In a landmark decision on February 20, 2026, the U.S. Supreme Court ruled 6-3 that the administration’s sweeping reciprocal tariffs were unconstitutional. The ruling, authored by Chief Justice John Roberts, stripped the executive branch of its most aggressive trade tool, declaring that the President cannot unilaterally impose taxes under the guise of “emergency powers.”
Why “Most” But Not All?
The Court’s ruling specifically targeted tariffs enacted under the International Emergency Economic Powers Act (IEEPA) of 1977. The administration had used this act to declare a national emergency over trade deficits and drug trafficking, bypassing Congress to set the “Liberation Day” and reciprocal rates.
The ruling does not strike down all tariffs. Duties remains in place if they were established under other laws, such as:
- Section 232: Tariffs based on “national security” (like steel and aluminum).
- Section 301: Retaliatory tariffs for “unfair trade practices” (often used against China).
Chief Justice Roberts noted that while IEEPA allows the President to “regulate” imports, it does not mention the word “tariff.” Because the Constitution explicitly grants the power to tax and set duties to Congress, the Court ruled the President cannot “fill in the blanks” of a statute to claim that authority.
The Great Refund Debate
The ruling has created an immediate financial crisis for the Treasury. Since last year, the government has collected between $130 billion and $175 billion in revenue from these now-illegal duties.
- The Argument for Refunds: Legal experts and major importers like Costco argue that since the collection was unauthorized, the money must be returned as a matter of “unlawful extraction.”
- The Logistical Nightmare: In a stinging dissent, Justice Brett Kavanaugh (joined by Justices Alito and Thomas) warned that the refund process would be a “mess.” Kavanaugh and Alito argued that the tariffs were lawful under historical precedent, but noted that even if they weren’t, a mass refund is nearly impossible to execute fairly.
The Consumer Gap
The most frustrating aspect for the public is that consumers will likely never see a dime. The “Importers of Record”—the large retailers and distributors who physically paid the check to Customs—are the ones legally entitled to the refunds. However, most of those companies already raised their prices to cover the tariff costs. There is no mechanism to track which individual bought a toaster or a pair of shoes at a 10% markup and pay them back. Consequently, if the government issues refunds, it may result in a “windfall” for corporations while the taxpayers who actually bore the cost remain uncompensated.
What Now?
The administration has already signaled it will look for “workarounds” using narrower trade laws, but for now, the broad, global tariff regime is effectively dead. Businesses are advised to file “protective protests” immediately with U.S. Customs to preserve their right to any potential payouts.
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