(UNITED STATES) — The U.S. Supreme Court ruled on February 20, 2026, that President Trump exceeded his legal authority when he imposed sweeping tariffs under the International Emergency Economic Powers Act, striking down large parts of the administration’s tariff program and prompting fast reactions from Canada and the European Union.
Chief Justice John Roberts, writing for the majority in Learning Resources, Inc. v. Trump, held that IEEPA does not authorize the president to impose tariffs of indefinite scope. The Court concluded that tariffs are a taxing power reserved to Congress under Article I of the Constitution, not a tool a president can deploy through emergency authority.
Roberts warned that Trump’s interpretation would “give the President power to unilaterally impose unbounded tariffs,” unconstrained by procedural limits and free from judicial review, calling it a “transformative expansion” of presidential authority that the Court rejected.
The majority applied the major questions doctrine, holding that when Congress intends to delegate authority over decisions of vast economic significance, it must do so explicitly and clearly, a standard the Court found IEEPA did not meet for tariff authority. Justice Neil Gorsuch and Justice Amy Coney Barrett joined that reasoning in a concurring opinion.
Justice Brett Kavanaugh dissented, arguing that IEEPA’s text, historical practice, and Supreme Court precedent showed Congress intended to grant the president sweeping tariff power.
The decision invalidated reciprocal blanket tariffs imposed on nearly all U.S. trading partners beginning in April 2025, as well as tariffs imposed to combat fentanyl trafficking. Some sector-specific measures remained a live issue, with Canada’s trade minister pointing to continuing measures affecting steel, aluminium, and auto industries.
For businesses, the ruling immediately cast doubt on the durability of one of the Trump administration’s most far-reaching trade moves, while leaving open questions about which tariffs might persist under other legal authorities. Companies that built supply-chain and pricing strategies around the now-invalidated duties faced another recalculation.
The tariff regime had generated more than $130 billion in import duties, affecting companies, supply chains, and trading partners worldwide. Another estimate in the aftermath of the case put the program’s projected revenue at over $1.2 trillion over ten years, underscoring why the Court treated the dispute as a question of vast economic significance.
The now-invalidated Trump tariffs reached deeply into trade flows that touch everyday pricing, from manufacturing inputs to consumer goods, because import duties typically work their way through supply chains. When tariffs lift the cost of components, manufacturers often face a choice between absorbing the hit, cutting costs elsewhere, or raising prices.
Autos and other manufacturing sectors can feel those pressures quickly because modern production depends on predictable cross-border sourcing. Agriculture can also sit at the center of tariff cycles, as duties and retaliation can reorder demand, shift shipping routes, and alter which exporters win contracts.
China stood out in the tariff buildup that preceded the ruling. On Chinese goods alone, the effective tariff rate had reached 145% by the time of the decision, after successive increases from 10% to 20% to 25% and ultimately 125%.
The Budget Lab estimated that if IEEPA authority had been upheld, the pre-substitution effective tax rate would have been 16.9%, with a post-substitution rate of 14.3%. Those figures reflect how buyers may switch products or suppliers when tariffs change prices.
Canada welcomed the ruling as a vindication of its long-standing view that the U.S. duties lacked justification. International Trade Minister Dominic LeBlanc said the ruling affirms the tariffs were “unjustified,” while cautioning that sector-specific measures affecting steel, aluminium, and auto industries remained in force despite the decision.
Canadian officials had argued the tariffs hit cross-border ties that many companies treat as a single integrated market. During the dispute, some goods faced duties reportedly reaching 35%, a level that strained commercial planning and helped fuel retaliatory measures and consumer boycotts.
European Union officials framed the decision in terms of predictability and institutional checks. EU trade spokesman Olof Gill said the bloc was “analysing it carefully” and remained “in close contact with the US administration as we seek clarity on the steps they intend to take in response to this ruling.”
“Businesses on both sides of the Atlantic depend on stability and predictability in the trading relationship,” Gill said, signaling that the bloc’s next moves would focus on whether Washington’s policy direction becomes clearer or more volatile.
Mexico also pointed to the practical reality of regional supply chains, but held off on immediate conclusions. President Claudia Sheinbaum said her administration would fully review the decision before commenting, adding that the ruling mirrors her argument that “the physical reality of North American integration is more powerful than temporary protectionist policies.”
