The U.S. Supreme Court (Scotus) has issued a seismic ruling on President Trump’s global tariffs.

The question before Scotus: whether the International Emergency Economic Powers Act (IEEPA) authorises the President to impose tariffs?

The final verdict: In a decision that reshapes the boundary between executive emergency powers and congressional authority, the Court held that IEEPA does not grant the President the power to impose tariffs. In effect, the tariffs are illegal and have thus been struck down.

So how did we get here? In 2025, President Trump declared national emergencies to address two perceived threats: the influx of illegal drugs from Canada, Mexico, and China, and “large and persistent” trade “deficits”. The President determined that the drug influx had “created a public health crisis,” and that the trade deficits had “led to the hollowing out” of the American manufacturing base and “undermined critical supply chains”. The President declared a national emergency as to both threats, deeming them “unusual and extraordinary,” and invoked his authority under IEEPA to respond. IEEPA is a 1977 statute that allows the President to “regulate… importation” during emergencies. Under this authority, the administration imposed:

• Drug Trafficking Tariffs: A 25% duty on most Canadian and Mexican imports, and 10% on Chinese imports.
• Reciprocal Tariffs: A baseline 10% duty on all imports from all trading partners, with some nations, such as South Africa at 30%, facing significantly higher rates.

Small businesses and several states sued, arguing that while IEEPA allows the President to “block” or “prohibit” imports, it doesn’t allow him to tax them.

Scotus’ Decision: Chief Justice Roberts, delivering the opinion of the Court, went back to basics:

1. Taxation is a Congressional “Birth-Right”- the Court emphasized that the power to lay and collect taxes and duties belongs to Congress alone. A tariff is, at its core, a tax levied to raise revenue. Because the Framers of the American Constitution were wary of “taxation without representation,” they did not vest any taxing power in the Executive Branch. There was no historical precedent for this seizure of power. This, coupled with the “breadth of authority” that the President claimed, suggested that the tariffs went beyond the President’s “legitimate reach”.
2. The “Major Questions” Doctrine – this doctrine requires the President to point to “clear congressional authorisation” before exercising power of vast economic and political significance. President Trump could not.
3. “Regulate Tax” – the Court noted that IEEPA lists nine specific verbs (like block, nullify, prohibit), but “tariff” and “duty” are missing. In many other statutes, “regulate” has never been understood to include the power to tax. “The facial breadth” of the term “regulate” does in any way include taxation. Taxes, to be sure, may accomplish regulatory ends, but it does not follow that the power to regulate something includes the power to tax it as a means of regulation (the fire brigade can block a road, but they can’t set up a toll road, as someone recently said). The practice of Congress suggests as much. When Congress addresses both the power to regulate and the power to tax, it does so separately and expressly. That Congress did not grant those authorities separately here is strong evidence that “regulate” in IEEPA does not include taxation. A contrary reading would render IEEPA partly unconstitutional.

So, what is the takeaway: While the President has broad emergency powers to block trade with enemies, the Supreme Court has made it clear that only Congress can decide to put a price tag on the “pockets of the people”. To be clear, the question before Scotus was not whether President Trump can use tariffs to regulate trade; rather, it was whether the IEEPA conferred this power. It does not. On that score, the tariffs were declared illegal.

Enter the new “temporary” global tariffs: As soon as the Scotus ruling was out, President Trump responded by imposing a new global tariff of 10%, then 15%, then 10%, for 150 days under section 122 of the Trade Act of 1974. This provision allows the President to address certain fundamental international payment problems through surcharges and other special import restrictions. The temporary import duty will took effect 24 February. This also rests on a dubious legal foundation, which will likely also be challenged in very short order.

President Trump’s senior advisors informed him that “fundamental international payments problems within the meaning of Section 122 exist and that special import measures to restrict imports are required to address these problems.” But this is quite obviously not true. Dawn Shackleford of the Hinrich Foundation explains that “[t]he Trump administration is not the first to make such a determination. In the days of fixed exchange rates and more limited capital mobility, especially around the time of the founding of the World Trade Organisation’s (WTO) predecessor, the General Agreement on Trade and Tariffs (Gatt), balance-of-payments crises were more frequent in other parts of the world. Thus, the founders of the Gatt, led by the United States, established rules for reviewing when import measures could be used to address such crises.

