The US Supreme Court on Friday (February 20) ruled that President Donald Trump did not have the authority to impose sweeping import tariffs on its trade partners under a national economic emergency law called the International Emergency Economic Powers Act (IEEPA).

The top court’s 6-3 majority decision upholds the earlier decisions by two lower courts dents Trump’s use of tariffs as a foreign policy tool.

“When Congress grants the power to impose tariffs, it does so clearly and with careful constraints. It did neither in IEEPA,” Chief Justice John Roberts said in the majority opinion. The top court currently has a 6-3 conservative majority, with three of the nine judges (Justices Neil Gorsuch, Brett Kavanaugh, and Amy Coney Barrett) appointed by Trump. Kavanaugh was among the dissenters on Friday.

The Supreme Court ruling, while far from convenient for Trump, does not remove tariffs from the table going forward; it simply means the Congress has to be brought on board. Whether that happens is a different question altogether.

Now, Trump has signed a proclamation using an alternative law — Section 122 of the Trade Act of 1974 — which would allow him to impose a new 10% temporary tariff on goods from all countries. Read more about this here.

US President Jimmy Carter enacted IEEPA in 1977 to replace the outgoing Trading with the Enemy Act of 1917 (TWEA), whose sweeping powers were used by President Richard Nixon in 1971 to impose a 10% tariff on all imports, even as the US struggled to resolve a balance-of-payments crisis amidst the collapse of the fixed exchange-rate system.

Under IEEPA, the US President has the power “to deal with any unusual and extraordinary threat, which has its source in whole or substantial part outside the United States, to the national security, foreign policy, or economy of the United States, if the President declares a national emergency with respect to such threat.”

Before Trump, the Act was used to impose sanctions on other nations, with Carter declaring a national emergency in the wake of the 1979 Iran hostage crisis to freeze all Iranian government assets in the US. This emergency has been renewed annually by eight successive presidents over 40 years, leaving the US in a virtual state of emergency ever since. George W Bush did something similar in 2001 following the September 11 attacks. As of September 1, 2025, 77 national emergencies have been declared under IEEPA, of which 46 are ongoing, according to a Congressional Research Service report.

However, no US President before Trump had interpreted IEEPA to impose tariffs. The executive order announcing the sweeping ‘Liberation Day’ tariffs of April 2, 2025, said the US is facing a “national emergency” due to the “foreign trade and economic practices” and the “absence of reciprocity” in trade relationships.

But what does the apex court’s decision mean for the US and the global trade policy environment?

Are refund an option?

The money from the IEEPA tariffs has boosted the US federal government’s coffers, with non-partisan research body The Budget Lab at Yale pointing out on Friday that the latest data from the US Customs and Border Protection implied $142 billion would have been collected from these tariffs over the course of 2025. But what happens to them now?

“SCOTUS did not rule out allowing importers to claim refunds on any IEEPA tariffs they may have paid. While there are a range of questions regarding the process firms will go through to obtain refunds, it is likely that a substantial portion of the revenue raised via IEEPA in 2025 will be returned to firms,” The Budget Lab at Yale said on Friday.

However, any refund process is likely to be far from straightforward.

“The Court says nothing today about whether, and if so how, the Government should go about returning the billions of dollars that it has collected from importers. But that process is likely to be a ‘mess,’ as was acknowledged at oral argument,” Justice Brett Kavanaugh, who voted against the majority ruling, wrote in his dissent.

The accountancy firm PwC had estimated last year the potential refund opportunities for various countries in case the Supreme Court struck down the IEEPA tariffs. As per their analysis, exports from India had faced tariffs to the tune of $487 million for trade conducted until October 2025, out of a total of $108 billion. “Even if refunds are ultimately permitted, the recovery process could be complex and resource intensive,” PwC had warned in a report, saying that companies would need to navigate complex customs procedures.

Whether refunds for the IEEPA tariffs are permitted or not, what is more important is how the Trump administration dealt with the setback it suffered from the country’s top court.

There were clear indications that the Trump administration had anticipated such an outcome, with Treasury Secretary Scott Bessent saying back in November 2025 that there were “lots of other authorities that can be used”, although IEEPA is “by far the cleanest”. “The others are more cumbersome, but they can be effective,” Bessant had told CNBC.

The other legal routes to tariffs in front of the Trump administration can be classified into two categories. The first being broad-based, but with constraints and possible legal challenges, according to Japanese investment bank MUFG, belongs to Section 122 of the Trade Act of 1974 and Section 338 of the Tariff Act of 1930.

And indeed, hours after the Supreme Court ruling, Trump issued a proclamation to impose a 10% global tariff on almost all imports to the US under Section 122. This Section allows the temporary imposition of 15% tariffs for up to 150 days in response to “fundamental international payments problems”.

Section 338 of the Tariff Act of 1930 gives the President the authority to impose tariffs of up to 50% on imports from countries that have “discriminatory” provisions for US trade. “In extreme cases, imports from these countries can be completely banned,” Commerzbank economists Bernd Weidensteiner and Christoph Balz said in a note on Friday.

But both these routes, the former of which has already been adopted, are vulnerable to legal challenges, according to MUFG research.

The second set of options is “narrow and sectoral” and requires time, MUFG said, although they have a strong legal footing. These options include Section 232 of the Trade Expansion Act of 1962, which allows an investigation into whether certain imports are detrimental to US national security. If confirmed, Trump will have “almost unlimited powers to restrict these imports”, Commerzbank said. This route is already in use by the US for steel and aluminium.

Another “narrow and sectoral” option is Section 301 of the Trade Act of 1974, which gives the President authority to act against unfair or excessive foreign regulations that may burden American trade.

While Trump has said tariffs are crucial to reinforcing US manufacturing and rebalancing its trade, the revenue from these import taxes cannot be ignored, given the US federal government’s large budget deficit. “There are therefore considerable political incentives to impose tariffs on a different legal basis, even if these may then be lower in scope,” Commerzbank’s Weidensteiner and Balz said.