The veredict

The Supreme Court ruled 6-3 yesterday, that President Trump exceeded his authority by imposing sweeping global tariffs under the 1977 International Emergency Economic Powers Act (IEEPA). The Court held that IEEPA allows the president to “regulate importation” during a declared national emergency but does not authorize imposing tariffs, which are taxes, a power the Constitution assigns to Congress. This strikes down the centerpiece of Trump’s second-term trade agenda: the broad “Liberation Day” tariffs announced in April 2025 (a baseline 10% on imports from nearly every country, with much higher rates on China, Canada, Mexico, the EU, etc.). These generated roughly $175–240 billion in revenue since then. What happens now? The IEEPA tariffs are now invalid. Importers (businesses, not ultimately consumers) can seek refunds through Customs and Border Protection and the courts; estimates of the refund bill run $120–175+ billion, creating fiscal pressure and potential litigation over who ultimately benefits. But that’s an unlikely scenario: Trump will not abandon tariffs, but will pivot aggressively to narrower, more established statutory authorities that the Court explicitly left intact. This creates a transitional period of partial de-escalation followed by targeted re-imposition, rather than a clean end to protectionism. What are Trump’s alternatives? (1) Section 232, the National-security tariffs on specific products after a Commerce Department investigation, which couldtwke some time. Already used for steel/aluminum; can be expanded. Slower than IEEPA but very broad once triggered. (2) Section 301: Retaliatory tariffs after USTR finds “unfair” practices in trade against the U.S. (3) Section 122: Up to 15% worldwide “balance-of-payments” surcharges. And (4) Section 201 “safeguard” tariffs or Tariff Act §338 (discriminatory practices). Finally, a republican Congress could authorize IEEPA powers to continue Trump’s tariffs, but it would face opposition from both sides of the isle. What’s next? the most probable path is continuity of Trump’s protectionist goals with reduced scope and speed: tariffs shrink temporarily, then reappear in targeted or reauthorized form. Blanket unilateral power under IEEPA is gone, but the era of high tariffs is not. Expect volatility, negotiations, and litigation for the rest of 2026 as the administration adapts. As this was somehow expected, markets had already discounted this could happen, and had a very modest reaction.

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