US Supreme Court strikes down Trump’s tariffs

HOUSTON – The US Supreme Court struck down President Donald Trump’s sweeping trade tariffs
on Feb 20 in a setback that shatters the cornerstone of his economic policy.

The court, in a 6-3 decision, established that the International Emergency Economic Powers Act (IEEPA) did not give the President the power to impose the tariffs.

“IEEPA does not authorise the President to impose tariffs,” the court said in a 170-page ruling.

The 1977 law is designed for sanctions and capital controls during national emergencies linked to a foreign threat.

The ruling did not directly address whether the US government will have to pay back the billions of dollars in tariff revenue it has already collected.

But in a huge jolt for the administration, it removes the signature negotiating tool wielded by Mr Trump to remake US trade deals and pressure other nations to align with his policies.

The court’s 6-3 conservative majority has regularly backed Mr Trump on other contentious cases.

The ruling was written by Chief Justice John Roberts, who was joined by two of his fellow conservatives, Justices Neil Gorsuch and Amy Coney Barrett, and the three liberal justices. Conservative Justices Samuel Alito, Clarence Thomas and Brett Kavanaugh dissented.

There was no immediate reaction from Mr Trump after the ruling but broadcaster CNN reported that he called the decision a “disgrace” in a private conversation. The stock markets rose after the verdict was announced.

The decision comes as little surprise, veteran US trade negotiator Wendy Cutler, senior vice-president at the Asia Society Policy Institute, told The Straits Times.

“The President took a serious risk in using IEEPA as the legal basis for many of his tariff threats and hikes, and this gamble did not pay off,” she said.

“Now, the administration will need to put in place its ‘Plan B’, using safer statutes to justify the tariffs. This all could have been avoided if clear tariff adjustment statutes had been initially relied upon, as during his first term.”

Mr William Reinsch, who analyses economics and international business at the Center for Strategic and International Studies in Washington, said the major impact of the decision is to further define the limits of presidential power.

“The impact on businesses will likely be limited, since the President has made clear that he has plans to reimpose the tariffs under other laws,” he told ST.

“That will lead to more lawsuits, but many of the tariffs will stay in place.”

There may, however, be an impact on foreign governments, since the tariffs that ended up being the basis for their trade agreement negotiations with the US have now been invalidated.

“That does not automatically invalidate the trade agreements, but it may make negotiating new ones more difficult, and it may ultimately persuade other governments that they do not have to adhere to the concessions they made.

“I would not rush to judgment on that, but it is something other governments will no doubt consider.”

Mr Trump stunned the world with the announcement of “Liberation Day” tariffs under IEEPA in April 2025, with tariffs ranging from 10 per cent to 50 per cent on goods coming into the US. 

Some of the highest tariff rates announced were on South-east Asian nations – between 46 per cent and 49 per cent for Cambodia, Laos, Myanmar and Vietnam. Most of these were subsequently lowered through negotiations. Goods from Singapore, a US free trade partner since 2004, are subject to a baseline tariff of 10 per cent
.

Mr Trump also imposed additional tariffs on China, Canada and Mexico tied to fentanyl trafficking concerns. India faced tariffs at around 50 per cent, which include levies to penalise its purchase of Russian oil, before these were negotiated down to 25 per cent in February
.

The President has raised tariff rates to their highest level in nearly a century and the federal government has been collecting about US$30 billion (S$38 billion) in tariffs every month.

It is not clear who will qualify to receive reimbursement.

However, the Trump administration has a Plan B
. It can reimpose a number of its tariffs within days by invoking other authorities. For instance:

• Section 232 of the Trade Expansion Act of 1962 allows the president to impose tariffs on imports that threaten national security, after an investigation by the Department of Commerce. This can work for sector-specific actions rather than across-the-board tariffs.
• Under Section 301 (Trade Act of 1974), the US trade representative can investigate and remedy unfair trade practices, including through tariffs. These actions are country-specific and do not offer universal coverage.
• Section 338 (Tariff Act of 1930) enables the president to impose additional tariffs on imports from countries that discriminate against US commerce.
• Section 122 (Trade Act of 1974) permits temporary import surcharges or quotas to address serious trade deficits, subject to caps of 15 per cent and 150 days. It can be a stopgap measure while longer investigations are conducted.

None of these allows for the sweeping, universal tariffs that Mr Trump imposed under IEEPA.

The Supreme Court heard oral arguments in November 2025, when both conservative and liberal justices asked probing questions that led the US media to speculate that an adverse ruling was likely
.

The cases stem from lawsuits filed by an educational toy manufacturer and a family-owned wine and spirits importer
.

In an interview with ST in November 2025, Ms Elana Ruffman, the scion of a 50-year-old family-owned toy company in Illinois that sued Mr Trump said Mr Trump’s tariffs had devastated their business.

“Most of the products that we import from China went from having 0 per cent tariffs to the prospect of 145 per cent tariffs in April,” said Ms Ruffman, who is vice-president of marketing and product development at hand2mind, which specialises in making educational toys.

“Of course, the tariff policy has changed many times since then, but we calculated that our tariff bill would be US$100 million in 2025 if the tariff stayed at 145 per cent,” she added. The toys made by hand2mind and Learning Resources, an affiliated company, are largely manufactured in China.

The toymaker won the lawsuit in a lower court in May, but the Trump administration appealed against the decision.

Before the case landed in the Supreme Court, the US Court of International Trade and a federal appeals court had ruled that Mr Trump had exceeded his authority. Congress, not the president, holds primary power over tariffs, the lower courts ruled.

Mr Trump had often argued that the tariff collections – which he claimed will “soon” exceed US$600 billion in revenue – could help bankroll domestic priorities.

The President has proposed allocating tariff revenue towards a US$2,000 dividend to low- and middle-income Americans by mid-2026. The rest of the funds would be used to bring down the nation’s massive US$38 trillion debt.

Mr Trump says aggressive tariffs are necessary to reverse the damage from decades of unfair global trade, a stance popular with his Make America Great Again movement.

Although US gross domestic product grew by 4.4 per cent in the third quarter of 2025, the biggest increase in two years, it slowed to 1.4 per cent
in the last quarter of the year. Additionally, jobs growth has slowed in sectors heavily exposed to tariffs.