- Unlawful use of emergency power: In a 6ā3 decision, the Supreme Court ruled that the International Emergency Economic Powers Act (IEEPA) does not grant the President authority to unilaterally impose tariffs.
- Strike down of 145% duties: The ruling invalidates a core administration policy that saw duties on some foreign goods soar as high as 145%.
- Major economic consequences: The decision leaves the administrationās trade framework fractured and creates immediate legal questions regarding the refund of billions of dollars in already-collected duties.
Winners and losers: While broadly seen as a win for consumers and small businesses, some domestic manufacturers may lose the competitive advantage the tariffs provided. Spot rates could see a short-term bump.
Editors' note: This story was updated Friday, February 20 at 2 p.m. to reflect President Trump's announcement of a new 10% global tariff.
The Supreme Court on Friday, in a 6ā3 decision, declared that President Donald Trump did not have the authority to impose far-reaching tariffs under the International Emergency Economic Powers Act (IEEPA)āa rule reserved for national emergencies.
The ruling strikes down a cornerstone of the administrationās trade policy, which had seen duties on some foreign goods soar as high as 145%.
Writing for the majority, Chief Justice John Roberts rejected the administrationās argument that the power to "regulate... importation" in a national emergency includes the power to tax foreign goods. "Based on two words separated by 16 others in Section 1702(a)(1)(B) of IEEPAāāregulateā and āimportationāāthe President asserts the independent power to impose tariffs on imports from any country, of any product, at any rate, for any amount of time," Roberts wrote. "Those words cannot bear such weight."
Shortly after taking office, President Trump declared national emergencies regarding two "unusual and extraordinary" threats: the influx of illegal drugs from Canada, Mexico, and China, and "large and persistent" trade deficits.
Invoking IEEPA, he imposed a 25% duty on most Canadian and Mexican imports and a 10% duty on most Chinese imports; a minimum 10% duty on all imports from all trading partners to address trade deficits; and, following these initial orders, issued several adjustments, eventually bringing the total effective tariff rate on most Chinese goods to 145%.
Small businesses and several states filed suit, arguing that IEEPAās grant of authority to regulate importation did not include the power to impose unbounded tariffs.
āNothing in IEEPAās text, nor anything in its context, enables the President to unilaterally impose tariffs,ā wrote Justice Elena Kagan in the SCOTUS opinion, joined by Justices Sotomayor and Jackson.
In its opinion, SCOTUS noted that IEEPAās list of nine authorized actions (e.g., "investigate," "block," "regulate") does not mention tariffs or duties. Historically, when Congress delegates tariff powers, it does so explicitly and with strict limits. Article I, Section 8, vests the power to "lay and collect Taxes, Duties, Imposts and Excises" exclusively in Congress.
Chief Justice Roberts noted in his opinion that while Congress has frequently delegated tariff authority, it has traditionally done so with "strict limits" and explicit languageārequirements the administration sought to bypass by invoking emergency powers.
Justice Jackson additionally looked to legislative history to confirm that Congress intended IEEPA only for freezing and controlling foreign property transactions, not for taxation.
The decision was met with a dissent from Justice Brett Kavanaugh, who was joined by Justices Thomas and Alito. Kavanaugh argued that the majority had essentially created a "magic-words test" that ignores the practical reality of national emergencies.
āIn my view, the statutory text, history, and precedent constitute āclear congressional authorizationā for the President to impose tariffs as a means to āregulate... importation,āā Kavanaugh wrote. He cautioned that the ruling creates "nonsensical textual and practical anomalies," noting that the Court allows the President to completely block trade through an embargo but now forbids the "less extreme, more flexible" tool of a tariff.
Positive impact on consumers, freight
The ruling leaves the administrationās trade framework in tatters and raises immediate questions about billions of dollars in collected duties, but Jason Millerāassociate professor of supply chain management at Michigan State University and interim chair of the Department of Supply Chain Managementāwarned, "This isn't over."
Miller predicted President Trump "will move quickly" to use another part of tariff law, likely Ā§122, to impose a 15% tariff for a maximum of 150 days, unless Congress approves this for longer. "I see no chance that happens," he added.
The Ā§122 tariffs, Miller said, would likely immediately be challenged in court.
"If the court were to keep the Ā§122 tariffs from taking effect, we will see a massive surge of imports into the USA in the short term," he added. "I wouldn't be surprised if we see a flood of goods out of bonded warehouses and foreign trade zones into the 'consumption channel' over the next few days. Great news for spot market rates, which had seemed to be plateauing."
President Trump indeed did move quickly. He imposed a 10% global tariff just hours after learning of SCOTUS's decision.
"I believe importers would have from now until Sunday to get stuff out of bonded warehouses, so we may have some busy truckers this weekend," Miller added. "Replace Coors beer with imports and we have modern day Smokey and the Bandit."
Miller noted various industrial chemicals, energy wire & cable, electric motors, industrial robots, various plastic products, beverages (like wines), perfumes, and tires as the goods most likely to see a higher import priority in the near-term.
Avery Vise, Vice President of Trucking at FTR agreed the tariff rollback brings with it a potential positive impact to fright, "but we expect it will be brief and probably will be lost in an overall strengthening of the truck freight market."
The logical effects will be in drayage and, possibly, dry van as well in regions near key ports ā i.e., Southern California, New York/New Jersey, Savannah, etc. ā as well as cross-border shipments, he added. Due to ocean transit times, any effect due to container imports likely would not show up until April or May.
"Cross-border truck shipments would be more immediate, of course. However, because of existing USMCA exclusions anyway, much of the cross-border activity will be unaffected," Vise said. "The newly injected chaos for the supply chain might accelerate some of the ongoing tightening of the truck freight market, but it will be hard to isolate and quantify the impact except briefly in places like Southern California and Laredo, for example."
While in general the American consumer and businesses win from this decision, Miller said the victory isn't universal.
"Some manufacturers that were seeing higher business may have just lost out, as buyers will shift back to sourcing from elsewhere," he said.
Miller, too, said he would not be surprised to see the White House get creative with Ā§232 steel and aluminum derivatives to claw back some of what it lost in the IEEPA ruling.
"For example, they could lump machinery into a 25% tariff bin for the entire value of the product and effectively recreate what IEEPA + Ā§232 steel and aluminum was doing using just the Ā§232 steel and aluminum," he said.
