Washington D.C. – In a significant blow to the Trump administration’s trade policies, the U.S. Supreme Court on , struck down the sweeping tariffs imposed by President Donald Trump under the International Emergency Economic Powers Act (IEEPA). The 6-3 ruling effectively limits the President’s authority to unilaterally impose tariffs, asserting that the power to raise revenue through taxes rests with Congress.
The decision stems from tariffs initially enacted in on goods from China, Mexico, and Canada, justified by the administration as a response to fentanyl trafficking. These were later expanded in – dubbed “liberation day” by Trump – to encompass nearly all imports, with levies ranging from 10% to 50%. The administration argued that the U.S. Trade deficit posed an “extraordinary and unusual threat” to the nation’s economy, justifying the use of IEEPA.
Chief Justice John Roberts, writing for the majority, stated that granting the President such broad authority to impose tariffs under IEEPA would represent a “transformative expansion” of executive power. He emphasized that, in its half-century of existence, no previous president had invoked the law to impose tariffs, highlighting the unprecedented nature of Trump’s actions. “It is also telling that in IEEPA’s half century of existence, no president has invoked the statute to impose any tariffs, let alone tariffs of this magnitude and scope,” Roberts wrote.
However, the ruling doesn’t necessarily signal the end of Trump’s tariff ambitions. Within hours of the Supreme Court’s decision, the President signed a proclamation enacting a new 10% “global tariff” utilizing Section 122 of the Trade Act of 1974. This move demonstrates a clear intent to circumvent the limitations imposed by the court’s ruling and maintain a protectionist trade stance.
The immediate aftermath of the ruling saw a positive reaction from Wall Street, with the Dow Jones Industrial Average closing up 230 points, a gain of 0.47%. The S&P 500 and Nasdaq Composite also experienced gains, rising 0.69% and 0.9% respectively, suggesting investor relief at the reduction of trade policy uncertainty. Karl Schamotta, chief market strategist at Corpay, noted the decision should lead to a “modest compression” in currency volatility.
The legal battle isn’t over, however. A significant question remains regarding the estimated $130 billion in revenue generated by the invalidated tariffs. The Supreme Court did not address whether importers are entitled to refunds, leaving that issue to be decided in future court proceedings. Justice Brett Kavanaugh, in a dissenting opinion, cautioned that the government “may be required to refund billions of dollars to importers,” a process he described as potentially complex and disruptive, particularly given the possibility that importers have already passed on the costs to consumers.
The potential for refunds has already sparked concern about the logistical challenges and financial implications for the U.S. Treasury. Treasury Secretary Scott Bessent acknowledged the uncertainty, stating, “My sense is that could be dragged out for weeks, months, years.” He also indicated that alternative tariff methods are expected to maintain revenue levels in .
The administration has pointed to other avenues for imposing tariffs, including Section 232, which has already been used to levy duties on aluminum, copper, steel, furniture, and car parts. Section 301, which allows tariffs after an investigation into unfair trade practices, is also being considered, with investigations already underway regarding Brazil and China. Trump has consistently framed the use of tariffs as essential for national security and the revitalization of American manufacturing.
The international response to the Supreme Court’s decision has been varied. The United Kingdom, which secured a trade deal with the U.S. Following the initial tariff announcements, expressed confidence that its “privileged trading position” would continue. Canada, which has experienced trade tensions with the U.S. Since Trump’s return to office, is preparing for potential alternative tariff measures. Germany’s chamber of commerce acknowledged the White House’s ability to pursue tariffs through other legal mechanisms, while Switzerland indicated it would assess the specific effects of the ruling.
Despite the initial optimism following the court’s decision, the long-term impact of Trump’s renewed commitment to tariffs remains uncertain. The administration’s willingness to explore alternative legal avenues suggests that trade tensions are likely to persist, potentially disrupting global supply chains and impacting international economic relations. The question of refunds, and the potential financial burden on the U.S. Government, adds another layer of complexity to an already evolving situation.
