The Supreme Court's Ruling on Trump's Tariff Policy

On February 20th, 2026, the Supreme Court of the United States struck down President Trump’s signature tariff policy in a 6-3 ruling. Many were shocked by this decision. However, Kalshi and Polymarket betting odds did not favor the president. Betting started well before the sole Supreme Court hearing on November 5th, 2025. Odds for the president’s victory ranged between 26% and 32%.

Neal Katyal, the lead attorney representing companies that sued the Trump administration, argued that a Trump victory would set a dangerous precedent. He warned that future presidents could impose tariffs for any reason they deemed a national emergency. He specifically mentioned climate change as a potential justification. Notably, the hearing did not address the possibility that a future president could issue executive orders to change or eliminate Trump’s tariff rates.

President Trump justified his authority to enact executive orders on tariffs under the International Economic Emergency Powers Act (IEEPA). Enacted in 1977, IEEPA allows the president to regulate international commercial and financial transactions after declaring a national emergency. This act enables the president to impose economic sanctions, freeze assets, and control imports. However, it does not specifically mention tariffs.

On April 2nd, 2025, President Trump declared specific reciprocal tariff percentage rates per country, coining it “Liberation Day.” His specified tariff rates fluctuated over eight months. Many reasons for these changes had little impact on the US economy.

Upon learning of the Supreme Court ruling, President Trump held an animated press conference. He cited four sections of various US trade laws that he could use to re-implement his tariffs. These sections are:

• Section 122 from the 1974 Trade Act, which allows the president to impose uniform worldwide tariffs of up to 15% for no more than 150 days to address balance-of-payment deficits. Congress can vote to expand these tariffs upon expiration. The president can also restart the 150-day tariffs without congressional approval, but this could lead to new legal challenges.

• Section 301 empowers the U.S. Trade Representative (USTR) to investigate and enforce action, including tariffs, against foreign countries engaging in unfair trade practices that harm U.S. commerce. It is a primary tool for enforcing trade agreements.

• Section 232 allows the president to impose tariffs or quotas on imports that threaten national security, as investigated by the Commerce Department.

• Section 338 is a Great Depression-era provision that grants the president authority to impose up to 50% additional duties on imports from countries that discriminate against U.S. commerce.

On February 20th, the same day SCOTUS ruled on tariffs, President Trump invoked Section 122 at a worldwide tariff rate of 10%. However, he changed his mind the following day, increasing it to the full allowable 15% rate. This rapid departure from the lower rate is likely to create shockwaves among all US trade partners. It may force them to revisit deals currently on the table. Additionally, the president will very likely face challenges to the implementation of Section 122. He interprets it as a means of rectifying trade deficits, rather than its true purpose, which is to address serious, fundamental international balance-of-payments deficits.

Utilizing Sections 301, 232, and 338 requires investigations and is country-specific. IEEPA was the president’s preferred choice because it allowed him the ability to levy any tariff rate on any country for any reason. SCOTUS did not consider this aspect of Trump’s actions. Instead, they focused solely on the constitutionality of his authority to levy taxes directly on Americans.

The repayment of tariffs levied on American importers was not mentioned in the ruling. However, since the tariffs were deemed illegal taxes, repayment is likely. Kalshi betting odds currently stand at 71% that SCOTUS will order a refund before 2027.