Supreme Court Restricts Presidential Tariff Power in Historic IEEPA Ruling
Washington, Saturday, 21 February 2026.
On February 20, 2026, the Supreme Court delivered a landmark decision in Learning Resources v. Trump, ruling that the International Emergency Economic Powers Act (IEEPA) does not authorize the President to impose tariffs. By applying the “major questions doctrine,” the Court clarified that the statutory power to “regulate” importation does not extend to taxation, a power explicitly vested in Congress. This ruling significantly curtails executive authority regarding trade protectionism. However, the economic landscape remains volatile; the administration has immediately pivoted strategies, invoking Section 122 of the Trade Act of 1974. This obscure statute, focusing on balance-of-payments authority, is now the legal basis for a proposed 10% temporary import surcharge. Investors must now navigate this rapid shift from broad emergency powers to more specific, albeit restrictive, trade statutes.
Defining the Limits of “Regulation”
The Supreme Court’s decision on February 20, 2026, hinged on a precise textual analysis of the International Emergency Economic Powers Act (IEEPA). Chief Justice Roberts, writing for the Court, determined that the statutory authority to “regulate… importation” does not inherently include the power to impose duties or tariffs [2]. The Court invoked the “major questions doctrine,” arguing that Congress must speak clearly if it intends to delegate “extraordinary” powers—such as the ability to tax—to the executive branch [2]. This ruling effectively vacates the administration’s previous attempts to utilize IEEPA for broad economic leverage, including the imposition of tariffs that had reached an effective rate of 145% on certain Chinese goods [2]. The Court noted that in the “half century of existence” of the IEEPA, no prior President had interpreted the statute to authorize such tariffs [2].
Judicial Consensus on Executive Overreach
While the legal reasoning varied, the rejection of the President’s IEEPA interpretation was decisive. Justice Kagan, joined by Justices Sotomayor and Jackson, concurred in the judgment, agreeing that the statute does not authorize the President to impose tariffs [2]. Justice Gorsuch, in a separate concurrence, emphasized that Congress did not “clearly surrender” the sweeping tariff power the President sought to wield [2]. Consequently, the Court vacated the judgment of the District Court in Learning Resources, Inc. v. Trump (Case No. 24–1287) and remanded it with instructions to dismiss for lack of jurisdiction, while affirming the judgment in the companion case Trump v. V.O.S. Selections, Inc. (Case No. 25–250) [2].
The Pivot to Section 122: A New Economic Strategy
With the IEEPA route blocked, the Trump administration has immediately shifted its legal footing to Section 122 of the Trade Act of 1974, a statute designed for handling balance-of-payments difficulties [1]. President Trump has announced a “temporary import surcharge” of 10%, which is scheduled to take effect on February 24, 2026 [1]. Unlike the indefinite duration of IEEPA-based actions, Section 122 imposes strict temporal limits; the surcharge is authorized for only 150 days, meaning it would expire on July 24, 2026, unless Congress intervenes to extend it [1]. This pivot represents a move from broad, emergency-based executive power to a more constrained, procedurally defined statutory authority.
Economic Justifications and Exemptions
The administration justifies this surcharge by citing “fundamental international payments problems,” pointing specifically to the U.S. net international investment position, which stood at $26 trillion at the end of 2024—representing 89% of the nation’s GDP [1]. To mitigate the impact on key regional allies, the administration has carved out significant exemptions. Goods from Canada and Mexico that are compliant with the USMCA are exempt from the duty, as are textiles and apparel from DR-CAFTA nations, including Costa Rica, the Dominican Republic, El Salvador, Guatemala, Honduras, and Nicaragua [1]. Furthermore, the administration plans to initiate accelerated investigations under Section 301 of the Trade Act of 1974 to address unfair trading practices, covering issues from industrial excess capacity to digital services taxes [1].