On February 20, 2026, the Supreme Court did something it had never done before: it struck down tariffs imposed by a sitting president, ruling 6-3 that the International Emergency Economic Powers Act does not give the president the power to impose them. The decision in Learning Resources, Inc. v. Trump invalidated the sweeping tariffs that had reshaped American trade policy since early 2025, and set off a chain reaction that is still unfolding a month later.
The immediate question was staggering in scale: what happens to the roughly $175 billion the government collected from importers under tariffs now deemed illegal? And what comes next for an administration that built its trade agenda on a law the court just said doesn’t do what the president claimed?
What the Court Actually Said
The case turned on two words buried in a 1977 law: “regulate” and “importation.” IEEPAA 1977 US federal law granting the president broad authority to regulate economic transactions with foreign countries after declaring a national emergency. gives the president broad powers to deal with foreign threats during national emergencies, including the power to “regulate … importation or exportation” of property. The Trump administration argued this included the power to impose tariffs.
Chief Justice John Roberts, writing for the majority, disagreed: “Based on two words separated by 16 others in … IEEPA, the President asserts the independent power to impose tariffs on imports from any country, of any product, at any rate, for any amount of time. Those words cannot bear such weight.”
Roberts pointed out that IEEPA never mentions “tariffs,” “duties,” or “taxes.” When Congress has delegated tariff authority in other laws, it has always done so explicitly and with strict limits on rates, duration, and scope. IEEPA has none of those guardrails.
The coalition was unusual. Roberts was joined by Justices Sotomayor, Kagan, Gorsuch, Barrett, and Jackson. Justices Thomas, Alito, and Kavanaugh dissented. Kavanaugh wrote a 63-page dissent arguing that tariffs are “a traditional and common tool to regulate importation” and that the majority was overstepping.
The $175 Billion Refund Problem
The ruling did not address refunds. The majority opinion said nothing about whether or how the government should return the money. But the math is unforgiving.
The Penn Wharton Budget Model projects up to $175 billion in refund obligations. IEEPA tariffs had grown to represent half of all U.S. customs duties by January 2026, with collections running at roughly $500 million per day.
More than 2,000 lawsuits have been filed at the Court of International Trade by companies seeking refunds, including FedEx, Costco, L’Oreal, Dyson, and Nissan North America.
On March 4, Judge Richard Eaton of the CIT ordered the government to refund all illegally collected IEEPA tariffs to every importer who paid them, not just those who filed lawsuits. Two days later, Customs and Border Protection told the court it could not comply. The agency’s existing systems and procedures were not designed to handle the unprecedented volume of refunds, particularly where manual recalculation of interest was required.
Meanwhile, interest on the unpaid refunds is accruing at roughly $650 million per month. CBP is developing a new web-based system to process refunds in bulk and hopes to have it operational within 45 days. Judge Eaton paused his order but required progress updates every seven days.
Plan B: The Section 122 Bridge
The administration moved fast. On February 24, four days after the ruling, Trump imposed a 10% tariff on nearly all imports under Section 122 of the Trade Act of 1974, a law that allows temporary tariffs of up to 15% for 150 days to address “large and serious balance-of-payments deficits.”
The law had never been used before. It was created in the 1970s after President Nixon took the U.S. off the gold standard, during a genuine balance-of-payments crisis. Alan Wolff, who served in the Treasury Department at the time, told CNN: “There was a balance of paymentsA comprehensive measure of all economic transactions between a country and the rest of the world, covering trade in goods and services as well as capital flows. crisis that could be felt palpably. Today, there is no crisis. If there were, financial markets would be in deep free fall.”
Gita Gopinath, former chief economist at the International Monetary Fund, compared the situation to the difference between high cholesterol and a heart attack: “There is no doubt in the US ability to pay the world and therefore no crisis.”
The Section 122 tariffs expire on July 24, 2026, and Congress is unlikely to extend them. Legal challenges have already been filed. A group of state attorneys general sued in the CIT, arguing that no qualifying balance-of-payments deficit exists and that the tariff’s country-specific exemptions violate the statute’s non-discrimination requirement.
