The Supreme Court just blew a hole through the centerpiece of Donald Trump’s economic agenda, and markets are already celebrating.
In a 6-3 ruling delivered Friday morning, the justices declared that Trump exceeded his authority when he used a 1977 national emergency law to slap sweeping tariffs on virtually every trading partner the United States has. Chief Justice John Roberts, joined by the three liberal justices plus conservatives Neil Gorsuch and Amy Coney Barrett, wrote the majority opinion with a line that will echo through trade policy for decades: “IEEPA does not authorize the President to impose tariffs.”
That’s it. Six words that just invalidated more than $175 billion in collected tariff revenue and potentially the most aggressive unilateral trade action in modern American history.
What The Court Actually Said
The legal question was straightforward, even if the politics weren’t. Trump imposed his “Liberation Day” tariffs last year using the International Emergency Economic Powers Act, or IEEPA, a 1977 law designed to give the president tools to deal with foreign economic threats during national emergencies. The tariffs ranged from 10% on most countries to as high as 145% on Chinese goods. Before Trump, no president had ever used IEEPA to impose tariffs. Not once.
Roberts was blunt about that fact. The administration had hung its entire legal argument on two words buried in the statute, “regulate” and “importation,” separated by 16 other words. From that thin thread, Trump claimed “the independent power to impose tariffs on imports from any country, of any product, at any rate, for any amount of time,” Roberts wrote. The Chief Justice wasn’t buying it.
“When Congress grants the power to impose tariffs, it does so clearly and with careful constraints,” Roberts wrote. “It did neither here.”
The ruling consolidated two lower court cases, both of which had already found Trump’s tariffs illegal. Small businesses, importers, and a group of states had challenged the duties, arguing exactly what the Supreme Court ultimately agreed with: this wasn’t a power Congress ever gave the president.
The $175 Billion Question Nobody Answered
Here’s where it gets messy. The Court struck down the tariffs but said absolutely nothing about what happens to the more than $175 billion the government already collected from importers. That money is just sitting there, and the majority opinion punted on whether any of it needs to be returned.
Justice Brett Kavanaugh, in his dissent, flagged exactly this problem. The refund process, he predicted, “is likely to be a ‘mess.'” He’s probably right. Some importers passed those costs directly to consumers. Others absorbed them. Unwinding over a year of tariff payments across thousands of businesses and product categories is an administrative nightmare that could take months or years to resolve.
The National Retail Federation, whose board includes CEOs from JPMorgan Chase, General Motors, FedEx, and The Home Depot, immediately urged the lower court to “ensure a seamless process to refund the tariffs to U.S. importers,” calling the potential refunds an “economic boost” that would let companies reinvest in operations and employees.
Seamless? With $175 billion on the line and no judicial guidance on how to handle it? Good luck with that.
Trump’s Furious Response And His Backup Plan
Trump was in a meeting with governors when someone handed him the news. He called it “a disgrace” and walked out.
At a hastily arranged press conference, the president unloaded on the justices who ruled against him, calling them “very unpatriotic and disloyal to the Constitution” and suggesting they had been “swayed by foreign interests.” He had particularly warm words for Kavanaugh, who wrote the principal dissent, praising his “genius” while suggesting the other justices may have lost money in the stock market.
But Trump didn’t just rage. He announced a pivot. Using Section 122 of the Trade Act of 1974, a different legal authority, Trump said he would impose a new 10% global tariff “over and above the normal tariffs already being charged.” He also signaled that the administration would launch trade investigations under Section 301, which allows retaliatory tariffs against unfair trade practices.
The practical difference is significant. IEEPA let Trump move fast and unilaterally, slapping duties on any country for any reason with virtually no process. Section 122 and Section 301 require more procedural steps, public comment periods, and congressional involvement. Trump himself has previously acknowledged that these alternative authorities are “more cumbersome.”
Translation: the tariff era isn’t over, but the blank check just got shredded.
Wall Street’s Verdict: Relief With An Asterisk
Markets initially spiked on the news. The S&P 500 jumped 0.6%, the Nasdaq Composite rose 0.9%, and the Dow added 139 points, recovering from a 200-point loss earlier in the session driven by disappointing GDP data. Retail and apparel stocks led the surge, with companies like Nike, Target, and Home Depot all jumping on the ruling.
