In a landmark decision that reverberated through the political and economic spheres on Friday, the U.S. Supreme Court delivered a 6-3 ruling sharply curtailing presidential authority to impose tariffs under the International Emergency Economic Powers Act (IEEPA)—a tool President Donald Trump wielded extensively throughout 2025. The ruling, issued on February 20, 2026, struck down sweeping tariffs on steel, aluminum, and a wide array of Chinese imports, placing more than $175 billion in tariff collections at risk of being refunded, according to Penn-Wharton Budget Model economists cited by Reuters.
The case, which consolidated lawsuits from small businesses and several states, challenged the Trump administration’s use of IEEPA to justify broad, indefinite tariffs as a response to economic threats posed by foreign trade partners. Lower courts had previously sided with the challengers, but the government was allowed to continue collecting tariffs as the issue worked its way to the nation’s highest court.
At the heart of the controversy was the interpretation of the IEEPA, a 1977 law originally designed to let presidents respond swiftly to international emergencies. The statute authorizes the president to deal with “any unusual and extraordinary threat, which has its source in whole or substantial part outside the United States, to the national security, foreign policy, or economy of the United States,” provided a national emergency is declared. A separate provision allows the president to “regulate … importation or exportation” of property in which a foreign country or its nationals have an interest.
President Trump’s administration argued that these provisions gave him sweeping power to impose tariffs on imports from any country, product, or duration, citing national security and economic threats, particularly from China. However, in the majority opinion written by Chief Justice John Roberts, the Court found this reading to be far too expansive. “Based on two words separated by 16 others in … IEEPA—‘regulate’ and ‘importation’—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,” Roberts wrote, as quoted by ScotusBlog. “Those words cannot bear such weight.”
Roberts further emphasized that IEEPA “contains no reference to tariffs or duties,” and that “until now no President has read IEEPA to confer such power.” The majority opinion, joined in part by Justices Neil Gorsuch and Amy Coney Barrett, invoked the “major questions” doctrine, which requires Congress to speak clearly if it intends to delegate decisions of vast economic or political importance. “When Congress has delegated its tariff powers,” Roberts stated, “it has done so in explicit terms, and subject to strict limits,” a standard he found unmet in this case.
The Court’s three Democratic appointees—Justices Sonia Sotomayor, Elena Kagan, and Ketanji Brown Jackson—joined another part of Roberts’ opinion, underscoring that the U.S. Code 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.”
Justice Brett Kavanaugh, joined by Justices Clarence Thomas and Samuel Alito, penned a vigorous dissent. He argued that tariffs are a “traditional and common tool to regulate importation,” and that Trump’s actions were within the bounds of IEEPA. Kavanaugh also suggested the ruling might not significantly constrain future presidents, as “numerous other federal statutes authorize the President to impose tariffs and might justify most (if not all) of the tariffs at issue in this case.” Still, he warned, “the interim effects of the Court’s decision could be substantial. The United States 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 economic consequences of the tariffs, and now their potential refund, are enormous. The tariffs imposed in 2025 alone were estimated to have raised more than $200 billion, as reported by ScotusBlog. According to economists at the Penn-Wharton Budget Model, more than $175 billion in tariff collections are now at risk of being refunded. The impact of these tariffs was felt across a broad swath of the U.S. economy: duties on imported steel and aluminum raised costs for downstream industries, from auto manufacturing to construction, while tariffs on Chinese goods led to higher prices on everything from electronics to furniture. Research from investment banks and branches of the Federal Reserve, including Goldman Sachs and the New York Fed, repeatedly showed that the financial burden of these tariffs fell overwhelmingly on U.S. companies and consumers, not on foreign exporters.
Retaliatory tariffs from China and other trading partners further compounded the pain, hitting U.S. agricultural and industrial exporters and resulting in lost exports, forgone investment, and higher input costs—collectively costing the U.S. economy hundreds of billions of dollars over the life of the measures. The government, for its part, defended the tariffs as necessary responses to national security threats and unfair trade practices, warning that the Supreme Court’s decision could undermine U.S. leverage with China and weaken the country’s ability to respond to supply-chain vulnerabilities and geopolitical shocks.
Despite the sweeping nature of its ruling, the Supreme Court left IEEPA itself intact for its traditional uses, such as sanctions and targeted trade restrictions. The justices were clear, however, that the law does not authorize the president to impose global, indefinite tariffs based on an open-ended “economic emergency.” Notably, the Court declined to address the mechanics of refunding the tariffs, leaving that complex and time-consuming process to the executive and legislative branches.
Blake Harden, Managing Director at EY’s global trade policy practice in Washington, D.C., told Fortune that “this is far from the end of tariffs,” emphasizing that while the ruling limits one specific tool, the administration retains several other tariff authorities. Harden predicted that refunding these tariffs would be a daunting administrative task: “Companies should start preparing supporting materials for that process now, while staying alert to which levers the administration pulls next to advance its trade agenda.”
On the political front, reactions were predictably divided. Democratic National Committee Chairman Ken Martin celebrated the decision, stating, “Donald Trump has tanked America so bad in one year that even the Supreme Court thinks he’s gone too far. This historic decision is a step in the right direction to rein in Trump’s illegal tariff taxes.” Martin added that the Supreme Court has handed Trump an “off-ramp” with this decision, but predicted Trump would “probably double down, even though it means screwing over everyday Americans, including his own voters.”
Market watchers, however, seemed less rattled. The S&P 500 index rose less than 1% following the decision, with David Wagner, Head of Equity and Portfolio Manager at Aptus Capital Advisors, calling the ruling “a non-event — at least for now.” Wagner noted that “somehow, the $133.5 billion collected under IEEPA in 2025 and 2026 will have to be refunded,” but suggested the largest impact may be on Trump’s negotiating powers, as other countries may now see him as having “lost his leverage” in future trade talks.
Ultimately, the Supreme Court’s decision in Learning Resources, Inc. v. Trump and Trump v. V.O.S. Selections represents a significant reassertion of Congress’s constitutional authority over tariffs and taxation. While the immediate economic and political fallout remains to be seen, the ruling has set a new boundary for presidential power in trade policy—a boundary that will shape U.S. economic strategy for years to come.