(UNITED STATES) — The U.S. Supreme Court on Friday narrowed the use of emergency authorities to impose tariffs, sharpening the legal line between presidential economic powers in a national emergency and Congress’s control over taxes and trade.
The February 20, 2026 ruling held that the International Emergency Economic Powers Act does not authorize sweeping global tariffs imposed through emergency powers. The Court ruled that: Congress — not the President — controls tariff authority.
That decision has pushed the International Emergency Economic Powers Act, or IEEPA, back into focus as a sanctions and economic-security statute rather than a general tariff tool. Companies, banks and cross-border employers track IEEPA closely because it drives asset freezes, transaction bans and other restrictions that can cascade through global commerce.
IEEPA is a major U.S. federal law that allows the President of the United States to regulate economic transactions during a declared national emergency involving foreign threats. It has become one of the most powerful economic authorities available to a U.S. president and is frequently used to impose sanctions, financial restrictions, and asset freezes against foreign countries, organizations, or individuals.
Congress passed IEEPA in 1977 after years of concern that presidents had leaned too heavily on the Trading With the Enemy Act of 1917, which granted very broad wartime economic powers. During the Cold War and beyond, presidents increasingly invoked TWEA during peacetime, prompting congressional concerns about unchecked executive authority.
The National Emergencies Act of 1976 limited TWEA’s scope, and IEEPA of 1977 established “a more limited and better regulated set of emergency presidential powers as compared with those permitted under the TWEA.” The law became effective on December 28, 1977.
IEEPA works only after a president triggers it through a defined process tied to a national emergency. A president must declare a national emergency under the National Emergencies Act and identify an “unusual and extraordinary threat” originating outside the United States that threatens national security, foreign policy, or the economy.
The statute also requires notification and publication steps. The president must notify Congress immediately and publish the declaration in the Federal Register, and the framework contemplates ongoing congressional oversight.
Congress can terminate an emergency through legislation. The National Emergencies Act provides an oversight structure that shapes how emergencies are declared and maintained, and how they can end.
Once a president declares a national emergency tied to a foreign threat, IEEPA authorizes a broad set of economic controls that sit at the center of modern sanctions practice. Presidents may regulate or prohibit economic activities involving foreign entities.
Those authorities include the ability to block or freeze foreign assets in the U.S. and restrict international financial transactions. IEEPA also allows bans on trade or investment with specific countries and prohibitions on transfers of money, technology, or property tied to the emergency threat.
In practice, these measures translate into day-to-day compliance obligations that can touch routine cross-border activity. Banks and other financial institutions screen payments and customers, companies examine supply chains and counterparties, and employers assess whether business relationships involve sanctioned parties.
IEEPA’s reach can extend beyond the obvious targets because it applies not only to foreign entities but also to U.S. persons engaging in transactions that touch the U.S. financial system. Even when a company operates outside the United States, U.S.-linked payments can pull activity into the compliance perimeter created by sanctions.
At the same time, IEEPA has hard limits that shape disputes over how far a president can go. The statute’s orientation is toward foreign threats, and it cannot regulate purely domestic commerce.
IEEPA also cannot directly confiscate private property permanently. It can block or freeze property and interests in property subject to U.S. jurisdiction, but blocking is not the same as taking title.
The law cannot override constitutional protections. It also includes limits that come up in litigation and policy debates, including that it cannot regulate gold or bullion and cannot seize records without proper legal process.
One limit has become central to the current tariff fight: IEEPA does not explicitly authorize tariffs. The Supreme Court’s February 20, 2026 ruling clarified that tariffs — which function like taxes — require congressional authority rather than emergency economic powers.
That line matters because tariffs and sanctions can look similar from the outside, especially when both disrupt trade. The Court’s reasoning treats tariffs as a congressional function under the Constitution’s Tariff Clause, while leaving room for IEEPA’s core sanctions tools when tied to foreign threats and national emergency findings.
IEEPA’s central role in sanctions administration runs through the Treasury Department’s Office of Foreign Assets Control. OFAC typically implements IEEPA-based sanctions by maintaining the Specially Designated Nationals (SDN) List and issuing regulations that govern prohibited transactions, permitted activity, and licensing.
That architecture supports a range of country-based and thematic sanctions programs. The law has underpinned sanctions against Iran, restrictions on Russian financial institutions, North Korea nuclear program restrictions, counter-terrorism asset freezes, and cybersecurity sanctions.
