The Supreme Court delivered a significant legal setback to Donald Trump, ruling with a 6-3 majority that his administration overstepped its executive power regarding tariffs. This decision reinforces previous lower court rulings and clarifies that the International Emergency Economic Powers Act does not authorize the president to impose tariffs on imported goods.
In April 2025, Trump declared a national emergency, citing the trade deficit as justification for implementing a standard 10% duty on all imports. He also sought to apply even higher rates on select countries. However, the justices concluded that the provisions of the 1977 law aimed at regulating imports during emergencies do not extend to tariff-setting powers, which rest with Congress under the Constitution’s commerce clause.
The administration contended that the language of the IEEPA, which permits the regulation of imports, included the power to impose duties. This interpretation was ultimately rejected by the majority. Following the ruling, Trump expressed his belief that the decision was politically driven and raised concerns about potential retaliatory measures from foreign governments.
While some tariffs remain, the ruling invalidates Trump’s specific “reciprocal” tariffs as well as the 25% duty on targeted imports from Canada, China, and Mexico, previously defended on the grounds of combating fentanyl abuse. Investors should closely monitor how these developments may impact trade relations and market dynamics.