The Supreme Court Clipped Trump’s Tariff Powers—and Opened New Trade Battlefronts

The Court’s 6–3 ruling is a major victory for congressional authority, but its reach is narrow. It leaves most existing tariffs intact and opens new fights over tariff refunds, other tariff authorities, and trade-deal stability.

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By Jennifer HillmanSenior Fellow for Trade and International Political Economy

Jennifer A. Hillman is a senior fellow for trade and international political economy at the Council on Foreign Relations.

The Supreme Court struck down the sweeping tariffs that President Donald Trump imposed on imports from Canada, China, and Mexico in one set of executive orders (the “fentanyl orders”) and on imports from all countries (the “reciprocal order”) in another. By a vote of 6–3, the justices ruled that the tariffs exceed the powers given to the president by Congress under the International Emergency Economic Powers Act (IEEPA), a 1977 law that allows the executive to “regulate commerce” during national emergencies created by foreign threats.

The Court’s decision rests on the fact that the Constitution gives taxing power, including tariff power, to Congress and not to the president. Therefore, any presidential imposition of tariffs depends on an act of Congress delegating tariff authority to the executive branch. The question before the Court was whether IEEPA was such an act. In writing for the majority, Chief Justice John Roberts said the answer was no.

“Our task today is to decide only whether the power to ‘regulate ... importation,’ as granted to the president in IEEPA, embraces the power to impose tariffs. It does not,” the opinion notes. “IEEPA contains no reference to tariffs or duties. The Government points to no statute in which Congress used the word ‘regulate’ to authorize taxation. And until now no President has read IEEPA to confer such power.”

Implications

Implications

Victory for Congress and the Constitution

From a legal and political perspective, the decision is of great significance, as it reaffirms the separation of powers between the legislative and the executive branches and upholds the basic right granted to Congress by Article I of the Constitution over the imposition of taxes, tariffs, and foreign commerce. As such, the decision is an important victory for Congress, the Constitution, and the rule of law. It represents a relatively rare instance of the Court imposing a check on Trump’s actions and is among the first decisions of the Court decided on the merits of a case rather than procedural grounds or pursuant to a “shadow docket” truncated decision.

Narrow Implications for Trade Policy

With respect to trade and tariff policy, because of the decision’s relatively narrow grounds based on a statutory interpretation of the phrase “regulate importation” within IEEPA, the decision has limited reach. It will not affect in any way the tariffs currently in place or tariffs being investigated under other major trade statutes, including Section 232 (national security), Section 301 (trade agreement violations or unreasonable or discriminatory practices burdening U.S. commerce), Section 201 (safeguards), or antidumping or countervailing duty laws. Nor will the ruling provide much interpretative guidance for how future courts might read other never-before-utilized trade statutes, such as Section 122 (international payments problems) or Section 338 (discrimination against U.S. commerce compared to trading partners).

IEEPA Left Untouched

Moreover, because the decision rested on the conclusion that “regulate importation” does not include the power to impose tariffs, it also leaves untouched the other powers under IEEPA to impose embargoes, sanctions, or freeze assets. Importantly, the Court did not engage in any analysis of the prerequisites to using IEEPA: the declaration of a national emergency based on an “unusual and extraordinary threat” to U.S. national security, foreign policy, or the economy originating from outside the country or the requirement that any actions taken under IEEPA must “deal with” the national emergency that has been declared and nothing else. As such, the Court never reached the question of whether a half-century trade deficit could be considered “unusual or extraordinary” or whether imposing tariffs on everything from teddy bears to T-shirts could be viewed as “dealing with” a fentanyl crisis.

Refunds Not Addressed

The Court also did not address the issue of refunds. Its ruling sent the two cases before it back to the Court of International Trade (CIT) for final resolution. This includes:

VOS Selections, which was filed by five small businesses and twelve state attorneys general, and previously decided by the CIT andaffirmedin part by the Court of Appeals for the Federal Circuit (CAFC)Learning Resources,which was filed by two small businesses and decided by the U.S. District Court for the District of Columbia (“D.C. District Court”)

Because the Court’s ruling was a decision that IEEPA does not authorize any tariffs, its decision affects the specific IEEPA tariffs that were before it (the “fentanyl” tariffs and the “reciprocal” tariffs) as well as all tariffs imposed pursuant to IEEPA. Accordingly, the Trump administration issued an executive order on February 20 stating that all of the IEEPA tariffs “shall no longer be in effect and, as soon as practicable, shall no longer be collected.”

However, stopping the collection of ongoing duties does not address the issue of what happens to the already collected duties. As noted below, the question of whether refunds are owed to importers is well settled, but the process for obtaining the refunds could take months or more.

Effect on Tariff Rates

Data from the Yale Budget Lab indicates that without the IEEPA tariffs, consumers will face an overall average effective tariff rate of 9.1 percent, the highest level since 1946, excluding 2025. If IEEPA tariffs had been allowed to stay in effect, this figure would have been 16.9 percent. Given that the president has now issued an executive order to impose Section 122 tariffs at 10 percent and a day later posted on social media his intent to raise the Section 122 tariffs to 15 percent, the most up-to-date estimates (assuming the tariff comes to pass) are an average effective tariff rate of 13.7 percent.