One example in the sanctions framework involves Russian sanctions under Executive Order 14024 for harmful foreign activities, including restrictions on financial institutions conducting transactions involving Russia’s military-industrial base. Such measures can affect correspondent banking, trade finance, procurement and other routine tools of global commerce.
IEEPA appears frequently across modern national emergency actions. It has served as the sole or primary statutory authority in 65 of the 71 emergency declarations made since the National Emergencies Act was enacted in 1976.
That frequency has kept compliance teams focused on IEEPA even when public attention shifts to other debates. The statute can drive restrictions that reach companies well beyond the immediate target, especially when sanctions block property, restrict services, or prohibit payments and other transfers.
Enforcement adds another layer of risk. IEEPA violations carry severe consequences, including civil penalties that can reach hundreds of thousands of dollars per violation.
Criminal penalties can include significant fines and imprisonment, particularly for willful misconduct or evasion schemes. Even inadvertent violations can result in substantial penalties, a reality that pushes regulated entities to treat screening, controls and internal escalation seriously.
Some controversies have centered on how far presidents can stretch IEEPA beyond its traditional sanctions role. The Brennan Center documented that President Trump used IEEPA to sanction members of the International Criminal Court’s prosecution office investigating potential war crimes in Afghanistan and the Israel-Palestine context.
The Brennan Center also documented the use of IEEPA to sanction Chinese mobile communication applications in ways that conflicted with free speech protections built into IEEPA. The Biden administration subsequently reversed these actions.
The tariff dispute that culminated in Friday’s Supreme Court ruling developed alongside other attempts to broaden emergency economic powers. President Trump invoked IEEPA to justify imposing tariffs on Canada, Mexico, and China in February 2025 after declaring national emergencies related to fentanyl smuggling and “the influx of illegal aliens” from Mexico.
Trump also imposed a “reciprocal” tariff regime with baseline 10% duties on all imports. More than a dozen lawsuits challenged Trump’s tariff authority under IEEPA.
The most significant case, V.O.S. Selections v. Trump, combined claims from small businesses and 12 U.S. states. A three-judge panel of the Court of International Trade unanimously ruled in February 2026 that the fentanyl and “Liberation Day” tariffs were unlawful under IEEPA and issued an injunction halting their collection.
The trade court’s reasoning centered on the distinction the Supreme Court later reinforced. Tariffs function as taxes, the court said, requiring explicit congressional authorization under the Constitution’s Tariff Clause rather than emergency economic powers.
Friday’s Supreme Court decision significantly narrowed how future presidents can use emergency economic powers in trade contexts. At the same time, the ruling leaves intact the core IEEPA sanctions framework that U.S. administrations use to block property, restrict transactions and isolate targeted foreign actors from the U.S. financial system.
For companies, the practical impact lies in a clearer separation between tariff tools and sanctions tools. A tariff imposes duties across imports, while IEEPA typically operates by targeting foreign parties, sectors or jurisdictions tied to an identified threat and by constraining financial and commercial dealings that touch U.S. jurisdiction.
The distinction also matters for global mobility and immigration, where IEEPA’s influence often appears indirectly. Although primarily an economic law, IEEPA strongly influences immigration and global movement.
IEEPA-based sanctions can restrict visa eligibility for sanctioned individuals. They can also block business transactions affecting visa sponsors, a risk that can spill into routine corporate activity when multinational employers rely on cross-border payments, contracts and intra-company transfers.
Companies affected by sanctions may halt global hiring and suspend international transfers, including L-1 visas. Restrictions can also reduce cross-border investment, which can reshape the business footprints that support employment-based travel and longer-term mobility.
For multinational employers and investors, the compliance questions are not confined to the border. Sanctions designations and restricted transactions can affect travel and international employment arrangements, including whether routine corporate support functions can legally provide services or pay expenses for certain individuals or entities.
The Supreme Court’s February 20, 2026 ruling did not recast IEEPA as a general trade lever. It instead reinforced that tariffs require Congress, while IEEPA remains a powerful mechanism for sanctions and economic controls during a declared national emergency involving foreign threats.
Ieepa Empowers President to Declare National Emergency and Control Foreign Economic Threats
The Supreme Court clarified the limits of executive power, ruling that the IEEPA cannot be used to impose tariffs, as that authority rests with Congress. While the ruling restricts trade duties, the IEEPA remains the primary framework for U.S. sanctions, asset freezes, and transaction bans. This decision reinforces the separation of powers between the president’s emergency economic controls and congressional oversight of national trade and taxes.
