SCOTUS Strips Presidential Tariff Power Under IEEPA: A Multi-Billion Dollar Shift

The U.S. Supreme Court’s 6–3 decision in Learning Resources, Inc. v. Trump marks a definitive shift in the balance of power regarding international trade and executive authority. By ruling that the International Emergency Economic Powers Act (IEEPA) does not grant the President the power to levy tariffs, the Court has effectively reclaimed a core constitutional taxing power for Congress. The decision invalidates a series of aggressive trade measures implemented in 2025, which the Trump Administration had justified as emergency responses to drug trafficking and trade imbalances. This ruling creates an immediate and massive financial liability for the U.S. government while providing a significant, if administratively complex, windfall for importers.

The core of the legal dispute rested on whether IEEPA’s broad mandate to "regulate... importation" included the specific power to impose duties. The majority opinion was clear: tariffs are taxes, and the Constitution assigns the power to tax exclusively to the legislative branch. While other statutes like Section 232 of the Trade Expansion Act or Section 301 of the Trade Act of 1974 contain explicit delegations of tariff authority with defined limits and procedural safeguards, IEEPA does not. The Court found that reading such a sweeping power into a statute intended for blocking transactions and freezing assets would grant the executive branch nearly open-ended control over the national economy, a precedent the majority was unwilling to set.

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Supreme Court’s 6–3 decision in Learning Resources, Inc.

For the global markets and supply chain managers, the immediate impact is the cessation of duty collections. U.S. Customs and Border Protection (CBP) must immediately stop enforcing tariffs that were based solely on IEEPA authority. This affects a wide range of goods, particularly those caught in the 2025 cross-border disputes involving Canada, Mexico, and China. However, the long-term implications are even more significant. As Justice Kavanaugh noted in his dissent, the ruling likely necessitates the refund of billions of dollars in duties already collected. While the Supreme Court did not outline a specific refund mechanism, the precedent set by the Court of International Trade (CIT) and previous Department of Justice briefings suggests that the government may not oppose these claims, potentially leading to an orderly, albeit slow, recovery process for affected businesses.

Industry sectors such as automotive parts and consumer goods—highlighted by the involvement of companies like AGS Co. Auto Sols. and Learning Resources, Inc.—stand to benefit most from these potential refunds. However, the ruling does not provide a blanket exemption from all trade barriers. Tariffs on steel, aluminum, and semiconductors remain in place because they are authorized under different statutes (Sections 232 and 301) that were not challenged in this case. This creates a bifurcated trade landscape where importers must carefully distinguish between the legal foundations of various duties to determine their eligibility for recovery.

Looking forward, this decision restricts the "emergency" toolkit available to any administration. Future presidents will no longer be able to use IEEPA as a shortcut to bypass congressional oversight on trade policy. This likely leads to a more predictable, if slower, trade environment where new tariffs will require more rigorous justification under traditional trade laws or direct legislative action. For now, the focus shifts to the Court of International Trade, which will oversee the inevitable wave of litigation as companies seek to claw back the billions of dollars paid into the Treasury over the past year.