The Supreme Court struck down many of President Donald Trump’s tariffs Friday in a landmark ruling that will immediately upend U.S. trade policy, restore lower rates on imports and take away the president’s preferred tool for hardball negotiations with foreign leaders.
In a 6-3 decision, the majority said that Trump lacks the authority to impose a sweeping tariff regime, upholding a September appeals court opinion that a 1977 law does not grant the power to the president to set tariffs at will.
Chief Justice John Roberts wrote that the Trump administration’s inadequate legal justification was “based on two words” from the International Emergency Economic Powers Act, or IEEPA: “regulate” and “importation.”
“The president asserts the independent power to impose tariffs on imports from any country, of any product, at any rate, for any amount of time,” Roberts wrote. “Those words cannot bear such weight.”
The ruling is a major setback for the Trump administration, which has depended on that legal justification to levy tariffs. It’s also a key decision for American households, many of which have struggled to keep up financially as businesses have hiked prices in response to Trump’s tariffs.
Supreme Court says most Trump tariffs are illegal
A mix of Democrat-led states and businesses filed lawsuits in April challenging the tariffs that the White House announced using emergency powers in the 1977 IEEPA law.
The administration said large trade deficits and drug trafficking were ongoing national emergencies, giving the president the authority to instate tariffs. On Friday, the Supreme Court opinion found that Trump’s IEEPA tariffs are not lawful.
Relying on IEEPA, Trump announced tariffs on Mexico, Canada and China last February. He also announced baseline tariffs of 10% on nearly every country in April and country-specific tariff rates up to 50% on about 90 nation that went into effect in August. (Since then, the administration has negotiated trade deals with some of these countries, leading to lower tariffs rates.)
The Supreme Court case only affects IEEPA tariffs, which were raising over $133 billion on annualized basis as of mid-December, according to Customs and Border Protection. Sector-specific tariffs on items like steel, aluminum and automobiles were not affected by this legal challenge.
The case, Learning Resources v. Trump and Trump v. V.O.S. Selections, consolidated multiple legal challenges. The first lawsuit — the V.O.S. Selections matter — was filed in the U.S. Court of International Trade by the Liberty Justice Center on behalf of importers and several states. The Learning Resources lawsuit was filed several days later in the U.S. District Court for the District of Columbia. The plaintiffs in that case were small businesses selling “educational products, educational toys and pet toys,” per the complaint.
The case addressed questions about the president’s ability to impose broad tariffs without congressional approval. During oral arguments on Nov. 5, one of the attorneys representing small businesses, Neal Katyal, argued that the power to tax lies with Congress.
“Tariffs are taxes,” he said. “They take dollars from Americans’ pockets and deposit them in the U.S. Treasury.”
According to the Yale Budget Lab, Trump’s tariffs were expected to cost the average American household about $1,700 this year. While most consumers do not pay tariffs directly, higher costs for importers have led to higher prices on the shelves.
Without IEEPA tariffs, the Budget Lab estimates that consumers now face an effective tariff rate of 9.1%. The tariffs that remain in place translate into a loss of about $800 a year for the average household.
Will the White House issue tariff refunds?
Many businesses and consumers were hoping that a negative outcome for the administration would actually be a win for the economy, stimulating imports and exports. On the other hand, the administration argues that tariffs support the U.S. job market and boost American manufacturing.
In the lead-up to the opinion, hundreds of companies — including Costco, Toyota and Crocs — initiated lawsuits against the Trump administration to maintain the ability to argue for refunds of the money they paid in tariffs.
The Supreme Court did not directly address how that process would play out. But in his dissent, Justice Brett Kavanaugh wrote that issuing refunds is one “serious practical consequence” of the ruling.
“The Court says nothing today about whether, and if so how, the government should go about returning the billions of dollars that it has collected from importers,” Kavanaugh wrote, “But that process is likely to be a ‘mess,’ as was acknowledged at oral argument.”
Last month, Treasury Secretary Scott Bessent told Reuters that the department has adequate resources to refund tariffs should they be struck down.
“It won’t be a problem if we have to do it,” Bessent said. “But I can tell you that if it happens … it’s just a corporate boondoggle.”
What’s next for Trump’s tariffs?
The Supreme Court’s decision will have wide-ranging effects on Americans’ budgets, international trade deals, inflation rates and, of course, the markets. Analysts have been anxiously anticipating a ruling on tariffs.
The S&P 500, Dow Jones Industrial Average and the Nasdaq all rose Friday morning immediately following the the news, but it’s not clear if those gains will sustain. The markets will have the weekend to fully digest the ruling.
Some analysts have speculated that the ruling does not fully shut the door on Trump’s tariffs — just the currently legal justification used to implement them. Kavanaugh hinted at this in his dissent, noting that the ruling “is not likely to greatly restrict presidential tariff authority going forward.”
With Trump slated to make the annual State of the Union address on Tuesday, he may indicate his administration’s next move — and whether he plans to impose tariffs under separate legal authority.
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