Next Steps

Next Steps

Refund Routes

Now that the Supreme Court has declared that IEEPA does not authorize the imposition of tariffs at all, importers of record are entitled to refunds plus interest on any entries for which they paid IEEPA duties. The Supreme Court’s clean opinion leaves no room to argue that any of the IEEPA tariffs were ever valid. The obligation to pay refunds is well-established, as is the process for obtaining refunds. When a country imports goods, the importer makes initial customs declarations and pays duties, but the paperwork is not finalized (i.e., the entry is not “liquidated”) until Customs and Border Patrol (CBP) effectively closes the books on the entry and confirms that the proper amount of duties was paid. CBP generally liquidates entries within 314 days of the date of import into the United States.

However, this timeline can be extended or accelerated depending on the circumstances. During that typical 314-day window of time, importers are allowed to file a “Post Summary Correction” to amend their entries retroactively to correct the rate of duty by removing the invalid IEEPA tariffs. CBP would then liquidate the entry without the IEEPA tariffs, thereby triggering a refund of any excess duties that were deposited.

For entries on which the books have been closed, i.e., the entry has been liquidated with the unlawful IEEPA tariffs included, importers may need to file an administrative protest within 180 days of the liquidation date. The protest is, in essence, a request for CBP to review and overturn its decision to assess the IEEPA duties in the first place. A recent decision by the CIT affirms that CBP has no basis to deny such protests.

Even though the legal authority for refunds is clear, the sheer magnitude of the number of refunds that will need to be issued means delays in the process are likely. It is possible that CBP will need to issue public guidance outlining the refund procedure.

Section 122 Tariffs

Within hours of the Supreme Court’s decision, the president issued an executive order declaring that the United States is experiencing fundamental international payments problems within the meaning of Section 122 of the Trade Act of 1974, and imposed a 10 percent tariff for a period of 150 days (through July 24, 2026), effective February 24, 2026.

The executive order included a long list of products that are exempt from the 10 percent Section 122 tariffs, including certain critical minerals, currency metals and bullion, energy products and natural resources, and fertilizers not sufficiently produced in the United States. Some agricultural products—including beef, tomatoes, and oranges—are also exempt, along with pharmaceuticals and ingredients, select electronics, passenger vehicles, certain trucks and buses, aerospace products, books and other informational materials, donations, and accompanied baggage. Compliant goods under the U.S.-Mexico-Canada Agreement are also excluded, as are qualifying textiles and apparel from countries covered under the Dominican Republic-Central America Free Trade Agreement.

A day later, Trump posted on social media that he was going to raise the Section 122 tariff rate to 15 percent, but as of yet, no executive order implementing that change has been issued.

Duties under Section 122 are only permitted to remain in place for 150 days unless Congress votes to extend them, which appears extremely unlikely. Moreover, like IEEPA, invoking Section 122 requires that the president meet the prerequisites in the statute, which includes a finding that there is a fundamental international payments problem that necessitates the imposition of import restrictions (including tariffs) to deal with a large and serious balance-of-payments deficit, or an imminent and significant depreciation of the dollar, or to cooperate with other countries in correcting an international balance-of-payments disequilibrium.

Some commentators are already suggesting that Trump has not made and cannot make such a showing, as the law was drafted at a time when the United States operated under a fixed exchange rate regime, with the dollar being pegged to the value of gold. Now that the United States has adopted a floating exchange rate system, its currency values adjust to market forces, indicating that, as economist Milton Friedman explained, “a system of floating exchange rates completely eliminates the balance-of-payments problem. The [currency] price may fluctuate but there cannot be a deficit or a surplus threatening an exchange crisis.”

Whether any party will choose to challenge the time-limited Section 122 tariffs on this basis remains to be seen. The success of any challenge may rest in large part on the degree of deference a court would give to a Presidential finding of fact—that the United States is suffering from fundamental international payment problems—particularly in light of the Supreme Court’s 2024 decision in Loper Bright Enterprises v. Raimondo which overruled

Chevrondeference and instead directed the courts to “exercise their independent judgment.” If such a challenge were brought and the courts ultimately struck down the Section 122 tariffs, a similar refund process to the one noted above would likely ensue.

The Effect on Trump’s Trade Deals

To date, the Trump administration has negotiated various agreements, frameworks, and joint understandings concerning trade and tariffs with eighteen countries. All of them are premised on our trading partners’ desire to escape IEEPA tariffs or at least to secure rates lower than those initially announced.

So far, it appears that U.S. trading partners are taking a “wait and see” attitude to whether or when they might renegotiate some of the terms of their agreements, given the more limited tariff threats that Trump can credibly make right now.

However, in light of indications that the administration will initiate a series of Section 301 investigations against a number of trading partners and may speed up the timing of pending Section 232 investigations (or initiate additional ones), the tariff landscape, and therefore bargaining positions, remain in flux. It seems most likely that changes to these agreements will play out over time, given that none of them are fully complete or binding and that their legal status remains a question in the absence of any approvals from Congress.

This work represents the views and opinions solely of the author. The Council on Foreign Relations is an independent, nonpartisan membership organization, think tank, and publisher, and takes no institutional positions on matters of policy.