The US supreme court has ruled that Donald Trump’s sweeping tariffs are illegal, in a landmark rebuke to the economic centrepiece of the US president’s second term.
America’s top court ruled in a six-three vote on Friday that Trump exceeded his authority in using the International Emergency Economic Powers Act (IEEPA) to impose tariffs on dozens of US trading partners.
In a ruling delivered on Friday, the supreme court said: “Our task today is to decide only whether the power to ‘regulate . . . importation,’ as granted to the president in IEEPA, embraces the power to impose tariffs. It does not.”
The case against the administration was brought by groups of American businesses, joined by 12 US states, most of them Democratic-governed, that argued they had been harmed by the tariffs.
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Trump returned to the White House last year vowing to use tariffs to remake a global trade order that he claimed had “ripped off” the US for decades. Trump announced his tariff regime on “liberation day” last April, sparking weeks of turmoil in financial markets and alarming US allies.
Although he has since backed away from imposing some of the most severe duties, the US ended 2025 with an effective tariff rate of more than 10 per cent — the highest since the second World War.
The tariffs were forecast to generate over the next decade trillions of dollars in revenue for the United States, which possesses the world’s largest economy.
The White House collected $200 billion in tariff revenue in 2025, according to US government figures. And much of that amount likely would need to be refunded on the basis of the supreme court ruling.
The justices didn’t address the extent to which importers are entitled to refunds, leaving it to a lower court to sort out those issues.
Dissenting Justice Brett Kavanaugh said the refund process was “likely to be a ‘mess,’” as was acknowledged at oral argument. Justices Clarence Thomas and Samuel Alito also dissented.
The ruling drew a muted reaction from investors, with the US dollar index briefly dropping before recovering. The S&P 500 and Nasdaq Composite remained modestly higher.
Stock markets have recovered since “liberation day” to hit record highs, but polls indicate that many Americans think the tariffs are hurting the country’s economy.
Explainer
What are tariffs?
The US constitution grants Congress, not the president, the authority to issue taxes and tariffs. But Trump instead turned to a statutory authority by invoking IEEPA to impose the tariffs on nearly every US trading partner without the approval of Congress.
Trump has imposed some additional tariffs under other laws that are not at issue in this case. Based on government data from October to mid-December, those represent about third of the revenue from Trump-imposed tariffs.
IEEPA lets a president regulate commerce in a national emergency. Trump became the first president to use IEEPA to impose tariffs, one of the many ways he has aggressively pushed the boundaries of executive authority since he returned to office in areas as varied as his crackdown on immigration, the firing of federal agency officials, domestic military deployments and military operations overseas.
Trump described the tariffs as vital for US economic security, predicting that the country would be defenceless and ruined without them. Trump in November told reporters that without his tariffs “the rest of the world would laugh at us because they’ve used tariffs against us for years and took advantage of us”. Trump said the United States was abused by other countries including China, the second-largest economy.
Trump’s ability to impose tariffs instantaneously on any trading partner’s goods under the aegis of some form of declared national emergency raised his leverage over other countries. But Trump’s use of tariffs as a cudgel in US foreign policy has succeeded in antagonising numerous countries, including those long considered among the closest US allies.
Trump has wielded his tariffs to extract concessions and renegotiate trade deals, and as a weapon to punish countries that draw his ire on non-trade political matters. These have ranged from Brazil’s prosecution of former president Jair Bolsonaro, India’s purchases of Russian oil that help fund Russia’s war in Ukraine, and an anti-tariffs ad by Canada’s Ontario province.
IEEPA was passed by Congress and signed by Democratic president Jimmy Carter. In passing the measure, Congress placed additional limits on the president’s authority compared to a predecessor law.
The cases on tariffs before the justices involved three lawsuits.
The Washington-based US court of appeals for the federal circuit sided with five small businesses that import goods in one challenge, and the states of Arizona, Colorado, Connecticut, Delaware, Illinois, Maine, Minnesota, Nevada, New Mexico, New York, Oregon and Vermont in another.
Separately, a Washington-based federal judge sided with a family-owned toy company called Learning Resources.
Markets traders are braced for turmoil now that the US’s top court has ruled against Trump, potentially leaving the federal government on the hook for billions of dollars in repayments of levies that have been collected.
But the US president is expected to launch a wave of new tariffs based on alternative legislation now that the Supreme Court has ruled against his current levies, diplomats and trade lawyers say.
The exact mix of laws the administration could deploy if the use of emergency powers is ruled illegal depends on the detail of the ruling, said one person familiar with the White House’s thinking.
“Nobody thinks the tariffs are going away,” said Ted Murphy, a trade lawyer at Sidley Austin in Washington. “They are just going to be reissued under a different umbrella.”
Among the moves expected from the administration is broader use of an obscure national security law known as Section 232 of the Trade Expansion Act of 1962, which has been activated to apply levies to cars, steel, aluminium, copper and lumber.
Investigations into semiconductors, pharmaceutical goods and medicines, critical minerals and aerospace parts are all under way using Section 232, but their conclusions have remained unpublished.
The administration has also relied on Section 301 of the 1974 US Trade Act to launch investigations into the trading practices of countries including Brazil, Nicaragua and China, and is likely to unveil more probes.
Trade lawyers say the administration could use a measure known as Section 122 of the Trade Act of 1974 that would allow Washington to impose tariffs of up to 15 per cent on trading partners for 150 days.
A separate provision, Section 338 of the Tariff Act of 1930, could also be triggered, although it has been used very rarely in recent history. It allows the government to immediately issue levies of up to 50 per cent on a foreign country that discriminates against US commerce, and can be used to respond to any “unreasonable charge, exaction, regulation or limitation”.
The administration discussed Section 338 and Section 122 in the early months of this year as ways to impose Mr Trump’s reciprocal levies, said people familiar with those talks.
But while the White House may be able to rebuild a tariff wall, the alternative legal avenues will curtail Trump’s ability to quickly raise and lower levies, depriving him of the most immediate route to hitting big trading partners with duties.
Lori Wallach, director of the Rethink Trade group and a lawyer, said: “Trump’s power to use tariffs both as punishment and reward will be significantly diminished.”
“With other laws, the administration would have to make a case for using tariffs,” she said. “It will be less like: ‘I have woken up and decided I am annoyed with this Canadian TV advert so I am going to increase the tariff rate.’”
Mr Trump had described the Supreme Court’s deliberation as “one of the most important cases in the history of our country”.
Without tariff revenue, the treasury department faces a yawning fiscal deficit and a faster pace of borrowing to fill the gap, lowering the price of existing debt. - Reuters / Copyright The Financial Times Limited 2026/ Bloomberg
