Supreme Court Rules Against Presidential Tariff Powers
The U.S. Supreme Court has ruled that the President does not have the legal authority to impose tariffs under the International Emergency Economic Powers Act (IEEPA). The decision has prompted advisory firm Wipfli to advise businesses to re-evaluate their tariff exposure. The ruling also introduces new uncertainty into the Federal Reserve's inflation and growth calculations, potentially complicating its monetary policy decisions.
- The Supreme Court's 6-3 decision was issued on February 20, 2026, in the consolidated cases of *Learning Resources, Inc. v. Trump* and *V.O.S. Selections, Inc. v. Trump*. - The ruling centered on the court's interpretation that the power to levy tariffs is a form of taxation, a power the U.S. Constitution grants exclusively to Congress. The majority opinion found that IEEPA's general authority to "regulate" imports was not a clear enough delegation of this taxing power. - Enacted in 1977, the IEEPA was primarily designed to allow the President to impose sanctions, freeze assets, and regulate financial transactions in response to a foreign national emergency. Prior to the tariffs in question, no president in the statute's nearly 50-year history had used it to impose broad import tariffs. - The now-invalidated tariffs had been applied to goods from most U.S. trading partners, including China, Mexico, and Canada, based on declared emergencies related to trade deficits and drug trafficking. Estimates suggest that between $160 billion and $175 billion in tariffs were collected under this now-voided authority. - Immediately following the decision, President Trump announced his intention to use a different law, Section 122 of the Trade Act of 1974, to impose a new 10% global tariff. That authority allows for temporary tariffs to address balance-of-payment deficits. - This ruling does not impact tariffs levied under other presidential authorities, such as the Section 232 tariffs on steel and aluminum or the Section 301 tariffs related to Chinese trade practices. - The Supreme Court did not rule on whether or how the billions in tariffs already paid by importers must be refunded. That issue is now expected to be decided through further litigation in the U.S. Court of International Trade. - One analysis from the Tax Foundation estimated that the IEEPA tariffs amounted to an average tax increase of $1,000 per U.S. household in 2025. Another from the Committee for a Responsible Federal Budget projected the ruling could increase federal deficits by about $2 trillion over the next decade without an alternative revenue source.
