The U.S. Supreme Court delivered a seismic jolt to American trade policy on February 20, 2026, striking down President Donald Trump’s far-reaching global tariffs in a landmark 6-3 decision. The ruling, which immediately upended the centerpiece of Trump’s second-term economic agenda, found that the sweeping duties imposed under the 1977 International Emergency Economic Powers Act (IEEPA) were illegal—reshaping the landscape for businesses, consumers, and policymakers alike.
At the heart of the case were the so-called “Liberation Day” tariffs, first announced by Trump in April 2025. These duties, ranging from 10% to 50% on imports from nearly every U.S. trading partner, were justified by the administration as a response to trade deficits and, in some cases, as emergency measures against drug trafficking. But the Supreme Court’s majority opinion, penned by Chief Justice John Roberts, was unequivocal: “IEEPA does not authorize the President to impose tariffs,” Roberts wrote, underscoring that the Constitution “very clearly” gives Congress—not the executive branch—the power to levy taxes, including tariffs.
The decision not only invalidated the tariffs but also upheld prior rulings from lower courts, including the U.S. Court of International Trade, which had found that Trump lacked the authority to impose such broad import taxes using emergency powers. The immediate impact was felt on Wall Street, where tariff-sensitive sectors surged; the Nasdaq Composite led gains, while the Dow Jones Transportation Average jumped around 1%. Retailers like Abercrombie & Fitch and industrial giants such as Stanley Black & Decker saw outsized stock increases, reflecting investor optimism about reduced trade friction.
Yet, the repercussions extend far beyond the stock market. According to the Congressional Budget Office, the economic impact of Trump’s tariffs had been estimated at a staggering $3 trillion over the next decade. As of December 2025, the Treasury had already collected over $133 billion from the import taxes imposed under IEEPA. Now, with the Supreme Court’s ruling, questions swirl about the fate of these funds. Economists at the Penn-Wharton Budget Model projected that more than $175 billion in tariff revenue could be at risk of refunding to importers, while Reuters cited an estimate of $129 billion potentially being returned in the coming months. However, the Supreme Court’s decision itself did not directly address the mechanics of these refunds, leaving importers and government agencies in a state of uncertainty.
The dissenting justices—Clarence Thomas, Brett Kavanaugh, and Samuel Alito—argued that the tariffs were lawful under existing statutes. Justice Kavanaugh, in his dissent, warned, “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.” This issue of who ultimately bore the brunt of the tariffs has been hotly debated. A report from the Federal Reserve Bank of New York found that in the first eight months of 2025, 94% of the tariff costs were shouldered by U.S. consumers and businesses, with only 6% absorbed by foreign exporters. By November, that share had declined to 86%, as some costs shifted overseas, but the majority still fell on Americans.
For many in Michigan—a state with an economy deeply tied to cross-border trade, especially with Canada—the ruling was especially significant. Democratic Senator Elissa Slotkin and Representative Shri Thanedar had joined a court brief arguing that Trump exceeded his “limited tariff authority—a result Congress did not intend.” John Sellek, spokesperson for the Michigan Smart Trade Alliance, commented, “Sudden tariff actions create uncertainty across manufacturing, agriculture, retail, and supply chains. The Supreme Court has put the focus squarely on Congress to deliver stable, transparent trade policy.”
Despite the court’s rebuke, the ruling does not prevent Trump or future presidents from imposing duties under other, more narrowly defined laws. The administration has already signaled plans to keep parts of the tariff framework in place using alternative statutory authorities, though these avenues come with greater limitations and procedural hurdles. In fact, in the weeks leading up to the decision, Trump began rolling back some tariffs on metals—such as steel and aluminum—in an effort to address mounting voter concerns about rising prices and an affordability crisis ahead of the midterm elections. According to the Financial Times, the administration was reviewing the list of affected products and planning to exempt some items, while halting further expansion of the tariffs.
Political fallout was swift. In Congress, six Republican representatives crossed party lines to vote with Democrats in favor of terminating the national emergency Trump declared to justify tariffs on Canada. This rare rebuke of the president’s trade policy highlighted growing bipartisan unease; polling has consistently shown that tariffs are not broadly popular with the public, especially as inflation and supply chain disruptions continue to bite.
The Supreme Court’s decision also rippled through international trade relations. In early 2026, the U.S. finalized several major trade deals, including agreements with Indonesia and Taiwan. The Indonesia deal cut U.S. levies to 19% from 32% on goods shipped from Southeast Asia’s largest economy, exempting key exports like palm oil, coffee, cocoa, and rubber. Meanwhile, the U.S.-Taiwan agreement set a 15% tariff rate for imports from Taiwan and committed Taipei to ramp up purchases of American goods, including liquefied natural gas, civil aircraft, and power grid equipment. These deals aimed to stabilize trade flows and provide certainty for businesses shaken by the abrupt policy shifts of the past year.
Elsewhere, Vietnam’s airlines signed $30 billion in deals for Boeing aircraft, and Japan announced up to $36 billion in investments in U.S. oil, gas, and critical mineral projects. Italian exports to the U.S. even rose by more than 7% in 2025, despite the tariffs, according to national statistics bureau ISTAT. Still, the tariff regime’s volatility prompted companies like Costco and Mercedes-Benz to line up in court, seeking refunds and relief from the financial toll of the duties.
The Trump administration, for its part, has fiercely defended the tariffs. National Economic Council Director Kevin Hassett lambasted a New York Fed study showing that Americans paid most of the tariff costs, calling it “an embarrassment” and “the worst paper I’ve ever seen in the history of the Federal Reserve System.” Yet, the evidence from multiple sources—academic, governmental, and market-based—points to a broad consensus: the tariffs’ economic pain was felt most acutely at home.
As the dust settles from the Supreme Court’s historic ruling, the path forward for U.S. trade policy remains uncertain. Congress now faces renewed pressure to craft a stable and transparent framework, while businesses and consumers wait anxiously to see if and how billions in tariff revenue will be returned. For now, the era of sweeping executive-imposed tariffs appears to have come to a decisive, if contentious, end.