February 23, 2026 — President Donald Trump has lost a key tool for imposing tariffs after the US Supreme Court ruled against his use of the International Emergency Economic Powers Act (IEEPA). The decision applies significant limits, potentially requiring refunds of up to $175 billion in collected duties.
Trump’s IEEPA Strategy
Since returning to the presidency, Trump deployed IEEPA as a versatile instrument for tariffs. He leveraged these measures to secure favorable trade deals and extract concessions from nations, including former US allies. Examples include pressuring Brazil over the imprisonment of Jair Bolsonaro, challenging Switzerland following a diplomatic exchange, and demanding Greenland from European countries.
The law appeared to grant the president broad authority to impose tariffs unilaterally, without congressional oversight, generating projected revenues of $3 trillion over a decade. Officials planned to direct these funds toward tax cuts in recent legislation, $12 billion in farmer aid amid Chinese retaliation, and $2,000 dividend checks to households. Trump even suggested the tariffs could eliminate income taxes entirely.
Supreme Court Ruling and Refunds
The Supreme Court’s decision disrupts this revenue stream. Importers who paid the duties now seek refunds, with over 1,500 of an estimated 300,000-plus filing lawsuits. Treasury Secretary Scott Bessent estimates $175 billion hangs in the balance, warning of prolonged court battles.
During lower court proceedings, the administration pledged refunds if the tariffs were invalidated, averting immediate relief for importers. Justice Brett Kavanaugh, dissenting, highlighted the potential chaos of processing refunds. However, US Customs and Border Protection maintains established systems for handling overpayments and errors.
Shift to Alternative Measures
The administration quickly activated contingency plans, imposing a 10 percent tariff on all imports under Section 122 of the Trade Act of 1974, later raising it to 15 percent. This provision carries a 150-day limit and targets balance-of-payments deficits, though the US currently lacks such a deficit due to capital inflows offsetting trade shortfalls.
Future options demand detailed investigations and apply non-discriminatorily across countries and products, unlike the targeted IEEPA approach. Nations previously committed massive US investments to mitigate tariffs, gaining competitive edges. Equal treatment now eliminates such leverage.
Economic Consequences
Refunding the duties would widen the projected $1.9 trillion budget deficit and swell government borrowing. Yale Budget Lab analysis forecasts a $1.2 trillion revenue shortfall through 2035, a 0.6 percent rise in the Federal Reserve’s preferred inflation gauge, halved household costs at about $780 annually, and a 0.1 percentage point GDP reduction.
Sectoral tariffs on steel, aluminum, and autos remain intact, expected to yield $635 billion over a decade per Tax Foundation estimates. Yet, nearly 75 percent of total tariff revenues face elimination.
Broader Trade Impacts
US goods trade deficits hit record highs despite the tariffs, with persistent overall deficits and rising debt. The measures have fueled inflation, slowed growth, and reduced manufacturing jobs, casting uncertainty over midterm election prospects. Countries with preliminary investment frameworks show no signs of withdrawal, as commodity-specific tariffs persist unaffected.
