$175B at Stake: Supreme Court Kills IEEPA Tariffs, New 10% Takes Effect

The U.S. Supreme Court ruled Feb. 20, 2026, that President Donald Trump overstepped his authority in imposing broad tariffs under the International Emergency Economic Powers Act (IEEPA), a law meant for emergencies not trade policy. The 6-3 decision declared most of the sweeping global tariff measures illegal because only Congress can authorize a tariff. The ruling struck down levies that had set a 10% baseline on almost all imports and higher penalties on key trading partners, putting more than $175 billion in collected duties at risk of refunds.

Chief Justice John Roberts wrote that the Constitution clearly grants the power to tax, including tariffs to Congress, not the president. The Court applied the “major questions doctrine,” a legal standard requiring explicit congressional language for executive actions with vast economic impact. The ruling affects trillions of dollars in trade and unsettles past tariff collections, triggering calls from states and businesses for reimbursement.

Reaction was swift. Trump called the decision “deeply disappointing” and criticized the justices. Lawmakers, analysts and business groups offered mixed views, with some welcoming the ruling as a constitutional check and others warning of ongoing trade uncertainty.

Administration Moves Quickly to Replace Duties

Within hours of the Supreme Court ruling, the White House shifted strategy to preserve import taxes. Trump signed an executive order to impose a temporary 10 % global tariff under Section 122 of the Trade Act of 1974, a rarely used provision that allows up to 15 % duties for 150 days to address balance-of-payments issues. The tariff will start on Feb. 24, 2026, and applies broadly to goods from nearly all countries, though some exemptions remain for specific products.

Section 122 does not require the lengthy investigations that other trade laws demand. Still, the administration also announced plans to launch formal investigations under Sections 301 and 232 of the Trade Act, focused on unfair practices and national security, respectively, which could support longer-term tariffs. Those methods involve administrative processes and may take longer to translate into permanent duties.

Treasury Secretary Scott Bessent said the new tariff and additional trade probes would largely maintain tariff revenue levels despite the legal setback. Markets and trading partners will watch closely how these measures play out and whether they face fresh legal challenges.

What It Means for Trade and Businesses

The Supreme Court decision upended a central piece of U.S. trade policy. Tariffs previously imposed on imports from countries including China, Mexico and Canada under IEEPA are invalidated, even though some separate sector-specific duties remain. Importers could seek refunds for tariffs collected under the now-invalid authority, a process that might take years through customs and courts.

Economists and industry groups warn that the legal uncertainty created by the ruling, compounded by the new temporary tariff could increase costs for companies and consumers and complicate global supply chains. Some sectors have already seen rising expenses and slowed job growth amid the broader tariff conflict.

Internationally, governments from Southeast Asia to Europe reacted cautiously. While some expressed relief that the sweeping IEEPA tariffs were struck down, many remain wary about how the new Section 122 tariff and planned investigations may affect trade relations.

The short-term 10 % tariff under Section 122 is likely a stopgap while the administration seeks other legal tools and possible congressional action to craft longer-term trade policies.