WTO balance-of-payments provisions, embodied in and incorporated as Articles XII (general) and XVIII:B (developing countries) of the WTO’s foundational treaty GATT 1947, allow WTO members to temporarily restrict imports to address critical monetary reserves shortages. Such measures are to be temporary, transparent, and limited to controlling the general level of imports. The WTO Committee on Balance-of-Payments Restrictions (BOP Committee) reviews these measures, ensuring they adhere to WTO rules.

That check requires the International Monetary Fund (IMF) to review if a country has a balance-of-payments crisis that merits imposing trade measures. As laid out in GATT Article XV”.

The WTO needs to be notified before such a measure is imposed, and that almost certainly has not happened. Awkward moment.

What goods are excluded from the new temporary global tariffs?

1. certain critical minerals, metals used in currency and bullion, energy, and energy products;
2. natural resources and fertilizers that cannot be grown, mined, or otherwise produced in the United States or grown, mined, or otherwise produced in sufficient quantities to meet domestic demand;
3. certain agricultural products, including beef, tomatoes, and oranges;
4. pharmaceuticals and pharmaceutical ingredients;
5. certain electronics;
6. passenger vehicles, certain light trucks, certain medium and heavy-duty vehicles, buses, and certain parts of passenger vehicles, light trucks, heavy-duty vehicles, and buses;
7. certain aerospace products;
8. informational materials (e.g., books), donations, and accompanied baggage;
9. all articles and parts of articles that currently are or later become subject to section 232 actions;
10. USMCA-compliant goods of Canada and Mexico; and
11. textiles and apparel articles that enter duty-free as a good of Costa Rica, the Dominican Republic, El Salvador, Guatemala, Honduras, or Nicaragua under the Dominican Republic-Central America Free Trade Agreement.

It is unclear if this is the full list of goods exempted from the 10% global tariff.

In a separate Executive Order, President Trump also reaffirmed and continued the suspension of duty-free de minimis treatment for low-value shipments, including goods shipped through the international postal system, which will also be subject to the temporary import duty imposed under section 122. Section 122 allows the President to impose a duty not exceeding 15% of the value of the product or a quantitative restriction in the form of quotas, or both, for a period of 150 days unless extended by Congress based on balance of payments problems.

In addition, President Trump ordered the Office of the United States Trade Representative to use its section 301 authority to investigate certain unreasonable and discriminatory acts, policies, and practices that burden or restrict U.S. commerce.

What does the “future” look like?

It is virtually impossible to predict the future in US trade policy since President Trump’s approach is volatile. This raises further implications. The Scotus decision affirms Congress’ power to impose tariffs. This, coupled with Trump’s choice of the section 122 tariffs, which only allow Congress to extend the duties, reiterates Congressional power over tariffs. It signals a return to a rules-based order. It is also encouraging that the Trump administration’s pivot to the section 122 duties shows that they will respect and honour the decision of Scotus.

The 150-day period for these duties may make it unlikely that countries will reach an agreement with the United States to address the so-called trade “deficit”. A wait-and-see approach might be attractive, although this may be unwise since Trump could pivot again to new legislation to impose his tariffs. All this means is that the Trump trade policy will continue to be driven by uncertainty, which breeds atrophy – the ultimate anathema to investment and economic growth.

But the Trump administration has signalled its intention to use the section 301 tariffs. These can be renewed every four years and will not have the bar of 15% that is imposed on the section 122 duties. Thus, the section 301 tariffs that look likely to succeed the section 122 duties will snap us back to the “bigly”, and “beautiful” reality of the liberation day tariffs. And yes, you sensed it, there is also a BUT here – section 301 duties are not omnipotent – they are subject to procedural fairness, allowing interested parties the right to make submissions and for public hearings. It does not end there.

Congress, as unwilling as it has been to rein in the President and to reaffirm its power to impose tariffs, is girded by section 302, which requires that the President send his decision (i.e. to suspend, withdraw, or prevent the application of, or may refrain from proclaiming, benefits of trade agreement concessions to carry out a trade agreement with such country or instrumentality; and impose duties or other import restrictions on the products of such foreign country or instrumentality, and may impose fees or restrictions on the services of such foreign country or instrumentality, for such time as he deems appropriate), and reasons for Congressional approval. If Congress does not approve, it has 90 days within which it can pass its own resolution disapproving of such duties, and this renders them invalid and of no effect.

So, folks, these global tariffs will return firmly into the hands of their true custodian, the United States Congress. The results of the US mid-term elections have never assumed more significance for global trade because the current Congress has proven unwilling to do its job.

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