If you haven’t noticed, what with the Olympics and everything, the Supreme Court is quietly weighing whether the President has the authority to impose sweeping new tariffs. Tariffs that are already reshaping the federal budget.

Last year, President Donald Trump issued a series of executive orders imposing tariffs on most U.S. imports, relying on the International Emergency Economic Powers Act (IEEPA), a statute typically used to respond to sanctions and financial emergencies. Not surprisingly, that move quickly ran into trouble in court.

In September, the Supreme Court agreed to hear two challenges, V.O.S. Selections, Inc. v. United States and Learning Resources, Inc. v. Donald Trump, after lower courts concluded that IEEPA does not give the president authority to impose at least some of those tariffs. Both lower courts rejected the idea that IEEPA’s power to “regulate importation” is a blank check to set tariff rates at whatever level the president chooses. Now the Supreme Court must decide whether Congress really handed over that kind of authority, and whether it even can, given that Article I of the Constitution assigns Congress authority over taxes and trade.

But this is more than a legal debate. The Congressional Budget Office’s (CBO) latest Monthly Budget Review shows customs duties, including tariff revenues, totaled $119 billion in the first four months of FY 2026, up from $28 billion a year earlier. That is a $90 billion jump, more than four times last year’s level. Over the same period, individual income and payroll taxes rose by $124 billion, but corporate income tax receipts fell by $22 billion. Against that backdrop, the tariff surge accounts for nearly half of the net increase in revenue. But the tariff revenue has been promised to offset rebate checks, eliminate income taxes, and provide relief to farmers impacted by the trade war. None of which adds up.

Here’s the problem. As CBO makes clear, this is not organic growth. Tariff rates were raised beginning in February 2025 and adjusted repeatedly across products and countries, which “substantially” boosted customs duties. In its longer-term outlook, CBO projects those duties will spike to about 1.3 percent of GDP in 2026, a modern high, but fall as imports decline. Debt held by the public still rises from roughly 100 percent of GDP today to about 118 percent by 2035, while annual net interest costs climb from around $1 trillion to $1.6 trillion.

That’s the fiscal side. The economic side tells a similar story. As former Sen. Phil Gramm (R-TX) and George Mason University economist Donald Boudreaux note, the first year of President Trump’s first term saw stronger job growth, faster manufacturing gains, and larger increases in real income and investment. What distinguishes 2025 from 2017 is the imposition of the largest tariffs in decades. CBO’s February outlook similarly projects that the new tariffs will push up prices, reduce real GDP modestly in the near term, and lower household purchasing power, even as they provide a short-term boost in revenue.

This is why the Supreme Court decision is more than a governance story. It has become a live fiscal risk.

If the Court strikes the tariffs down or narrows the authority behind them, the government could see a meaningful drop in expected tariff revenue at the same time last year’s tax changes in the One Big Beautiful Bill Act are projected to add $4.2 trillion to the national debt through 2034 and $4.7 trillion through 2035 on a dynamic basis. The government may also have to refund a substantial share of the tariffs already collected. That would turn today’s windfall into a sudden budget gap, leaving lawmakers to replace the money or borrow more.

If the Court upholds broad emergency tariff authority, then we have a different problem. Future presidents would hold a powerful switch they could flip without Congress. Trade taxes could rise or fall quickly, with consequences for the broader economy and international relations. That unpredictability undercuts the very investment incentives Congress tried to create in last year’s OBBBA tax cuts. Tax policy can encourage capital formation, but not if costs change overnight.

Tariffs are not a durable fiscal solution. They tax consumers and businesses, distort markets, invite retaliation, and generate volatile receipts. Any short-term budget gains come at the cost of slower growth. It was fiscally reckless to build so much of the near-term revenue story on authority that is still in dispute.

So, while the legal question before the Supreme Court is about authority, the larger issue is where this leaves us. If the Court upholds broad emergency tariff power, Congress’s control over taxes and trade weakens further. If it strikes the tariffs down, billions in assumed revenue could vanish, widening already large deficits. Either way, a meaningful share of federal receipts now rests on contested emergency authority. That is bad news for both the separation of powers and the federal balance sheet.