The United States Supreme Court, in a decisive 6-3 ruling on February 20, 2026, struck down every tariff imposed by the Trump administration under the International Emergency Economic Powers Act, finding that the law simply does not give the president the authority to levy tariffs. The financial fallout is staggering: companies across the country paid an estimated $160 billion or more in tariffs that were, according to the highest court in the land, never legally authorized in the first place. Major corporations including FedEx, Costco, L’Oréal, Dyson, and Nissan North America are now among more than 2,000 plaintiffs demanding their money back — with interest accruing at roughly $650 million per month. The ruling in *Learning Resources Inc. v.
Trump* and *V.O.S. Selections v. United States* did not just invalidate a policy. It created one of the largest potential refund obligations the federal government has ever faced, with the Penn Wharton Budget Model estimating total IEEPA-based tariff collections at between $175 and $179 billion. Chief Justice Roberts, writing for the majority, was blunt: IEEPA “contains no reference to tariffs or duties” and “until now no President has read IEEPA to confer such power.” The decision united an unusual coalition — Roberts was joined by Sotomayor, Kagan, Gorsuch, Barrett, and Jackson, while only Thomas, Kavanaugh, and Alito dissented. This article breaks down exactly how these tariffs were collected and struck down, the ongoing legal battle over refunds, what replacement tariffs the administration has imposed, and what businesses and consumers should expect in the months ahead.
Table of Contents
- How Did Companies End Up Paying Tens of Billions in Tariffs the Supreme Court Found Illegal?
- What Is the Government Required to Refund — and What Are the Limits?
- The Replacement Tariffs — Section 122 and the New Legal Battle
- Section 122 at least explicitly mentions tariffs, but it comes with real constraints on rate, duration, and the economic conditions that must exist to justify its use.
- What Importers and Businesses Should Do Now
- Why the Constitutional Stakes Go Beyond Trade Policy
- The Consumer Impact — Who Actually Paid These Tariffs?
- What Comes Next — The 150-Day Clock and Beyond
- Conclusion
How Did Companies End Up Paying Tens of Billions in Tariffs the Supreme Court Found Illegal?
The Trump administration invoked the International Emergency Economic Powers Act — a 1977 law designed to let the president freeze foreign assets and block financial transactions during national emergencies — as the legal basis for sweeping import tariffs. The theory was that trade deficits constituted a national emergency, and that IEEPA’s broad language about regulating economic transactions encompassed the power to tax imported goods. Businesses had little choice but to pay. When goods arrive at U.S. ports, Customs and Border Protection collects duties before releasing shipments. Companies that refused to pay simply could not import their products. The tariffs applied across industries, hitting everything from consumer electronics to industrial components to food products, and the costs rippled through supply chains until they landed, in many cases, on the end consumer. The legal challenge was years in the making, but the supreme Court’s reasoning was straightforward.
No president in the nearly 50-year history of IEEPA had ever interpreted it as a tariff authority. The statute’s text deals with blocking property, prohibiting transactions, and freezing assets — the tools of economic sanctions, not trade policy. Roberts noted that Congress has established separate, specific statutory frameworks for tariffs, and reading IEEPA to grant tariff power would effectively render those frameworks meaningless. The Court found that the administration’s interpretation would give the president unilateral authority to impose unlimited tariffs on any country, for any duration, with no congressional check — a power the Constitution reserves to Congress. For a company like Learning Resources Inc., a toy importer that served as lead plaintiff, the stakes were existential. Smaller importers without the margins of a Costco or FedEx faced tariff bills that ate directly into already thin profits. Many passed costs to consumers. Others absorbed losses, cut staff, or exited product lines entirely. All of them were paying what the Supreme Court now says was never a lawful tax.
What Is the Government Required to Refund — and What Are the Limits?
