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The ruling means the U.S. could owe businesses billions of dollars in restitution. It also means that consumers may eventually see lower prices than they have been since reciprocal tariffs began.
But the SCOTUS ruling doesn’t mean a complete elimination of tariffs — Trump’s tariffs on steel and aluminum, for example, will remain in place. And the president could certainly impose more tariffs, but he would have to find a different channel to do so.
Trump says the tariffs are aimed at combating what he describes as unfair trade practices and pressuring trading partners to negotiate more favorable terms for the United States.
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Several private companies and 12 states challenged the tariffs in multiple lawsuits, arguing that the IEEPA did not authorize the president to impose tariffs and that such broad trade policy required congressional authorization.
Federal district courts ruled in favor of the challengers, holding that the president does not have the authority to impose tariffs under the IEEPA and that Congress has historically controlled broad tariff policies.
The Trump administration appealed the rulings, saying the IEEPA gives the president discretion to respond to economic threats.
Oral arguments were heard in the Supreme Court on November 5. Learning Resources vs. TrumpA case combining important questions in lower court cases. During arguments, several justices expressed skepticism about the administration’s use of the IEEPA as justification for imposing large tariffs.
On February 20, SCOTUS agreed 6-3 that the administration could not impose tariffs under the IEEPA.
Chief Justice John Roberts wrote in the majority opinion, “The President claims extraordinary power to unilaterally impose tariffs of unlimited amount, duration, and scope. “In light of the breadth, history, and constitutional context of this asserted authority, it must indicate Congress’ express authorization to exercise it.”
Roberts said the IEEPA cannot be used as a justification because the IEEPA contains no reference to tariffs or duties, there is no statute that authorizes the president to “regulate” imports, and no president has used the IEEPA to impose tariffs.
What does the tariff order mean for you?
The court’s ruling means the tariffs imposed under the IEEPA — the majority of Trump’s second-term tariffs — are void.
Without tariffs, importers’ costs would fall, which means the cost of doing business would go down. As a result, consumer prices are likely to eventually ease, meaning everyday imports such as electronics and appliances, apparel, auto parts and furniture could become cheaper. This dynamic is also likely to reduce tariff-driven inflation.
Without tariffs, international product shipments will likely be faster, and importers will not have to rely on supply chain solutions. Not only will overseas purchases arrive faster, but there will also be more options on store shelves.
However, it will take time for prices to come down as importers work through inventories purchased under tariff terms and wait for agreements with suppliers or shippers. In other words, consumers probably won’t see prices drop overnight.
There’s another wrinkle: some companies can’t lower prices and instead absorb the savings from the absence of tariffs as profits.
Importers expect returns.
Importers will no longer have to pay tariffs and once the tariffs are lifted, importers are expected to get a refund of the duties they paid while the tariffs were in place. What’s unclear at this point is how businesses will recover the tariff money and the timeline for doing so. This process can take years to run.
Some companies have already sold their rights to any future refunds they may receive under the ruling, allowing them to cash in immediately rather than waiting for refunds later. Investors, banking on the tariffs being reversed, paid only a small portion and reserved rights to a final refund.
Trump will likely look for other ways to impose tariffs.
It is likely that the Trump administration will not abandon the tariffs. Trump has other possible ways to impose tariffs on imports without Congress including:
Section 232 of the Trade Expansion Act of 1962which gives the president the authority to impose sanctions, such as tariffs, if the Secretary of Commerce declares a threat to national security. For example, Trump has used Section 232 for his tariffs on steel and aluminum.
Section 301 of the Trade Act of 1974which authorizes the president to take actions against unreasonable or unfair foreign trade practices, such as the imposition of tariffs. During Trump’s first term, he used Section 301 as the basis for tariffs on China.
Elizabeth Renter, senior economist at NerdWallet, said the ruling introduces new uncertainty for consumers who have already felt the effects of the tariffs for months. “While management will likely look for alternative ways to achieve their goals, there will not be a plug-and-play solution that allows things to continue on the path they are on,” says Renter. “For consumers, the rule means less risk of higher and higher prices, but no end to economic uncertainty.”
Trump criticized the Supreme Court’s decision and demanded a new 10 percent tariff.
Trump was furious with the court’s decision.
On Friday, at a press conference following the announcement, Trump called the SCOTUS ruling a “disrespect” and “ridiculous.” He also identified the judges who spoke against him as “unpatriotic”.
“Foreign countries that have been ripping us off for years are excited,” Trump said. “They’re very happy and they’re dancing in the streets, but they’re not going to be dancing for long, I can assure you.”
Trump said all existing national security tariffs under Section 232 of the Trade Expansion Act of 1962 and Section 301 of the Trade Act of 1974 would remain in place.
He also pointed to other “powerful” alternatives to imposing tariffs and said that, starting Monday, he would impose a 10% tariff worldwide under Section 122 of the Trade Act of 1974. But the law only allows tariffs in place for 150 days, so it’s unclear how long the tariffs will last.
Trump said the tariffs would take longer to implement under other laws, but his administration would continue to pursue them. “I thought I would simplify things, but they wouldn’t let us,” he said. Trump also indicated that he would not need to work with Congress to impose more tariffs.
Asked what would happen to the US government’s revenue from the tariffs, he said it was unclear, adding, “We will be in court for the next five years.”
(Photo by Mario Tama/Getty Images Images via Getty Images)
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