The Longer Game
Section 122 was always a placeholder. As trade analysts have noted, it is a “bridge to buy time” while the administration deploys other legal authorities.
On March 11, U.S. Trade Representative Jamieson Greer announced Section 301 investigations into 15 countries and the European Union, targeting excess manufacturing capacity. One day later, he announced separate investigations into 60 countries over forced labor practices. If these investigations conclude that unfair practices exist, the available remedies include tariffs with no statutory ceiling.
The administration is also expanding Section 232 national security tariffs. Beyond the existing tariffs on steel, aluminum, and autos, new investigations are targeting imports of batteries, iron fittings, plastic piping, and telecom equipment.
As Kavanaugh noted in his dissent, the ruling “might not substantially constrain a President’s ability to order tariffs going forward” because “numerous other federal statutes authorize the President to impose tariffs.” But Roberts countered that those laws “contain various combinations of procedural prerequisites, required agency determinations, and limits on the duration, amount, and scope of the tariffs they authorize.”
What It Means for You
Even with the IEEPA tariffs gone, the remaining tariffs are historically high. The Yale Budget Lab estimates the average effective tariff rate at 9.1%, the highest since 1946, outside of 2025 itself. Remaining tariffs will cost the average household roughly $800 per year in higher prices, with the burden falling disproportionately on lower-income families.
The Tax Foundation estimates the 2026 tariff burden at $600 per household. The trade deficit, the stated target of the tariff policy, barely moved: it fell by just $2.1 billion in 2025, driven not by reduced imports but by a small increase in the services surplus.
The Yale Budget Lab projects the remaining tariffs will increase unemployment by 0.3 percentage points and reduce employment by 550,000 jobs by end of 2026. The long-run GDP hit has been cut from 0.3% to 0.1% by the ruling, equivalent to about $30 billion annually.
The ruling was a constitutional landmark. But for most Americans, the practical question is not what the court said about presidential power. It is whether the prices on the things they buy will come down, and when. So far, the answer to both is: not much, and not yet.
On February 20, 2026, the Supreme Court held 6-3 in Learning Resources, Inc. v. Trump that the International Emergency Economic Powers Act does not authorize the president to impose tariffs. The decision, which vacated both the “reciprocal” tariffs and the “trafficking and immigration” tariffs imposed under IEEPAA 1977 US federal law granting the president broad authority to regulate economic transactions with foreign countries after declaring a national emergency. beginning in early 2025, is the first time the Court has struck down tariffs imposed by a sitting president, and it arrives with an estimated $175 billion in refund obligations trailing behind it.
The Statutory and Constitutional Reasoning
The majority opinion by Chief Justice Roberts rested on two independent grounds, each commanding a different coalition.
The Textual Argument (Roberts + Sotomayor, Kagan, Jackson)
IEEPA authorizes the president to “investigate, block during the pendency of an investigation, regulate, direct and compel, nullify, prevent or prohibit … importation or exportation” of property during a declared national emergency. The administration argued that the power to “regulate … importation” encompasses tariffs.
Roberts rejected this reading: “Those words cannot bear such weight.” The enumerated powers in the statute are transactional, not fiscal. IEEPA “contains no reference to tariffs or duties,” and “until now no President has read IEEPA to confer such power.”
Roberts further noted that interpreting “regulate” to include taxation would render IEEPA partly unconstitutional, because the statute also authorizes regulation of “exportation,” and the Constitution specifically prohibits taxes on exports under Article I, Section 9. Reading “regulate” as including the taxing power would create an unconstitutional grant of authority over export taxation.
The textual analysis also drew on negative inference from other tariff statutes. “The U.S. Code,” Roberts wrote, “is replete with statutes granting the Executive the authority to ‘regulate’ someone or something. Yet the Government cannot identify any statute in which the power to regulate includes the power to tax.”
