SCOTUS Eliminates IEEPA Tariffs

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

Neal Katyal, the lead attorney who represented companies that sued the Trump administration over now illegal tariffs, argued that a Trump victory would set a precedent for future presidents to impose tariffs for anything he/she deemed a national emergency. He specifically mentioned climate change as an example. Not mentioned in the hearing was the idea that a future president could just as easily issue executive orders to change or eliminate President Trump's tariff rates.

President Trump justified his authority to enact executive orders on tariffs via IEEPA (International Economic Emergency Powers Act). IEEPA was enacted in 1977. It authorizes the President to regulate and/or block international commercial and financial transactions after declaring a national emergency in response to a substantial foreign economic threat. Through IEEPA, the president can impose economic sanctions, freeze assets, and broadly control imports. IEEPA does not reference tariffs.

President Trump declared specific reciprocal tariff percentage rates per country on April 2nd, 2025, which he coined “Liberation Day”. His specified tariff rates were very fluid over the course of eight plus months, and many of the reasons for rate change had no impact on the US economy.

Upon learning the result of the Supreme Court ruling, President Trump held an animated press conference that same day. He cited four sections of various US trade laws that he could utilize to re-implement his tariffs. They are sections 122 and 301 from the 1974 trade act, section 232 from the trade expansion act of 1962, and section 338 from the tariff act of 1930.

• 122 authorizes the President to impose uniform worldwide tariffs of up to 15% for no more 150 days to address balance-of-payment deficits. Upon expiration, congress can vote to expand the tariffs. The president can also simply choose to restart the 150 days of tariffs without congressional approval, but that would surely deliver new legal challenges.

• 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.

• 232 authorizes the President to impose tariffs or quotas on imports that can threaten national security, which are investigated by the Commerce Department.

• 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%. For whatever reason, he changed his mind the following day and increased it to the full, allowable 15% rate.

Such a rapid departure from the lower rate will surely create shock waves among all US trade partners and possibly force them to revisit deals that are currently on the table. Additionally, the president will certainly face challenges to the implementation of section 122, considering he is interpreting it as a means of rectifying trade deficits.

Utilizing sections 301, 232, and 338 from the various trade laws require investigation, and they are country-specific laws. IEEPA was the president’s obvious preference because it allowed him the unfettered ability to levy any tariff rate on any country for any reason. SCOTUS did not take that aspect of Trump’s actions into consideration and instead focused solely on the constitutionality of his authority to levy taxes directly on to Americans.

Repayment of tariffs levied on American importers was not mentioned in the ruling. With that said, the tariffs were determined to be illegal taxes, so repayment will likely follow. Kalshi betting odds are currently 71% that SCOTUS will order a refund before 2027.