Supreme Court Voids IEEPA Tariffs: A $175B Refund Crisis Looms

The Supreme Court’s 6-3 decision in the IEEPA tariff case represents one of the most significant curbs on executive trade authority in decades. By ruling that the International Emergency Economic Powers Act (IEEPA) does not grant the President the power to impose tariffs, the Court has effectively dismantled a cornerstone of the current administration’s trade policy. Chief Justice John Roberts, writing for the majority, emphasized a strict constitutional interpretation: the power to tax is reserved for Congress. While IEEPA allows the executive to regulate importation during declared emergencies, the Court found that this does not extend to the imposition of duties or surcharges—powers that Congress has historically delegated only with explicit language and rigorous constraints.

This legal distinction is critical for the broader trade landscape. Unlike Section 232 of the Trade Expansion Act of 1962 (covering national security) or Section 301 of the Trade Act of 1974 (covering unfair trade practices), IEEPA was being used as a catch-all tool for economic leverage. The ruling leaves Section 232 and 301 tariffs—such as those on Chinese goods and global steel and aluminum—untouched, but it creates an immediate vacuum for the reciprocal tariffs applied to a wide array of goods from the European Union, Japan, and other partners since early 2025. The drug-trafficking tariffs applied to Canada and Mexico are also invalidated by this ruling.

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With estimates of collected IEEPA tariff revenue exceeding $175 billion, the federal government faces a massive liability.

The financial ramifications are staggering. With estimates of collected IEEPA tariff revenue exceeding $175 billion, the federal government faces a massive liability. Justice Brett Kavanaugh’s dissent, which characterized the potential refund process as a mess, highlights the administrative nightmare ahead. While the government previously signaled in court filings that it would issue refunds if the tariffs were found unlawful, President Trump’s recent comments suggest a pivot toward aggressive litigation to protect the Treasury. This sets the stage for a protracted legal battle at the U.S. Court of International Trade (CIT), which must now determine the mechanics of restitution.

For importers, the path to recovery is fraught with technical hurdles. The importer of record—the entity that physically paid the duties to U.S. Customs and Border Protection (CBP)—is the primary claimant. However, the complexity of modern supply chains means many companies absorbed these costs indirectly through price hikes from vendors. These secondary players may find themselves in contractual disputes rather than direct government refund queues. Furthermore, the status of liquidated versus unliquidated entries will be the primary battleground. Under standard customs law, once an entry is liquidated, the window for protest is narrow. If the CIT does not provide a blanket reopening of these entries, billions of dollars in paid tariffs could remain trapped behind procedural barriers.

Beyond the balance sheets, the ruling destabilizes recently negotiated trade frameworks. Agreements with the EU and Japan, often predicated on the removal or mitigation of these now-unlawful IEEPA tariffs, may require total renegotiation. Trading partners who made concessions to avoid these levies now find the U.S. executive’s primary point of leverage has been neutralized by its own judiciary. Looking forward, markets should expect a surge in legislative activity as the administration likely pressures Congress to retroactively validate the tariffs or grant new, explicit authorities under a revised IEEPA framework. In the interim, the focus shifts to the Automated Commercial Environment (ACE) data, where importers must meticulously document every dollar paid to secure their place in what will likely be the largest customs refund event in U.S. history.