Supreme Court Pulls Plug On Trump's IEEPA Tariffs

(MENAFN- ING) What the Court says

The Supreme Court concluded that the International Emergency Economic Powers Act (IEEPA) does not authorise broad tariffs based on persistent trade deficits, and US President Donald Trump went too far in enacting the tariffs without clear authorisation from Congress. Three justices dissented. This is the very first time the Supreme Court has effectively limited Trump’s powers, which – at least in my view – is a strong statement that goes beyond trade.

The Court did not address the extent to which importers were now entitled to refunds. This will be a matter of lower courts again.

Setback for Trump’s tariff agenda

The ruling applies to tariffs implemented under the International Economic Emergency Powers Act (IEEPA) only, which had generated roughly $133 billion in duties by the end of last year. The decision removes one of Trump’s fastest tools for imposing broad tariffs.

However, the question about possible refunds remains open for now and will be decided by lower courts in the coming months. The US Court of International Trade will ultimately manage that process, and refunds won’t come automatically, as any importer that wants its money back must sue individually. This process has already kicked off, with over 1,000 corporate entities now involved in a legal fight.

The replacement toolkit is extensive

The White House has been preparing for such a ruling. Alternative tariff authorities have been queued up for months. Trump launched a Section 301 investigation against Brazil in December precisely to have replacement options ready, and there have been several sectoral tariffs being put in place or at least contemplated.

In short, the US administration’s toolbox includes tariffs under Section 301 (unfair trade practices), Section 232 (national security), Section 122 (balance of payments issues), and Section 338 (discrimination against US exports).

Of these options, Section 122 offers the fastest path forward. This provision allows tariffs up to 15% for balance-of-payments reasons with minimal procedural requirements. Implementation could be nearly instantaneous. The limitations: a 150-day time limit unless Congress extends it, and a ceiling well below current reciprocal rates. Section 122 has never been invoked, but its balance-of-payments trigger clearly applies to major partners like China and Mexico. Think of it as a temporary patch while more durable options take shape.

For longer-term tariffs, Section 301 investigations remain the primary tool. These allow duties in response to unfair trade practices but require up to nine months of review before implementation. The Brazil investigation is already underway. More will follow. Section 232 national security reviews offer similar flexibility with similarly lengthy timelines – current investigations cover steel, aluminium, copper, autos, and auto parts.

Last but not least, there’s Section 338, dating back to the 1930 Tariff Act. This Great Depression-era provision allows tariffs up to 50% based on discrimination against US commerce. It’s untested in modern trade law, lacks procedural safeguards, and would invite immediate legal challenges. But it sits in the toolkit if the administration wants to signal maximum aggression.

Impact on bilateral trade agreements uncertain

The IEEPA tariffs were the basis of Trump’s Liberation Day announcements and a cornerstone in the negotiations of bilateral trade agreement frameworks since then, such as the US-EU trade deal. However, these trade deals are bilateral agreements and will not be directly affected by the Court ruling. Still, with the IEEPA tariff threat gone, some trading partners might try to renegotiate or to rethink their own commitments. As the EU had put the ratification of its part of the US-EU deal on hold after the Greenland conflict, some European members of parliament might now feel encouraged to continue doing so. However, the truth is that the filled toolkit of other tariff options and the new US stance on geopolitics will keep US trading partners in check.

Tariffs are still here to stay

The Supreme Court’s ruling underscores a broader debate over executive power in economic policy. As recent days have shown, not only in trade and tariffs. IEEPA was never intended to be used to implement broad tariffs but was designed to grant the president targeted authority to respond to emergencies. Upholding Trump’s tariffs would have shifted the balance of power from Congress to the President, further enhancing his executive power. The decision ultimately reaffirms constitutional checks and balances to prevent excessive presidential authority.

Europe should not be mistaken, this ruling will not bring relief. Instead, Section 301 and 232 investigations can target specific sectors more precisely than IEEPA’s broad-brush approach. Pharmaceuticals, chemicals, automotive components – all plausible candidates for the next round. The legal authority may be different, but the economic impact could be identical or worse.

The Supreme Court ruled on constitutional limits, not trade policy. Trump’s tariff agenda survives with new legal foundations and a messy transition period. Companies face months of uncertainty about refunds that may never fully materialise, replacement tariffs that will likely restore previous rates, and which sectors get targeted in round two. The scaffolding has come down, but the building remains under construction. No matter how today’s ruling reads, tariffs are here to stay.

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