The Ruling That Rewrote Tariff Power: Inside the 2026 Supreme Court Trade Decision

The ruling didn't come out of nowhere. It affirmed an August 2025 decision from the US Court of Appeals for the Federal Circuit, which had already concluded that IEEPA's language authorising a president to "regulate" imports during a declared emergency was too thin to support something as significant as taxation. By the time the case, formally Learning Resources, Inc. v. Trump, consolidated with Trump v. V.O.S. Selections, Inc., reached the Supreme Court, most trade lawyers expected the government to lose. The surprise was less the outcome than how fast the administration had a replacement ready.

That replacement, Section 122 of the Trade Act of 1974, is a narrower tool by design. Congress capped it at 15% and limited it to 150 days specifically so that a president could not use a balance-of-payments emergency to run an open-ended tariff regime the way IEEPA had been used. The administration set the initial rate at 10% and floated raising it to 15% in a social media post, but never issued the legal order to do so.

The bigger financial story has been on the refund side. Because the Court found the IEEPA tariffs were collected without legal authority, importers who paid them became eligible to claim the money back. US Customs and Border Protection built a new system, called CAPE, to process these claims, and had refunded roughly $85 billion by late May. The Penn Wharton Budget Model estimates the eventual bill could reach $175 billion, a figure that matters for the federal budget given how much revenue the IEEPA tariffs had briefly been generating.

Refunds are not flowing without friction. The Department of Justice has appealed the part of the Court of International Trade's refund order covering entries that are already liquidated and past the 80-day window in which Customs can reopen them administratively. That appeal is still pending at the Federal Circuit, so some importers are waiting on money the government has not yet conceded it owes.

Section 122 itself has had a rough few months too. In May, the Court of International Trade ruled that the administration's use of Section 122 was itself unlawful, but the Federal Circuit issued a stay days later while the appeal proceeds. The result is that the 10% global tariff has stayed in place, suspended in legal limbo rather than either validated or struck down.

For companies, this has meant planning for several tariff scenarios at once rather than a single settled rate. Industries with globally distributed supply chains, civil aviation among them, have had to model both the current 10% Section 122 surcharge and what comes after it expires around July 24, since the rate that replaces it is still being worked out through a separate legal process.

That separate process is Section 301, and it is arguably the more consequential story. The US Trade Representative has opened Section 301 investigations, nominally over forced labour practices and industrial overcapacity, covering 59 countries and the European Union, and has proposed tariffs of 10% to 15% on most goods from those trading partners. Unlike Section 122, Section 301 carries no statutory rate cap and no built-in expiry date, which is precisely why the administration is racing to have it ready before the current tariffs lapse.

Domestically, the political reaction has cut in different directions. Import-competing manufacturers who had benefited from the broader IEEPA tariffs lobbied for the administration to find a replacement quickly, while retailers and consumer-goods importers, who had been absorbing most of the added cost, welcomed any reduction from the roughly 17% blended rate even as they flagged the uncertainty of not knowing what Section 301 rates would ultimately settle at.