Supreme Court Strikes Down IEEPA Tariffs

The U.S. Supreme Court has ruled that the International Emergency Economic Powers Act (IEEPA) does not authorize the President to impose tariffs. The decision held that tariffs imposed under IEEPA exceeded statutory authority, including the Reciprocal Tariffs introduced in April 2025, as well as tariffs imposed on Canada, Mexico, and China under emergency declarations related to fentanyl trafficking and unlawful migration.

The ruling represents a significant development in U.S. trade policy and clarifies the limits of executive authority under IEEPA. However, it leaves several practical questions unresolved — particularly for businesses that have already paid tariffs under the statute.

What Did the Court Decide?

In a 6–3 decision, the Court concluded that IEEPA does not grant the authority to levy import duties. While the statute allows the President to regulate certain economic transactions during national emergencies, the Court determined that this authority does not extend to imposing tariffs, which fall under Congress’s constitutional taxing power.

The ruling applies specifically to tariffs imposed under IEEPA. It does not affect tariffs implemented under other statutory provisions that expressly authorize trade-related duties.

Which Tariffs Are Affected?

The decision held two primary categories of tariffs unlawful under IEEPA:

• Trafficking and Immigration Tariffs, which applied duties to imports from Canada, Mexico, and China in response to declared national emergencies relating to fentanyl trafficking and unlawful migration
• Reciprocal Tariffs, announced in April 2025, which imposed minimum 10% duties on imports from most trading partners, with higher rates for certain countries

Tariffs imposed under other authorities — including Section 232 (national security) and Section 301 (unfair trade practices) — remain in effect. As a result, many product-specific and country-specific duties continue to apply.

Potential Impact on Businesses

The IEEPA tariffs generated significant federal revenue over the past year. Monthly collections increased substantially compared to pre-2025 levels, though tariffs still represented a relatively modest portion of total government revenue.

Economic research indicates that much of the cost of these tariffs was assumed by U.S. importers, either through reduced profit margins or higher prices passed along to customers. In response, many businesses adjusted sourcing strategies and supply chains to manage rising costs and shifting duty rates.

With the Court’s decision, attention now turns to the status of tariffs that have already been paid.

The Refund Question

The Supreme Court did not address whether refunds will be issued for IEEPA-based tariffs already collected. Refund-related issues are expected to be addressed through further proceedings in the lower courts, including matters before the U.S. Court of International Trade.

At this stage, it is too early to know how the refund process, if any, will unfold. While more than 1,000 businesses had previously sought reimbursement, no formal mechanism or timeline has been established. The Court’s opinion did not direct that refunds be issued, nor did it outline how such claims should be handled.

If refunds are ultimately pursued, the process could involve administrative review, additional court rulings, or extended litigation. Given the size of the amounts involved and the procedural complexities, it is possible that disputes over refunds could take years to resolve.

Businesses should not assume that refunds will be automatic, immediate, or guaranteed.

What Comes Next?

On February 20, 2026, the administration announced a temporary 10% global import surcharge under Section 122 of the Trade Act of 1974. That provision allows temporary import surcharges for up to 150 days, subject to statutory limitations and potential congressional involvement. The Trump administration is working to increase these surcharges to 15%.

Other trade mechanisms, including Sections 232 and 301, also remain available and may be used to impose additional duties following required investigations and formal findings.

As a result, while IEEPA-based tariffs have been struck down, the broader tariff landscape remains dynamic and subject to further policy developments.

Planning Considerations for Businesses

Companies engaged in international trade should continue to monitor developments closely. Key considerations may include:

• Evaluating exposure to newly announced or potential replacement tariffs
• Monitoring court proceedings related to potential refunds

The timing and scope of any potential refund process remain uncertain, and further guidance from the courts or federal agencies may take time to emerge. LMC is closely monitoring developments in trade policy and the potential financial implications for our clients. As the situation evolves, we will continue to provide updates.

If you have questions about how these changes may affect your business, please reach out to your LMC advisor.