Supreme Court vs. Trump Tariffs: What the 6-3 Ruling Actually Changes
TL;DR
The U.S. Supreme Court just told the president he can't use a 1977 emergency law to slap tariffs on the entire world. In a 6-3 ruling on February 20, 2026, the court declared that the International Emergency Economic Powers Act (IEEPA) doesn't give the president tariff authority. Over $175 billion in collected duties could be refunded. But Trump isn't backing down. He signed a new 10% global tariff under a different law within hours.
What Happened, Exactly?
The case, Learning Resources, Inc. v. Trump, started with a toy company. Learning Resources, a U.S.-based educational toy manufacturer, challenged tariffs that were making its imported products more expensive. Several other companies and U.S. states joined similar lawsuits.
The core question: can the president use a law designed for economic sanctions to impose import taxes on virtually every country?
Six justices said no. Three said yes.
Chief Justice John Roberts wrote the majority opinion. He didn't mince words: "IEEPA does not authorize the President to impose tariffs."
The ruling vacates a massive chunk of Trump's tariff architecture, the "Liberation Day" tariffs from April 2025, the fentanyl-related tariffs on Canada, Mexico, and China, and various other duties imposed under IEEPA.
What survives? Tariffs imposed under other legal authorities, specifically Section 232 (steel, aluminum, autos) and Section 301 (China-specific trade measures). Those weren't challenged in this case.
The Legal Reasoning: Two Paths, One Destination
Here's where it gets interesting. The six justices in the majority agreed on the outcome but split on why.
The Roberts-Gorsuch-Barrett path: These three invoked the "major questions doctrine," a legal principle that says Congress must clearly authorize the executive branch when it claims power over issues of vast economic significance. Roberts wrote that the Framers gave "Congress alone" the power to impose tariffs during peacetime. Using vague language in a 1977 emergency law doesn't count as clear authorization.
Roberts put it plainly: "Based on two words separated by 16 others" in IEEPA, the president claimed "the power to impose tariffs from any country, of any product, at any rate, for any amount of time." Those words, he said, "cannot bear such weight."
The Kagan-Sotomayor-Jackson path: The liberal justices reached the same conclusion using standard statutory interpretation. Justice Kagan wrote a concurrence stating: "Nothing in IEEPA's text, nor anything in its context, enables the President to unilaterally impose tariffs." No need for any special doctrine. The text just doesn't say what the administration claims it says.
The dissent: Justice Kavanaugh, joined by Thomas and Alito, argued that tariffs are a "traditional and common tool" to regulate importation and that IEEPA's text clearly covers them. He also flagged a practical concern the majority left unresolved: "The United States may be required to refund billions of dollars to importers." The administrative process, he warned, would be "a mess."
Why IEEPA Was Never Meant for This
To understand why this ruling matters, you need to know what IEEPA actually is.
Congress passed the International Emergency Economic Powers Act in 1977, during the post-Watergate era of reform. It replaced parts of the Trading with the Enemy Act of 1917, which had given presidents sweeping, unchecked economic emergency powers for decades. Congress wanted guardrails.
IEEPA allows the president to declare a national emergency over foreign threats and then "regulate" economic transactions, freeze assets, block financial flows, impose sanctions. Presidents have used it 77 times since 1977, targeting everything from Iranian assets to Russian oligarchs to cybercrime networks.
What no president before Trump had done was use IEEPA to impose tariffs.
The closest precedent? Richard Nixon's 10% import surcharge in 1971. But that was under the older Trading with the Enemy Act, the very law Congress replaced because it gave presidents too much power.
Trump's innovation was to declare trade deficits a "national emergency" and fentanyl trafficking an "extraordinary threat," then use those declarations to justify sweeping import taxes on nearly every country.
The Supreme Court just said that was a bridge too far.
The $175 Billion Question
Between 2025 and early 2026, the U.S. government collected more than $175 billion in IEEPA tariff revenue, according to the Penn Wharton Budget Model. The Yale Budget Lab estimates the effective tariff rate will drop from 16.9% to about 9.1% as these duties are rolled back.
But the ruling doesn't explicitly order refunds. Kavanaugh's dissent flagged this. Importers who paid IEEPA tariffs will likely need to pursue refunds through the Court of International Trade, a process that could take years.