The Major Questions DoctrineA legal principle requiring Congress to explicitly authorize executive actions of major economic or political significance; ambiguous statutory language is not enough. (Roberts + Gorsuch, Barrett)
Three justices also relied on the major questions doctrine, reasoning that IEEPA tariffs involve decisions of “economic and political significance” that require clear congressional authorization. Roberts quoted the government’s own brief: “In the President’s view, whether ‘we are a rich nation’ or a ‘poor’ one hangs in the balance. These stakes dwarf those of other major questions cases.”
The application of the major questions doctrine to foreign affairs was contested. Kavanaugh’s dissent argued for a foreign-affairs exception, contending that courts should “read the statute as written” rather than applying a thumb on the scale against presidential authority in this domain. Roberts rejected this exception, noting that while the president has independent constitutional powers in foreign affairs, the power to impose tariffs during peacetime belongs to Congress under Article I.
The Concurrences and Dissent
The decision produced a notable doctrinal fracture. Kagan, joined by Sotomayor and Jackson, declined to endorse the major questions doctrine, calling it the “so-called major-questions doctrine” and arguing the case could be resolved through “straight-up statutory construction.”
Gorsuch and Barrett disagreed on the doctrine’s theoretical foundations. Gorsuch rooted it in separation-of-powers principles; Barrett argued it simply reflects arriving at the “most natural meaning” of a statute.
Kavanaugh’s 63-page dissent, joined by Thomas and Alito, is the most comprehensive defense of executive tariff authority under IEEPA. Kavanaugh warned of practical consequences: the government “may be required to refund billions of dollars to importers who paid the IEEPA tariffs, even though some importers may have already passed on costs to consumers or others.”
The Refund Crisis
The decision’s silence on remedies has created the largest refund dispute in U.S. customs history. The Penn Wharton Budget Model estimates cumulative IEEPA tariff collections at approximately $165 billion through January 2026, with additional collections in February before the tariffs terminated on February 24. Collections had been running at roughly $500 million per day, with IEEPA tariffs representing half of all U.S. customs duties by late 2025.
More than 2,000 lawsuits have been filed at the Court of International Trade, including by FedEx, Costco, L’Oreal, Dyson, and Nissan North America.
The CIT’s Universal Refund Order
On March 4, Judge Richard Eaton of the CIT issued a universal refund order in Atmus Filtration, Inc. v. United States, directing CBP to refund all illegally collected IEEPA tariffs to every importer who paid them, not just litigants. Eaton distinguished the Supreme Court’s holding in Trump v. CASA, Inc. that “universal injunctionsA court order that applies to all people affected by a law or policy, not just the parties who filed the lawsuit. Also called a nationwide injunction. are impermissible,” arguing that the CIT’s exclusive national jurisdiction under 28 U.S.C. Section 1581 and the Constitution’s uniformity requirement for duties place it outside that precedent.
The government could not comply. CBP’s Automated Commercial Environment system cannot easily separate IEEPA duties from other tariffs. CBP’s existing procedures and technology were not suited for the volume of refunds required, particularly where manual interest calculations were needed. The agency is developing a new web-based system to streamline refund processing, targeted for completion within 45 days.
Interest continues accruing at an estimated $650 million per month. Eaton paused his order pending system development but required weekly progress reports. The universal scope of the order will likely be challenged on appeal.
Distributional Questions
Even if the refund mechanism works, a fundamental distributional problem remains. Importers paid the tariffs, but the Yale Budget Lab estimates a substantial portion was passed through to consumers as higher prices. Some companies, like FedEx, have said they will pass refunds back to customers. Most have not. Meanwhile, as the Volokh Conspiracy noted, there is no established procedure for compensating consumers who paid higher prices, workers who were laid off, or businesses that lost sales and supplier relationships during the tariff period.
