Feb 20, 2026
The Supreme Court struck down the Trump administration’s controversial tariff policy Friday, delivering a blow to the president’s signature economic and trade negotiation tool.
After months of speculation and debate, the court, in a 6-3 decision, ruled that Trump could not use the International Emergency Economic Powers Act (IEEPA) as a means to levy tariffs and, further, could not impose tariffs at all without the approval of Congress.
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“Based on two words separated by 16 others in Section 1702(a)(1)(B) of 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. Those words cannot bear such weight,” the opinion, written by Chief Justice John Roberts, explained.
“The President asserts the extraordinary power to unilaterally impose tariffs of unlimited amount, duration, and scope. In light of the breadth, history, and constitutional context of that asserted authority, he must identify clear congressional authorization to exercise it” (1).
The opinion may come as a surprise to some, given the conservative-leaning Supreme Court ruled in favor of the Trump administration’s emergency actions in at least 20 out of 24 cases last year, according to SCOTUS Blog, an independent outlet (2). Trump himself reportedly called the opinion a “disgrace” during a White House meeting Friday morning, while others note that the strike down isn’t entirely surprising.
Kimberly Clausing, economist and former U.S. Treasury Deputy Assistant Secretary for Tax Analysis, told Moneywise, “This isn't an area where reasonable people have differences of opinion. This is an area where entire professions have weighed in to say that this is nonsense.”
The court’s decision, meanwhile, also inevitably raises questions around the Trump administration’s duty to refund the nearly $300 billion it has collected in tariff revenue (3) — and if any of that massive sum could end up in the pockets of American consumers.
Refunds and price relief? Don’t hold your breath
It’s no secret that Trump’s tariffs contributed to the rising cost of everything from clothing to coffee to furniture to beef last year. In fact, the Tax Foundation think tank estimated that tariffs cost U.S. households an extra $1,000 on average, while projecting $1,300 for 2026 (4). Those hoping that the SCOTUS decision could lead to consumer refunds, however, are likely to be disappointed.
“I don't see a mechanism through which rebates show up at people's doors,” Clausing said. “So I don't think they should expect that.”
In fact, any tariff refunds doled out by the Trump administration would go directly to the importer of record that paid the tariff.
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From there, Patrick T. Childress, an international trade and disputes attorney and former assistant general counsel for the U.S. Trade Representative (USTR), explained to Moneywise that it will be up to the importer’s suppliers and customers to seek their share of the refund — a process that could play out “over the course of months, if not years.”
It’s possible that, as refunds work their way through the supply chain, retailers could pass along the savings to customers. But they aren’t obligated to do so, economist Brad W. Setser, a former senior advisor to the USTR, told Moneywise, adding that “It's not a given that the rebated tariffs will flow all the way to the final consumer in every case.”
Clausing said that retailers who hiked prices due to tariffs may reduce them back to the pre-tariff rates. But, she added, some changes could be invisible to consumers, like retailers reducing their planned price increases.
That said, the Wall Street Journal reports that U.S. companies will pass even more tariff cost onto customers in 2026 — a situation that could still play out, despite the SCOTUS decision, if the Trump administration pivots to their tariff Plan B (5).
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The Trump administration’s Plan B
The Trump administration anticipated an unfavourable SCOTUS outcome, with Treasury Secretary Scott Bessent previously explaining how, in the event that the IEEPA tariffs are struck down, they could invoke Sections 122 and 301 of the Trade Act of 1974, and Section 232 of the Trade Expansion Act of 1962, to “recreate the exact tariff structure” (6).
Those three sections would all allow the administration to levy new tariffs in different ways.
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Setser said that applying “a broad balance of payment tariff using Section 122,” which would allow for 15% tariffs for a maximum of 150 days, could help replicate the current tariff structure.
“Will you have the exact same set of tariffs? Almost certainly no,” he added. “Could you get a broadly similar set of tariffs … in terms of overall level, revenues? Yeah, probably.”
Childress, meanwhile, said that the Section 301 tariffs could prove the “longer term solution.”
Those tariffs, which are used “to enforce U.S. rights under trade agreements and respond to certain foreign trade practices,” according to Congress, allow for a tariff rate above 15% (7) and, as Childress explained, “can be used on a country-by-country basis to support some of these ongoing trade negotiations … and can be used as leverage in those negotiations.”
The Section 301 tariffs, however, can only be invoked following an investigation of the individual trade partners to validate them. The Section 232 tariffs also require an investigation, in this case to show that “those imports ‘threaten to impair’ U.S. national security’” (8).
As a result, Setser believes the Trump administration will “be a little more cautious” if they opt for 232 and 301 tariffs, to avoid losing any ensuing legal challenges that could nullify them.
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And as for their economic impact on American households, he added that these different tariffs, if enacted, could offer some modest relief but that “It's up to the Trump administration to decide how many of these 232s, 301s they want to bring, and on what basis.”
Conversely, Clausing suggested that the SCOTUS ruling could offer the Trump administration an “off-ramp” on the tariff issue, which has proven unpopular with voters while also contributing to increased job losses. She added, though, that “If there's one policy that the president just clings to, it's tariffs,” which is why “It's hard to imagine them walking away entirely.”
Still, she hopes that whatever policies do move forward, future administrations don’t follow Trump’s tariff example.
There's a reason why rich countries around the world average extremely low tariff rates as a share of imports, Clausing added.
“If this were a smart idea, there'd be another rich country that was doing this.”
Article Sources
We rely only on vetted sources and credible third-party reporting. For details, see our editorial ethics and guidelines.
Supreme Court of the United States (1); SCOTUS Blog (2); Federal Reserve Bank of Richmond (3); The Tax Foundation (4); The Wall Street Journal (5); Newsweek (6); Library of Congress (7, 8)
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Mike Crisolago is a Staff Reporter at Moneywise with more than 15 years of experience in the journalism industry as a writer, editor, content strategist and podcast host. His work has appeared in various Canadian print and digital publications including Zoomer magazine, Quill & Quire and Canadian Family, among others. He’s also served as a mentor to students in Centennial College’s journalism program.
