Supreme Court Limits President's Tariff Authority
The Supreme Court of the United States ruled that the President does not have the legal authority to impose tariffs under the International Emergency Economic Powers Act (IEEPA). The decision follows a challenge to tariffs imposed by former President Trump. In response, advisory firm Wipfli is advising businesses to re-evaluate their tariff exposure.
- The ruling came in a 6-3 decision, with Chief Justice John Roberts writing for the majority, arguing that the power to "regulate…importation" in the IEEPA does not include the power to tax, which is constitutionally vested in Congress. This was the first time in the statute's nearly 50-year history that a president had used it to impose tariffs. - The decision invalidates several major tariff actions, including the broad "reciprocal" tariffs applied to most trading partners and specific tariffs imposed on goods from China, Canada, and Mexico related to national emergencies declared for drug trafficking and immigration. - The ruling does not impact tariffs imposed under other legal authorities, such as the Section 232 tariffs on steel and aluminum (for national security reasons) or the Section 301 tariffs targeting China's trade practices. - Economists estimated the now-illegal IEEPA tariffs would have reduced long-run U.S. GDP by 0.3%. Even with these tariffs removed, the effective tariff rate for consumers remains at 9.1%, the highest since 1946. - The question of refunds for tariffs already paid, estimated to be as high as $175 billion, was not settled by the Court and is expected to be the subject of further litigation. As of December 2025, the government had collected $129 billion from just the fentanyl and reciprocal tariffs. - In immediate response to the ruling, former President Trump announced a new 10% global tariff under Section 122 of the Trade Act of 1974, an authority that allows for temporary tariffs to address balance-of-payments deficits.
