How did we get here?

• Starting in early 2025, President Trump used IEEPA – a 1977 law designed to give the president emergency powers over international economic transactions – as the legal basis to impose sweeping tariffs on imports from nearly every country in the world. No prior president had used this statute to impose tariffs.
• Two groups of tariffs were imposed under IEEPA. In February 2025, Trump placed a 25% tariff on goods from Canada, Mexico, and China, citing those countries’ failure to stop fentanyl from crossing into the U.S. Then in April 2025, on what the White House called “Liberation Day”, he imposed tariffs of 10–50% on imports from virtually every other country, citing persistent trade deficits as a national emergency.
• Small businesses and 12 Democratic state attorneys general challenged the tariffs in court, arguing the president lacked authority to impose what is effectively a tax without congressional approval. In total, three lower courts and 11 of 15 judges ruled the tariffs unlawful before the Supreme Court took up the case on a fast-track basis, hearing oral arguments in November 2025. The tariffs remained in effect during appeal process.

What happened today?

• The Supreme Court ruled 6–3 that IEEPA does not give the president the power to impose tariffs. In plain terms: the law gives the president tools to deal with international emergencies, but tariffs aren’t one of them. Chief Justice Roberts wrote the majority opinion, joined by two fellow conservatives (Justices Gorsuch and Barrett) and all three liberal justices. Three conservative justices dissented (Thomas, Alito, and Kavanaugh).
• What’s NOT affected: tariffs on steel, aluminum, automobiles, auto parts, copper, and lumber remain in place. These were imposed under a different law and were not challenged.
• The ruling could cut the U.S. average effective tariff rate by more than half—from approximately 13.6% to 6.5%, according to pre-ruling analysis cited by Bloomberg.
• President Trump called the decision “a disgrace” and said he would implement a backup plan. The administration is expected to try to reimpose tariffs using other legal tools.

Key Unknowns

• Will companies get their tariff payments back? The Court deliberately left this question unanswered. Over 1,000 lawsuits seeking refunds have already been filed, and total refunds could reach as much as $170 billion (per Bloomberg). There is no set timeline, and the process is expected to be lengthy and complicated.

• Will the administration reimpose tariffs under different laws? Potentially, but the other laws available to the president are narrower. They come with caps on rates or durations, require formal investigations, or durations, or both.

Market Implications

• The immediate tariff burden has decreased, but trade policy uncertainty has increased. Markets now face a new set of unknowns: how aggressively the administration will pursue replacement tariffs, through which legal channels, and on what timeline?
• The administration has broad discretion over how it responds, and any announcement of new tariffs could cause volatility in markets.
• If courts ultimately require the government to return billions to importers, that would widen the federal deficit and could increase Treasury issuance – a dynamic bond markets are already beginning to price in through higher long-term yields.

*See Disclosures