On February 20, 2026, the Supreme Court (the Court) handed down a ruling striking down a substantial portion of the tariffs enacted by the Trump administration. Tariffs imposed under this authority accounted for more than 50% of all tariff revenue collected in the final months of 2025. To make sense of this situation, below we discuss the ruling and what options the administration has to utilize tariffs going forward. We then discuss likely impacts of the ruling and implications to the economy, assuming the administration utilizes those other tools at its disposal.
The administration had relied substantially on the International Emergency Economic Powers Act (IEEPA) to impose tariffs on various countries. This law specifies that the president may regulate imports when responding to “unusual and extraordinary threats” to U.S. national security, foreign policy, or the economy. It requires that the president declare an emergency but does not specify what qualifies as an emergency.
In its ruling, the Court held that the IEEPA does not authorize the president to impose tariffs because sweeping, revenue-raising regulations must be clearly authorized by Congress. This is known as the Major Questions Doctrine. It ruled that though the IEEPA permitted regulation, it never specifically mentions tariffs. Additionally, the Court emphasized that the Constitution specifically vests taxing authority in Congress.
The Administration has claimed that effectively little has changed, and that it will continue to impose tariffs under other authority. It then issued a 15% tariff on most imports. This is permitted by Section 122 of the Trade Act of 1974 to address “large and serious” balance of payment deficits. However, the authority to issue those tariffs is only valid for 150 days unless Congress extends that period. One question that may arise is whether the president could restart the 150 day period after the first period terminates. If such an issue arises, it will likely be subject to judicial challenges.
Another provision, Section 232 of the Trade Expansion Act of 1962, allows tariffs and trade restrictions if a Commerce Department investigation finds that imports threaten national security. Unlike Section 122 described above, there is no time limit once tariffs are in place. However, Commerce must conduct the study, arrive at its findings, and those findings are subject to procedural and judicial challenges.
Section 301 of the Trade Act of 1974 empowers the U.S. Trade Representative to impose tariffs after an investigation into unfair foreign practices. After four years, these tariffs come to an end unless domestic beneficiaries of the law request continuation. At that point a new review is triggered.
And then there is Section 201 of the Trade Act of 1974 which permits industries to petition for temporary import relief if a surge of imports threatens or causes serious injury to that industry. Like Section 301, there is a four year sunset. Unlike Section 301, there does not have to be unfair practices. The impact is what matters here.
As one can see, the availability of other authorities and the administration’s swift pivot to implementing tariffs under Section 122 means that tariffs will remain an important tool of the administration. The threat of new tariffs will likely keep uncertainty at high levels. But while that uncertainty level will remain high, the ability for the administration to utilize the threat of large tariffs as a negotiating tool has been fundamentally reduced.
On the other hand, the administration may utilize other provisions of the IEEPA, such as regulating the volume of imports as a replacement for the implementation of tariffs, when it is at the negotiating table. While the use of such tactics might be challenged under the Major Questions Doctrine (discussed in the 3rd paragraph of this article), the Constitution’s vesting of taxing authority in Congress wouldn’t be an issue.
An additional uncertainty is whether refunds will be available for those who have already paid tariffs. There is no established process for requesting a refund, and obtaining a refund may involve an extended legal process. One thing that is highly likely is only those who actually paid the tariffs, i.e. the actual importers, will have any claim against the government. There will likely be no recourse for those who “paid” tariffs through higher prices or import fees unless they are able to negotiate with the actual importer.
Finally, there are potential economic impacts of the ruling. According to a study by Pen Wharton approximately $175 billion in tariffs have been collected under IEEPA authority, with current amounts being about $20 billion per month1. Obviously, if the government is forced to refund that amount, that will have a meaningful short-term impact on the federal deficit. Deficits could also expand if replacement tariffs don’t offset the current level of IEEPA tariffs. Given the high level of deficit spending in this country, there is a risk that interest rates, particularly long-term rates, could remain stubbornly high even if the Federal Reserve lowers short-term rates.
And then we get to the bottom line about tariffs. Tariffs are taxes, and someone has to pay them. It doesn’t matter if one pays them directly or indirectly. All else equal, there will be lower growth and / or higher prices as a result.
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