In the UK, a government spokesperson said Britain would work with the U.S. over the impact of the tariffs ruling, indicating cooperation rather than escalation.
President Trump moved quickly after the decision to sustain tariff pressure, announcing a new 10% global tariff under Section 122. The White House framed the shift as a change in legal tools rather than an abandonment of its broader agenda.
The administration argued that even after the Supreme Court’s IEEPA ruling, its trade agenda aimed at protecting American industries would continue. Trump’s trade team also vowed to pursue other legal strategies to preserve high tariffs, though the available statutes carry limitations.
For global companies, the pivot kept uncertainty elevated because it suggested a cycle of tariff announcements, legal challenges, and recalibration. Planning decisions that normally depend on stable landed costs, predictable shipping lanes, and steady demand can become harder when tariff authority and duration shift quickly.
That uncertainty can spill beyond trade and into immigration and global mobility, because companies often pair investment and staffing decisions. Firms that expand cross-border operations may increase demand for skilled visa holders, while firms that retrench or delay projects can slow hiring and reduce transfers.
Multinational employers commonly rely on H-1B visas for specialized roles and on intra-company transfers for reassignment across offices. When tariff volatility changes where a company produces, assembles, or distributes goods, it can also change where it places teams that support those operations.
Trade tensions can also influence international student pathways in the United States. Employers that pull back on hiring or freeze budgets may reduce internship opportunities and corporate sponsorship, affecting pipelines tied to STEM hiring and work authorization routes used by F-1 graduates.
Companies adapting to tariff uncertainty can also diversify operations across countries, which may accelerate remote work models and global hiring strategies. That can reshape how employers decide whether to relocate workers, create new roles in the United States, or place roles in other markets.
The Supreme Court decision also left a major financial question unresolved: whether companies will recover tariffs already paid. The ruling did not explicitly order immediate refunds, but the finding that tariffs were collected illegally opened the door to refund claims.
Importers generally have 180 days after goods are “liquidated” to protest and request refunds from U.S. Customs and Border Protection. That process typically requires detailed documentation, and disputes can move through administrative steps before reaching the courts.
Legal experts warned that repayment battles could take years to resolve, even as businesses and industry groups seek refunds worth billions of dollars. Those disputes can become even more complicated when costs have already moved down the chain to wholesalers, retailers, and consumers.
Kavanaugh highlighted that concern in dissent, noting that some costs may already have been passed on to consumers. When that happens, determining who ultimately bore the burden can become contentious, especially if contracts allocated tariff risk in different ways.
Beyond immediate business impacts, the ruling carried constitutional weight by reinforcing Congress’s central role in tariffs and taxation. The Court’s reasoning treated broad, indefinite tariff authority as incompatible with Article I’s assignment of taxing power to the legislative branch.
The decision also signaled that courts may scrutinize sweeping economic moves that lack clear congressional authorization, especially when presidents invoke emergency powers to reshape policy in ways that carry large fiscal and market consequences. That scrutiny sits at the heart of the major questions doctrine the Court applied.
Allies may also use the decision as leverage in pushing for rules-based arrangements, arguing that predictable frameworks matter when domestic legal constraints can abruptly reshape U.S. trade policy. EU officials, in particular, tied their reaction to the need for stability in transatlantic commerce.
The near-term path now runs through two tracks the administration already set in motion: alternative tariff authorities and intensified negotiations with major partners. Trump’s Section 122 move showed how quickly the White House can switch legal foundations while keeping the same pressure strategy.
At the same time, reactions from Canada, the EU, Mexico, and the UK suggested that U.S. partners will watch which measures remain in place and which new duties Washington pursues. For businesses that operate across borders, the practical question is how to plan staffing, sourcing, and pricing while legal disputes and policy shifts continue.
Gorsuch, in his concurrence, framed the constitutional stakes in institutional terms: “The deliberative nature of the legislative process was the whole point of its design. …The nation can tap into the combined wisdom of the people’s elected representatives.”
U.S. Supreme Court Limits Trump Tariffs Under International Emergency Economic Powers Act
The U.S. Supreme Court invalidated the Trump administration’s sweeping emergency tariffs, ruling they usurped congressional taxing power. This decision affects over $130 billion in duties and complicates trade relations with Canada and the EU. Although the ruling provides a path for potential refunds, the administration’s immediate pivot to alternative legal authorities suggests that tariff volatility and supply chain disruptions will persist for multinational businesses and global markets.
