20 February 2026 US Supreme Court rules IEEPA does not authorize presidents to impose tariffs
The United States (US) Supreme Court has held, in a 6-3 decision issued on 20 February 2026, that the International Emergency Economic Powers Act (IEEPA) does not give the President authority to impose tariffs. The decision (Learning Resources Inc" et al. v. Trump) involves tariffs imposed under IEEPA to address drug trafficking and "reciprocal" trade deficits, concluding that Congress did not clearly delegate its core taxing/tariff power through IEEPA's authority to "regulate … importation." The Court did not decide the scope of duty refunds; the issue was remanded to lower courts and ultimately the US Court of International Trade (CIT) to instruct on the scope and mechanics of relief. Refunds, if authorized and distributed in full, could total up to roughly US$170b. The White House has indicated it will move quickly to replace the levies using other legal tools, though those alternatives are generally more limited or cumbersome than the broad powers asserted under IEEPA. (NOTE: Please register and plan to attend EY's webcast, Tariffs after IEEPA: what the Supreme Court's decision means for your business, scheduled for Wednesday 25 February 2026, 12 p.m. to 1 p.m. Eastern Time.) The Court's decision encompasses two consolidated cases — Learning Resources, Inc., et al. v. Trump and Trump v. V.O.S. Selections, Inc., et al. — which challenged tariffs that President Trump imposed after declaring national emergencies to address (1) the influx of illegal drugs from Canada, Mexico and China, and (2) "large and persistent" trade deficits. The measures included a 25% duty on most Canadian and Mexican imports, a 10% duty on most Chinese imports, and a baseline "reciprocal" tariff of at least 10% on imports from all trading partners, with some countries facing higher rates. Lower courts reached different procedural postures but concluded IEEPA did not authorize the President to impose these tariffs; the Supreme Court granted review and consolidated the cases. In reaching its decision, the High Court vacated and remanded the district court's decision in Learning Resources for lack of jurisdiction and affirmed the Federal Circuit's decision in V.O.S. Selections. (For further background, see EY Global Tax Alerts, US Supreme Court will hear oral arguments in tariff case in early November 2025; opening briefs due soon, dated 15 December 2025, and Court of International Trade rules tariffs under International Emergency Economic Powers Act unlawful; appeals court temporarily reinstates tariffs as case proceeds, dated 20 May 2025.) With Chief Justice John Roberts writing for the majority, the Court held that IEEPA does not authorize the President to impose tariffs. The majority emphasized that Article I of the Constitution vests Congress with the power to levy duties and that IEEPA's text lists specific authorities including blocking, prohibiting, and regulating importation, but does not mention tariffs or duties. The Court rejected the argument that the power to "regulate … importation" silently includes the power to tax, noting Congress has historically delegated tariff authority explicitly and with limits when it intends to do so. The Court also observed that no other US president had used IEEPA to impose tariffs in the statute's 50-year history. The majority concluded that reading IEEPA to confer open-ended tariff authority would mark a transformative, and unauthorized shift of Congress's core taxing power to the Executive branch. The opinion applied separation-of-powers principles and cited past "major questions" cases as cautioning against finding sweeping delegations in ambiguous text, particularly where Congress's power of the purse is concerned. Concurring opinions agreed with the bottom line — that IEEPA does not convey authority on the President to impose tariffs — but Justices Elana Kagan, Sonia Sotomayor and Ketanji Brown Jackson would have reached the result using ordinary statutory interpretation without invoking the major-questions doctrine. Further, Justice Jackson said she would also have consulted legislative history. Dissenting, Justices Brett Kavanaugh, Clarence Thomas and Samuel Alito said they read the statute differently. The justices did not decide whether, and to what extent, importers are entitled to refunds of IEEPA-based tariffs already paid. Those questions are remanded for lower-court resolution. If fully allowed, potential refunds could reach as much as approximately US$170b, based on tariffs already paid. According to Administration statements, the White House intends to move quickly to reimpose tariff measures using other legal authorities. Those fallback tools — e.g., Section 122, Section 232, or Section 301 — generally involve more defined procedures, narrower scopes and a longer implementation timeline than the broad, emergency-based powers asserted under IEEPA. Companies that paid IEEPA tariffs should consider evaluating potential refund exposure and begin assembling documentation (e.g., entry data, payment records and product/Harmonized Tariff Schedule (HTS) details) to preserve rights as lower courts address remedies and refund processes. Taxpayers can expect near-term regulatory and policy developments as the Trump Administration pivots to alternative authorities. Duty rates and scopes may change, but reimposed measures could take time and follow different procedures. Affected entities may also consider building scenario plans for pricing, contracts and supply chains. While monitoring case developments from the lower courts for refund eligibility criteria, timing and procedural steps, businesses should maintain compliance with all other applicable tariffs and trade remedies unaffected by the ruling. Importers might also consider force majeure and price adjustment clauses tied to tariff changes and coordinate with suppliers and customers on potential retroactive adjustments if refunds materialize.
Document ID: 2026-0486 | ||||||
