The problem? Much of this bounty rests on Trump’s use of the International Emergency Economic Powers Act (IEEPA), a legal stretch now torn apart by a federal appeals court. Should the Supreme Court side against the White House, the Treasury might not only lose this windfall but also have to refund billions. Bessent insists he’s confident of victory, but then, what else would he say?

The irony is thick. Even at $300 billion a year, tariff revenue amounts to just 1% of GDP, a rounding error against a deficit running at more than 6% of output. In other words, Washington is trying to plug a leaking oil tanker with duct tape. Yet without tariffs, investors and bondholders are left with little more than rosy forecasts about productivity miracles that never quite materialise.

For businesses, the chaos is even more immediate. Illinois-based toy-maker Hand2Mind dutifully shifted production from China to India, only to be hit with higher tariffs than if it had stayed put. Their Christmas mindfulness sets for kids now come with an unintended lesson: the futility of trying to outguess Trump’s trade policy. Unsurprisingly, firms are suing.
Should the courts kill IEEPA tariffs, Yale economists estimate it would wipe out $1.5 trillion in projected revenues over a decade. That would bring America’s debt trajectory back to the same alarming path flagged by the Congressional Budget Office, heading towards record post-war levels by 2029, tax cuts and all. Even S&P, which recently cited tariff revenues as justification for maintaining the US’s AA+ rating, may be forced to reassess.

Bond markets, for now, are shrugging. They’re more fixated on the Fed’s looming rate cuts than on fiscal farce. But strategists warn that if Washington suddenly has to write refund cheques while simultaneously issuing record amounts of new debt, nerves could fray quickly.
Of course, Trump could try to reimpose tariffs under other statutes, sections 232 and 301 offer handy workarounds, but that means yet another redesign of an already incoherent policy. As Bessent admitted, the fallback would be “heavier” and would “tie the president’s hands.” Translation: more legal uncertainty, more business confusion, and still no serious plan to fix America’s fiscal black hole.

In short, the tariff “strategy” was never going to save America’s finances. At best, it was a temporary cash grab dressed up as economic patriotism. At worst, it now risks boomeranging into refunds, lawsuits, and higher borrowing costs. For a president who promised to run the country like a business, this looks suspiciously like running it into administration.