In a landmark 6-3 decision on February 20, 2026, the Supreme Court ruled in Learning Resources Inc. v. Trump that the International Emergency Economic Powers Act (IEEPA) does not grant the president the authority to impose tariffs.
The ruling effectively nullifies the “Liberation Day” reciprocal tariffs and other sweeping trade penalties, labeling them an illegal exercise of executive power. While providing immediate economic relief, the decision leaves roughly $635 billion in other tariffs untouched.
The Financial Impact of the Ruling
The Supreme Court’s decision halts a massive tax increase on U.S. consumers and businesses. Our updated estimates highlight the scale of the revenue at stake:
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Illegally Collected to Date: Approximately $160 billion has been collected under IEEPA authorities through February 2026.
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Projected Revenue Loss: The ruling erases $1.4 trillion in anticipated federal revenue between 2026 and 2035.
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Economic Relief: By striking these tariffs, the Court removed a projected 0.3% drag on long-run U.S. GDP.
The case has been remanded to the U.S. Court of International Trade to determine the process for refunding the $160 billion already paid by American importers.
Which Tariffs are Affected?
The ruling specifically targets tariffs enacted under IEEPA. Other trade actions remain in effect.
| Illegal (IEEPA) Tariffs | Status | Remaining (Section 232) Tariffs |
| “Liberation Day” Reciprocal Tariffs (10%–50%) | Struck Down | Steel and Aluminum |
| Border & Fentanyl Tariffs (China, Mexico, Canada) | Struck Down | Autos and Heavy Trucks |
| Russian Oil Tariffs (applied to India) | Struck Down | Various Industrial Components |
| End of De Minimis Exemptions | Reversed | Estimated $635B revenue over 10 years |
Note: While IEEPA tariffs are gone, Section 232 tariffs still cost the average U.S. household approximately $400 in 2026.
Breakdown of Illegal Payments
As of late 2025, U.S. importers had already funneled billions into the Treasury under the now-illegal IEEPA mandates.
| Origin of Imports | Tariff Payments (Billions) |
| Reciprocal (All Countries) | $81.7 |
| China & Hong Kong | $37.9 |
| Mexico | $6.5 |
| Canada | $2.4 |
| Other (Brazil, India, Japan) | $5.0 |
| Total (as of Dec 14, 2025) | $133.5 |
What Happens Next?
While the ruling is a victory for the small business owners and state attorneys general who brought the suit, the administration may look toward other legal avenues to maintain its trade agenda.
Potential “Plan B” options for the White House include:
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Section 232: Expanding “national security” investigations into semiconductors and pharmaceuticals.
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Section 301: Targeting “discriminatory” practices (used previously against China).
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Sections 122 & 338: Obscure, rarely used authorities for balance-of-payment concerns or discriminatory trade. These, however, carry stricter limits on rate percentages and duration.
The Bottom Line: The Supreme Court has checked the executive branch’s ability to unilaterally raise taxes through emergency powers. However, until the administration clarifies its next move, trade uncertainty remains a primary concern for the U.S. economy.