But the rally had a ceiling, and for good reason. Wall Street had largely priced in this outcome. JPMorgan’s trading desk had assigned a 64% probability to tariffs being struck down and immediately replaced, predicting only a modest net gain in the S&P 500 after an initial spike. That’s almost exactly what happened.
Wedbush Securities analyst Dan Ives called the ruling “bullish for tech,” particularly if the potential refunds materialize. “We believe this would act as a net positive for tech with financial relief for many companies while creating greater supply chain visibility, especially coming from the Asia supply chain,” he wrote.
The skeptics had a point too, though. Keith Lerner, Chief Investment Officer at Truist Wealth, noted that “it does add another layer of uncertainty” since companies have spent months restructuring supply chains around a tariff regime that just got invalidated. Now they need to adapt again, while watching Trump try to reimpose duties through different legal channels.
“I don’t think we have heard the last from Trump and tariffs,” wrote Neil Dutta, head of economics at Renaissance Macro. That’s probably the safest bet on Wall Street today.
What This Means For The Economy
The timing of this ruling matters. Just hours before the decision dropped, the Bureau of Economic Analysis reported that U.S. real GDP grew just 1.4% in the fourth quarter of 2025, badly missing estimates. Core PCE inflation, the Fed’s preferred gauge, came in hotter than expected. The economy was already showing the strain of 14 months of trade chaos.
The tariffs touched nearly every American consumer. A Federal Reserve Bank of New York report found that Americans were paying for almost all of the additional costs. Higher prices on everything from electronics to clothing to groceries were a direct consequence of the duties that just got thrown out.
If refunds materialize, even partially, the economic impact could be significant. Over $175 billion flowing back to importers would act as a stimulus, potentially easing prices and boosting corporate margins. But that’s a big “if” with no clear timeline or mechanism.
The trade deficit, meanwhile, barely budged. U.S. trade deficit totaled $901 billion in 2025 despite Trump’s tariffs, undermining the central economic argument for imposing them in the first place.
The Bigger Constitutional Picture
This was a rare setback for Trump at a Supreme Court that has been broadly favorable to his claims of executive power. Since he began his second term, the Court had sided with the administration in roughly two dozen cases on its emergency docket. This time, two of Trump’s own appointees, Gorsuch and Barrett, joined the majority against him.
Roberts invoked the major questions doctrine, the same principle the Court used to block Biden’s student loan forgiveness, which holds that Congress must explicitly authorize policies with vast economic impact. The irony isn’t lost on anyone: the same legal theory that frustrated Biden’s agenda just kneecapped Trump’s.
Rachel Ziemba, adjunct senior fellow at the Center for a New American Security, told Al Jazeera that the ruling is “definitely a big repudiation of Trump’s tariff agenda” that will “rein in Trump’s ability to threaten tariffs against any country for any reason.”
That last point might be the most consequential one. Trump wielded tariff threats as a diplomatic weapon, using the possibility of crushing duties to pressure allies and adversaries alike. With IEEPA off the table, that weapon just got a lot less intimidating.
What Comes Next
Three things to watch. First, the refund fight. Without Supreme Court guidance, lower courts will have to sort out whether and how $175 billion gets returned. Expect litigation that makes the original tariff cases look simple.
Second, Trump’s replacement tariffs. The new 10% global duty under Section 122 and upcoming Section 301 investigations will face their own legal challenges. And the by-country, by-sector implications could look very different from the IEEPA tariffs, creating what Evercore called “another bout of trade policy uncertainty.”
Third, Congress. Roberts’ ruling fundamentally reasserted that the power to tax belongs to Congress, not the president. Whether lawmakers actually use that power, or continue to let the executive branch run trade policy, will determine whether this ruling marks a genuine shift in how America conducts trade or just a speed bump on the way to the same destination.
For now, the markets are cautiously celebrating, importers are lawyering up for refunds, and Trump is already looking for the next legal channel to keep his tariff machine running.
The Supreme Court said the president can’t use IEEPA to tariff the world. It did not say the world won’t get tariffed.
