SCOTUS’s Decision on Tariffs Imposed Under IEEPA

On Friday, February 20, 2026, the U.S. Supreme Court ruled on tariffs imposed under the International Emergency Economic Powers Act (IEEPA):

• In a 6-3 decision, the Supreme Court declared that tariffs imposed under the IEEPA are unlawful.
• However, the majority opinion did not address whether or how refunds would be issued, nor did it clarify the impact on U.S. trade agreements made in the past year, such as with the European Union and Japan.
• The ruling does not affect tariffs imposed under Section 232 (e.g., steel, aluminum, and autos) or Section 301 (e.g., China).
• Ultimately, this decision only strikes down a specific subset of tariffs, not the entire administration’s tariff strategy.

Impact of the Ruling: The decision invalidates tariffs that President Trump imposed last year under national emergency declarations. This includes tariffs on imports from Canada, China, and Mexico, based on claims that those countries failed to address the fentanyl crisis and trade imbalances. The ruling also affects reciprocal tariffs imposed in response to trade deficits with various countries.

However, the ruling does not affect tariffs imposed under Section 232 of the Trade Expansion Act of 1962, which are meant to protect U.S. national security by restricting imports critical to defense, such as steel and aluminum. Similarly, Section 301 tariffs, enacted under the Trade Act of 1974, target unfair trade practices like intellectual property theft and were notably applied to Chinese imports.

Presidential Response: In light of the court’s decision, President Trump issued a presidential proclamation imposing a 10% global tariff under Section 122 of the Trade Act of 1974. This allows for temporary tariffs of up to 15% for up to 150 days to address balance-of-payments deficits. The administration argues that large trade deficits and the risk of a sharp depreciation of the U.S. dollar qualify as urgent international financial issues.

The proclamation exempts certain products from these new tariffs, including agricultural goods, electronics, vehicles, and items covered by trade agreements like the USMCA and CAFTA-DR (Central America Free Trade Agreement – Dominican Republic). These tariffs will apply to goods imported from February 24 to July 23, 2026, at which point they will automatically expire unless Congress votes to extend them.

Uncertainties and Legal Challenges: No previous administration has invoked Section 122 to impose tariffs, so the statute’s limits have never been tested in court. This raises questions about whether current trade deficits are enough to justify these tariffs and whether the President could extend them after they expire by declaring another balance-of-payments emergency.

Additionally, President Trump announced new Section 301 investigations into unfair trade practices but did not specify which countries would be targeted. Unlike the IEEPA tariffs, tariffs under Section 301, Section 232, and Section 201 require agency investigations and public comment, processes that take more time.

Congressional Reaction: The Supreme Court’s ruling has created uncertainty regarding trade deals negotiated under IEEPA authority, such as those with the European Union, UK, and Japan.

• Senate Majority Leader Thune (R-SD) and House Speaker Johnson (R-LA) previously blocked efforts to end IEEPA tariffs, with Speaker Johnson restricting House consideration of such measures.
• Last September, the House passed a rule preventing votes on the tariffs through January 2026, narrowly passing with Republican support. Speaker Johnson later attempted to extend the legislative block until July, but it failed by 214-217.
• House Democrats then pushed for a resolution (H.J. Res. 72) to overturn the IEEPA tariffs on Canada. President Trump threatened election consequences for Republicans voting in favor, but the measure passed 219-211, with six Republicans voting in favor.
• Similarly, in the Senate, three resolutions passed to disapprove of national emergencies tied to tariffs on imports from Brazil, Canada, and other nations, with five Republicans voting in favor.

Future Legislative Action: We anticipate increased legislative activity in response to the Supreme Court decision. Some bills may focus on simplifying the tariff refund process or providing relief for smaller businesses, potentially earning bipartisan support.

Republicans might also attempt to codify IEEPA tariffs using budget reconciliation, though this could face significant hurdles given the slim Republican majority and the number of Republican tariff skeptics.

Given the complexity of the issue, it remains unclear how Congress will ultimately respond to the ongoing uncertainty surrounding the tariff refund process and its economic impact.