A 1977 law granting the American president broad economic powers during declared national emergencies. It has its roots in the Trading with the Enemy Act, passed after America joined the first world war in 1917, which gives the president leeway to interfere in international economic transactions during national emergencies. Previous presidents used IEEPA to justify targeted sanctions but never tariffs. In 2025 Donald Trump became the first president to invoke the act to impose tariffs, declaring emergencies over fentanyl smuggling and illegal immigration (for Canada and Mexico) and over trade deficits themselves (for "reciprocal" tariffs on all countries).
Even if IEEPA is struck down, presidents retain several other statutory routes to impose tariffs. Section 122 of the Trade Act of 1974 allows tariffs of up to 15% for up to 150 days. Section 301 of the same act grants the ability to place tariffs on targeted countries following an inquiry by the US Trade Representative; it was the basis for Trump's first-term tariffs on China. Section 232 of the Trade Expansion Act of 1962 grants the ability to place tariffs on targeted industries following a Department of Commerce inquiry; it was used for tariffs on cars, steel and other sectors. Section 338 of the Tariff Act dates back to the 1930s and has never been invoked; it allows retaliatory levies of up to 50% on countries with "unreasonable" trade practices without requiring lengthy investigations.
Three federal courts sided with challengers who argued that IEEPA does not authorise tariffs—first the Court of International Trade in May 2025, then a federal appeals court in August 2025 (ruling 7-4), then the Supreme Court itself. The challengers included Learning Resources, an educational-toy company, and VOS Selections, a small wine importer.
At oral argument on November 5th 2025 the administration fared poorly. All three liberal justices expressed scepticism; Amy Coney Barrett pressed the solicitor-general to name "any other time in history" when "regulate…importation" was understood to mean tariffs; Chief Justice Roberts said the major-questions doctrine "might be directly applicable"; Justice Neil Gorsuch asked what would stop Congress "from just abdicating all responsibility to regulate foreign commerce" to the president. Only Justices Samuel Alito, Brett Kavanaugh and Clarence Thomas seemed inclined to uphold the tariffs.
On February 20th 2026 the Supreme Court ruled 6-3 that "IEEPA does not authorise the President to impose tariffs." Roberts's majority opinion noted that the framers of the constitution "did not vest any part of the taxing power in the Executive Branch." The six conservatives split over the major-questions doctrine: Roberts, Barrett and Gorsuch held that it doomed the tariffs, while the three liberal justices reached the same result without invoking the doctrine. Kavanaugh, Alito and Thomas dissented, opining that the doctrine has less bite in foreign affairs. The court stated that "when Congress has delegated its tariff powers, it has done so in explicit terms, and subject to strict limits."
Trump's IEEPA tariffs raised perhaps $180bn. Over the preceding year 1,800 companies—including Goodyear and Costco—filed lawsuits to protect their right to a refund. The refunds owed, equivalent to roughly 0.6% of GDP, accrue interest compounded daily at 6-7%. Goldman Sachs estimated that around 60% of the tariffs' cost had been passed on to consumers through higher prices.
Within hours of the Supreme Court's ruling Trump invoked Section 122 of the Trade Act of 1974 to levy 10% tariffs on all imports for 150 days, raising the level to 15%—the legal maximum—the next day. According to the Yale Budget Lab, America's effective tariff rate edged down from 13.7% under IEEPA to 12.2% under Section 122, still far above the 2-3% that prevailed before Trump took office for the second time.
Because Section 122 must be applied indiscriminately, trade partners that had negotiated lower rates under IEEPA—notably Britain and the European Union—were furious, while those previously clobbered, like China and Brazil, came out ahead. Section 122 tariffs expire after 150 days unless Congress extends them. The administration would then likely try to recreate tariff authority using Section 301 and Section 232, both of which require formal investigations before tariffs can be levied.
The ruling highlighted an unanticipated flaw of post-war American trade law: excessive congressional deference to the president. Congress delegated tariff powers on the assumption that presidents would counterbalance the inherent protectionism of the legislature, where parochial interests predominate. The president was supposed to take into account not just domestic firms competing against imports, but also consumers and exporters. That assumption proved false.
Don't tell any big lies today. Small ones can be just as effective.