On February 20, a Supreme Court ruling significantly limited the federal government’s ability to impose sweeping global tariffs under emergency powers.
The decision upheld that the President’s use of the International Emergency Economic Powers Act (IEEPA) to levy broad tariffs was unlawful, emphasizing that taxation authority resides solely with Congress under Article I of the Constitution. Justices emphasized that IEEPA was never intended to serve as a broad trade policy tool and cannot be used to bypass congressional authority over taxation.
What the Supreme Court’s Decision Means
The ruling invalidates many global tariffs imposed under IEEPA since April 2025. While some of these tariffs had been adjusted or renegotiated, the decision clarifies their legal standing.
Affected IEEPA tariff measures included:
- The 10% baseline global tariff applied broadly to imports under the April 2025 framework
- Reciprocal tariffs of approximately 15% on selected goods, including electronics, vehicles, machinery, and pharmaceuticals from the European Union, Japan, and South Korea
- Separate emergency tariffs of approximately 25% applied to certain imports from Canada and Mexico, and other tariffs applied to China under national emergency declarations
The ruling applies only to IEEPA tariffs. Other tariffs, such as Section 232 tariffs on steel and aluminum, or Section 301 tariffs targeting specific products and countries, remain in effect. Policymakers may still leverage these authorities or others to impose new or temporary tariffs.
The Court did not address whether previously collected IEEPA tariffs will be refunded to importers or how a fund recovery process would work. In a recovery scenario, tariff refunds typically occur through administrative refund claims filed with U.S. Customs and Border Protection, duty drawback mechanisms, litigation pathways, or, in some cases, congressional action. The timing and likelihood of recovery depend on subsequent regulatory guidance.
Potential Implications for Businesses
A broad rollback of IEEPA-enforced tariffs may eventually ease input costs for some organizations. However, the extent of any relief will depend on supplier pricing, replacement tariffs, and broader trade policy developments.
The decision also affects core business assumptions related to costs, forecasts, and contracts. Key implications include:
- Potential cost relief with continued uncertainty: Some organizations may see lower input costs, though timing and magnitude remain unclear, and relief may be short-term, depending on replacement tariffs and supplier pricing.
- Shifts in cost assumptions: Pricing models, inventory valuation, standard costs, and project budgets may need to be revisited where tariffs were embedded.
- Forecasting uncertainty: Tariff changes introduce variability into financial planning, requiring more advanced scenario planning and modeling capabilities.
- Contract exposure: Escalation clauses, pass-through provisions, and negotiated pricing adjustments may respond differently depending on contract structure.
What Businesses Can Do Now
Organizations across construction, manufacturing, distribution, food and beverage, and other import-reliant sectors may benefit from the following actions:
- Model multiple scenarios: Evaluate outcomes under different tariff environments, including continuation, replacement, or partial rollback across IEEPA, Section 232, and Section 301 frameworks.
- Review contracts: Examine escalation clauses, tariff pass-through provisions, force majeure triggers, and change-order mechanisms for potential exposure.
- Reassess procurement and inventory strategy: Consider sourcing alternatives, adjust purchasing timelines, and revisit inventory assumptions that were influenced by tariffs.
- Evaluate accounting and compliance implications: Assess accounting and compliance impacts of tariff reversals, including whether duty drawback eligibility affects inventory valuation, standard costing and potential financial statement adjustments.
- Stay informed: Monitor regulatory developments, including guidance on refunds, replacement tariffs, and related trade policy changes.
Practical Guidance in an Evolving Global Trade Environment
This ruling is one of several developments reshaping the global trade environment. Organizations that maintain visibility into tariff exposure, contract risk, and cost assumptions are better positioned to respond as policy evolves. Congress may respond with new legislation, or the administration may shift toward other tariff authorities.
Given the pace of change in U.S. trade policy, proactive planning is essential. Visit the Grassi Tariff Hub for the latest updates, industry perspectives, and actionable strategies from our advisors. For more information on how trade policy changes may affect your organization, contact your Grassi advisor today.
FAQs:
Q: What did the Supreme Court decide about emergency tariff powers?
A: The Supreme Court ruled that the President’s use of the International Emergency Economic Powers Act (IEEPA) to impose broad global tariffs was unlawful, reaffirming that taxation authority resides solely with Congress under Article I of the Constitution.
Q: Which tariffs are affected by this ruling?
A: The ruling invalidates many global tariffs imposed under IEEPA since April 2025. However, tariffs under other authorities, such as Section 232 (steel and aluminum) and Section 301 (targeted products and countries), were not rolled back under this decision.
Q: Will businesses receive refunds for previously paid IEEPA tariffs?
A: The Court did not address whether refunds will be issued for previously collected IEEPA tariffs or how a refund process might work. The process may include administrative refund claims, duty drawback mechanisms, litigation pathways, or possibly congressional action.
Q: How does this decision impact businesses?
A: Some organizations could experience cost stabilization if refunds are issued, but uncertainty remains regarding new tariffs or policy shifts. Key impacts include budgeting challenges, contract implications, and potential supply chain adjustments.
Q: What should businesses do to prepare for these changes?
A: Businesses should model multiple scenarios, review contracts for tariff-related clauses, reassess procurement strategies, and stay informed about regulatory developments and potential refund processes.
Q: How can Grassi help businesses navigate these changes?
A: Grassi’s advisors provide tailored guidance on trade policy changes, helping businesses reassess cost assumptions, manage contract risks, and refine procurement strategies. Contact your Grassi advisor for more information.
