Supreme Court:
The Supreme Court of the United States has handed a stinging blow to U.S. President Donald Trump, invalidating his most drastic tariffs and effectively restricting his ability to impose import taxes without congressional approval.
The decision, issued on February 20, 2026, means that the President is no longer able to rely on the 1977 International Emergency Economic Powers Act (IEEPA) to support drastic tariffs to help cut down America’s trade deficits. Although the decision will reduce the powers of the President, it is unlikely to remove the uncertainty that has surrounded U.S. trade policy for the last year.
“It’s only gotten more complicated for everybody,” said Ryan Majerus, a partner at King & Spalding and a former U.S. trade official.
Key Questions Remain
The implications of the court’s ruling are numerous. Can the President use other legal provisions to restore some aspects of the tariff system? Will this be challenged in court again? What will happen to trade agreements that were signed under the threat of tariffs that are no longer valid?
Another significant issue is the refunding of tariffs. Companies that paid billions of dollars in tariffs last year may ask for a refund, but this may lead to protracted litigation.
Although the President had weeks to prepare for the ruling, his response was immediate and erratic. On the day of the ruling, he announced that he would impose tariffs of 10% using other legal provisions. The next day, he indicated that he might increase the tariffs to 15%.
Economists warn that while a reduction in tariffs could theoretically have a positive effect on the economy, this could be negated by the uncertainty that exists. Mike Skordeles, the head of U.S. economics at Truist, said that while the positive effect of the reduction in tariffs could be negated by the uncertainty.
Section 122: A Stop-Gap Tool?
After the loss, the administration resorted to Section 122 of the Trade Act of 1974. This section gives the President the authority to impose tariffs of up to 15% for 150 days. But any extension of that period has to be approved by Congress, which is not an easy task, especially before midterm elections.
Section 122 has never been used before, and it was intended to solve “fundamental international payments problems” and not trade deficits, according to critics. Bryan Riley of the National Taxpayers Union says that Section 122 is an outdated law that was created in a time when the U.S. dollar was pegged to gold, a practice that was abandoned long ago.
Using Section 122 may trigger another round of lawsuits, according to lawyers. Dave Townsend, a partner at Dorsey & Whitney, said that lawsuits challenging Section 122 tariffs and seeking refunds are likely.
Section 301: A Stronger Option
A hardier course may be found in Section 301 of the same legislation from 1974. Section 301 gives the U.S. the authority to take action against nations that are alleged to practice “unjustifiable” or “discriminatory” trade practices.
Indeed, U.S. Trade Representative Jamieson Greer has already announced new Section 301 investigations just days after the Supreme Court decision, indicating that the administration is ready to shift gears rather than back down.
Although the Supreme Court decision removes one of the key legal foundations of Trump’s tariff policy, it does not bring the larger trade policy fight to a close.
