Trump Tariffs on Trial: The U.S. Supreme Court’s Decision

Almost a year after President Donald Trump established a 10% baseline tariff on all countries and imposed higher individual import duties on specific nations, the U.S. Supreme Court has ruled in a 6-3 decision that the legal mechanism Trump used as a basis for the tariffs is invalid.

The decision could lead importers to seek repayment of about $200 billion that the U.S. Treasury has collected from them since the tariffs took effect in early April 2025. However, this doesn’t necessarily mean the tariffs will go away, as the Trump administration has an array of other legal options through which to impose at least some import duties.

After the Court’s ruling, Trump announced he would implement a 10% global tariff through Section 122 of the Trade Act of 1974, which allows the executive branch to impose tariffs of 15% for a maximum of 150 days.

While this move demonstrates the administration’s determination to maintain tariffs despite legal setbacks, it also signals that uncertainty about trade tensions is likely to continue. Therefore, we believe it’s essential to look past headline noise and stay focused on your long-term investment goals.

How the Tariffs Got to the Supreme Court

On April 2, 2025, Trump announced wide-ranging tariffs on U.S. imports. He bypassed Congress, which normally must approve tariffs, by invoking the International Emergency Economic Powers Act (IEEPA). This 1977 law grants the executive branch broad power to regulate economic transactions during national emergencies.

It didn’t take long for many to question whether U.S. trade imbalances rose to the level of a national emergency. A group of U.S.-based importers and trade associations filed suit, arguing that Trump exceeded his statutory authority by using IEEPA to impose tariffs.

On May 28, the Court of International Trade ruled in their favor, siding against the Trump administration, which immediately appealed. In a separate case, the U.S. District Court for the District of Columbia ruled in early June that IEEPA doesn’t authorize the executive branch to impose tariffs.

In September, the U.S. Supreme Court agreed to hear arguments in the case and did so in early November. This followed the U.S. Court of Appeals for the Federal Circuit's August ruling that Trump lacked the authority to impose tariffs under IEEPA without congressional approval.

Tariffs remained in place as the appeals process unfolded. By mid-December, U.S. Customs and Border Protection reported that the U.S. had collected $200 billion in tariffs in 2025. The overall effective U.S. tariff rate by late 2025 reached 16.8%, the highest since 1935 and up from just 2.4% before Trump took office for the second time.¹

On February 20, 2026, the Supreme Court ruled that Trump couldn’t use IEEPA as a basis for implementing tariffs without congressional approval. The Court’s ruling applies only to tariffs Trump instituted under IEEPA, not to other tariffs applied under different statutes.

Looking Ahead: Possible Next Steps for the Trump Administration

Even before the Supreme Court ruling, a group of companies, including Costco, sued the Trump administration to obtain full refunds for the tariffs they had paid. The Supreme Court’s ruling did not directly address the subject of refunds, but it further opens the door for companies to seek repayment from the U.S. Treasury.

Meanwhile, the Trump administration has other ways to implement tariffs without needing the explicit approval of Congress:

• Section 122 of the Trade Act of 1974 allows the executive branch to impose tariffs of 15% for a maximum of 150 days. The law aims to give the executive branch the ability to respond to trade practices that could harm U.S. economic interests.²

• Section 201 of the Trade Act of 1974 authorizes the executive branch to impose tariffs if imports harm specific U.S. industries. The U.S. International Trade Commission must conduct an investigation and hold public hearings before the executive branch can apply tariffs.³

• Section 232 of the Trade Expansion Act of 1962 authorizes the executive branch to impose tariffs or restrict imports on items deemed to threaten national security.⁴

• Section 301 of the Trade Act of 1974 grants authority to the U.S. Trade Representative to conduct investigations into unfair trade practices on a country-by-country basis. For instance, tariffs on imports from China imposed in 2018 as part of a Section 301 action remain in effect.⁵ After the ruling, Trump announced the U.S. would explore investigations using this section of trade law.

• Section 338 of the Trade Act of 1930 — a provision that has never been used to authorize tariffs — authorizes the executive branch to impose tariffs of up to 50% on countries that engage in discriminatory practices against the U.S.⁶

It’s still unclear to what extent the Trump administration might use these avenues, but Trump’s immediate response to the ruling suggests tariffs will continue in the near term.

Investor View: Tariffs, Inflation and Interest Rates in 2026

If tariffs remain in place in some form, the Supreme Court’s decision doesn’t significantly change the macroeconomic outlook. Similar to 2025, tariffs will probably help keep U.S. inflation above the Federal Reserve’s (Fed’s) 2% target, at least through the first half of 2026. Consensus forecasts for U.S. economic growth remain within the 2.3% to 2.6% range in 2026, with tariffs exerting a slightly negative effect on growth.

Otherwise, the ruling doesn’t change our broadly optimistic earnings outlook for U.S. companies in a meaningful way. Firms have shown resilience in navigating tariffs and in managing their bottom lines. Investors may benefit slightly from a reduction in legal uncertainty now that the Supreme Court has issued its decision.

The decision also likely doesn’t affect the outlook for interest rates if tariffs stay in place. The Fed paused interest rate cuts in January as it continues assessing labor market conditions. For bonds, persistent concerns about inflation and high government debt will likely keep steepening the yield curve.

We encourage you to stay committed to your long-term investment plans as always. While policy changes can alter short-term return paths, your time horizon, goals and risk tolerance should continue to guide your portfolio decisions. Diversification across asset classes and regions may also help reduce the impacts of policy changes on your portfolio.