The Replacement Tariff Strategy
Section 122: The 150-Day Bridge
On February 24, Trump imposed a 10% across-the-board tariff under Section 122 of the Trade Act of 1974, which authorizes temporary surcharges of up to 15% for 150 days to address “large and serious balance-of-payments deficits.” Unlike the IEEPA tariffs, Section 122 applies uniformly to all countries without the differentiated rates previously negotiated.
The legal basis is debatable. Section 122 was enacted in the wake of the Nixon shock, when the U.S. was literally running out of gold reserves. The U.S. currently has a large trade deficit but, as Gita Gopinath observed, “there is high cholesterol but not a heart attack.” The balance of paymentsA comprehensive measure of all economic transactions between a country and the rest of the world, covering trade in goods and services as well as capital flows., which includes capital inflows and outflows alongside trade, is near zero.
A group of states have challenged the Section 122 tariffs on two grounds: no qualifying balance-of-payments deficit exists, and the tariff’s country-specific exemptions violate Section 122’s non-discrimination requirement. The tariffs expire July 24, 2026, and litigation may not conclude before then.
Section 301, Section 232, and Beyond
The longer-term strategy involves authorities that require investigations but offer broader powers. USTR Jamieson Greer announced Section 301 investigations into 15 countries and the EU on March 11 (excess manufacturing capacity) and 60 countries on March 12 (forced labor). Section 301 tariffs have no statutory rate ceiling and no time limit, though they require agency determinations of unfair trade practices.
Section 232 national security tariffs are also expanding. Beyond existing tariffs on steel, aluminum, and autos, the administration is reportedly investigating imports of batteries, iron fittings, plastic piping, and telecom equipment.
Trade scholars cited by the Yale Budget Lab have argued that a tariff regime approximately as large as the IEEPA regime could be reconstructed using a combination of these authorities. But the “additional procedural steps” that Roberts referenced in the majority opinion create delays, require factual predicates, and generate new litigation targets.
Economic Aftermath
The ruling delivered measurable relief. The Tax Foundation estimates the weighted average applied tariff rate dropped from 13.8% to 6.7% after the ruling (rising to 10.3% during the Section 122 period). The average effective tariff rate was 7.7% in 2025, the highest since 1947.
The Yale Budget Lab projects remaining tariffs will increase consumer prices by 0.6% in the short run, costing the average household about $800 per year. The burden is regressive: lower-income households in the bottom decile bear a cost equal to 1.1% of their income, compared to 0.4% for the top decile. The remaining tariffs are projected to increase unemployment by 0.3 percentage points and reduce employment by 550,000 jobs by end of 2026.
The long-run GDP impact was cut from an estimated 0.3% to 0.1% by the ruling, equivalent to approximately $30 billion annually. IEEPA tariff refunds may provide a temporary positive fiscal impulse that offsets some negative growth effects for 2026, though the timing and distribution of refunds remain uncertain.
The trade deficit barely moved: it fell by just $2.1 billion in 2025, with the goods deficit actually increasing by $25.5 billion. The reduction came entirely from the services trade surplus.
Unresolved Questions
The majority explicitly left several issues open. It did not address whether the “trafficking tariffs” genuinely “deal with” “an unusual and extraordinary threat” as IEEPA requires, nor whether courts can review the president’s emergency determinations under IEEPA at all. It also declined to specify what the power to “regulate … importation” does include, calling any such answer “plain dicta.”
The doctrinal split on the major questions doctrine is notable. Only three of the six majority justices endorsed it. The three liberal justices explicitly distanced themselves from it. And the dissenters, while acknowledging the doctrine as an “important canon,” argued it was satisfied here and should not apply to foreign affairs powers. The decision strengthened the doctrine’s application but revealed its unstable coalition.
The administration’s pivot to alternative legal authorities has already generated new litigation. Whether those authorities can sustain a tariff regime of comparable scale will depend on factual predicates, procedural compliance, and judicial interpretations that may take years to resolve. The IEEPA ruling established that broad emergency powers cannot substitute for specific congressional authorization of tariffs. Whether the administration can find that authorization elsewhere remains the central question of American trade policy in 2026.