The market, predictably, liked the news. The S&P 500 rose 0.69%, the Nasdaq gained 0.9%, and the Dow added 230 points on the day. European auto stocks and Asian market indices also rallied.
But it wasn't all celebration. U.S. Treasury yields jumped as investors priced in lower future tariff revenue and potentially larger deficits. The dollar initially rose, then fell.
Trump's Counterpunch
Trump didn't wait. Within hours of the ruling, he signed a proclamation imposing a "temporary import duty" of 10% on all imports, effective February 24, 2026. The legal authority this time? Section 122 of the Trade Act of 1974.
He also called out Justices Gorsuch and Barrett, both his own nominees, saying their decision was "terrible" and "an embarrassment to their families."
Treasury Secretary Scott Bessent signaled the administration has "lots of other authorities" and isn't done. Section 232 (national security tariffs) and Section 301 (retaliatory trade measures) remain available. But there's a catch: these laws require formal investigations, public comment periods, and explicit justifications. They aren't blank checks.
And Section 122 tariffs expire after 150 days unless Congress extends them. That's a tight clock for an administration whose relationship with Congress has been complicated.
What This Means for India
This ruling landed at a particularly interesting moment for India-U.S. trade relations.
Just two weeks earlier, on February 7, India and the U.S. had announced an interim trade agreement that reduced U.S. tariffs on Indian goods from 50% to 18%. In exchange, India committed to lowering barriers on American exports.
Trump immediately stated that "nothing changes" for the India deal. But the math has shifted.
The Global Trade Research Initiative (GTRI) urged India to reassess the deal. Their logic: since IEEPA tariffs are now void, about 55% of India's exports to the U.S. automatically revert to standard MFN (Most Favoured Nation) tariff rates under WTO rules. That's significantly lower than 18%.
In other words, India may have agreed to concessions in exchange for relief from tariffs that no longer legally exist.
Section 232 tariffs still apply: 50% on steel and aluminum, 25% on some auto components. And Trump's new 10% global duty adds a fresh layer. But for textiles, pharmaceuticals, engineering goods, and other major Indian exports, the picture has improved.
A team led by Darpan Jain, India's chief trade negotiator, is heading to Washington this weekend to finalize the deal's legal text. They'll be negotiating from a stronger position than they were a week ago.
The Bigger Picture: Congress Takes Back Trade Power
Beyond the immediate economic impact, this ruling redraws the boundary between presidential power and congressional authority on trade.
For decades, Congress had been delegating its constitutional trade powers to the executive. Presidents used various statutes, IEEPA, Section 232, Section 301, to set tariffs with minimal congressional input. This ruling puts a hard stop on the most expansive interpretation of that delegation.
As the Cato Institute noted, the court got it right, but the champagne should stay corked. Other presidential trade authorities remain intact. Congress hasn't actually reclaimed its constitutional power over tariffs. It has only been told that one particular law can't be stretched to cover them.
The real test is whether Congress uses this moment to establish clearer guardrails, or whether a future president simply finds another legal loophole.
Key Takeaways
| What Changed | What Didn't |
|---|---|
| IEEPA can't be used for tariffs | Section 232 tariffs (steel, aluminum, autos) remain |
| "Liberation Day" tariffs voided | Section 301 tariffs on China remain |
| Effective tariff rate drops from 16.9% to ~9.1% | Trump imposed new 10% global tariff under Section 122 |
| $175B+ in collected duties potentially refundable | No automatic refund process exists yet |
| India's negotiating position strengthened | India-U.S. trade deal framework still in place |
What to Watch Next
Three things will determine how this plays out:
The refund battle. Importers will flood the Court of International Trade with claims. The government has signaled it won't voluntarily return the money. This will be litigated for years.
Trump's Section 122 tariffs. They expire in 150 days. Will Congress extend them? The political dynamics are unclear. Many Republican lawmakers support tariffs in principle but are uncomfortable with unilateral executive action.
India-U.S. trade talks. The March deadline for finalizing the deal is approaching. India now has leverage it didn't have a week ago. Whether it uses that leverage, or plays it safe to maintain goodwill, will be revealing.
The Supreme Court didn't end Trump's tariff era. It just told him he needs to use the right legal tools. Whether those tools are sharp enough for what he wants to build remains to be seen.