On March 4, 2026, Judge Richard Eaton of the Court of International Trade issued a sweeping order that went further than many legal analysts expected. The CIT ordered the government to provide refunds with interest to all importers who paid IEEPA tariffs — not just those who had filed lawsuits. This was a significant development because it meant companies that had quietly paid their tariff bills without retaining trade attorneys or joining litigation would still be eligible for reimbursement. However, the refund process is far from settled. The government is expected to appeal the CIT’s refund order, and the appeals process could take months or longer. Even dissenting Justice Kavanaugh acknowledged in his opinion that the government “may be required to refund billions of dollars to importers,” a tacit concession that the financial exposure is enormous.
If you are a business counting on a refund check arriving soon, the reality is that bureaucratic and legal obstacles remain. The government has strong institutional incentives to slow-walk refunds of this magnitude — we are talking about returning a sum larger than the annual budgets of most federal agencies. Interest continues to accrue at an estimated $650 million per month, which means every month of delay adds to the eventual bill, but also increases the government’s motivation to challenge, narrow, or slow the refund process. There is also the question of who ultimately bears the loss. Many importers passed tariff costs on to customers through higher prices. Whether those companies are entitled to full refunds, or whether some portion should flow back to consumers, is a legal question that has not yet been fully litigated. Past trade disputes suggest importers will likely receive refunds regardless of whether they absorbed the cost or passed it along, but this is an area where future rulings could impose conditions.
The Replacement Tariffs — Section 122 and the New Legal Battle
The ink was barely dry on the Supreme Court’s ruling before the administration moved to a backup plan. Hours after the decision came down on February 20, President Trump invoked Section 122 of the Trade Act of 1974 to impose new across-the-board tariffs of 10 percent on all imports. The next day, the rate was raised to 15 percent — the statutory maximum allowed under Section 122.
Section 122 at least explicitly mentions tariffs, but it comes with real constraints on rate, duration, and the economic conditions that must exist to justify its use.
Multiple state attorneys general have already filed legal challenges to the Section 122 tariffs, arguing that the required economic conditions — a balance-of-payments deficit or imminent dollar depreciation — simply do not exist. The United States runs a trade deficit in goods, but the overall balance of payments, which includes services and investment flows, tells a more complicated story.
Whether courts will scrutinize the administration’s economic justifications closely or defer to executive judgment is an open question, but the legal vulnerability is real. Businesses should plan for the possibility that these tariffs, too, could be struck down or allowed to expire without congressional renewal.
What Importers and Businesses Should Do Now
If you are an importer who paid IEEPA tariffs, the CIT’s March 4 order puts you in a favorable position — at least on paper. The order covers all importers, not just litigants. But favorable court orders and actual refund checks are different things. Companies should be documenting every tariff payment made under IEEPA authority, preserving customs records, and consulting with a trade attorney about the mechanics of filing refund claims. The more than 2,000 lawsuits already filed suggest that many large importers are well ahead of this process, but smaller businesses may not have the same legal infrastructure in place. There is a real tradeoff between waiting for the appeals process to play out and taking action now. Filing a refund claim or joining existing litigation costs money — legal fees, administrative burden, staff time. For a company that paid $50,000 in IEEPA tariffs, the calculus is different than for one that paid $50 million.
Large importers like FedEx and Costco have the resources to pursue every dollar. Smaller businesses need to weigh the cost of legal action against the expected recovery, keeping in mind that the government’s appeal could delay payments significantly. That said, the CIT’s order covering all importers reduces the urgency of filing an individual lawsuit, since the court has already said everyone is entitled to a refund regardless of litigation status. For businesses currently importing goods, the immediate concern is the Section 122 tariffs. At 15 percent across the board, these are lower than many of the IEEPA tariffs they replaced, but they still represent a meaningful cost. The 150-day expiration means companies need to watch Congress closely. If the tariffs expire in July without renewal, import costs drop. If Congress extends them, businesses need longer-term pricing and supply chain adjustments.
Why the Constitutional Stakes Go Beyond Trade Policy
The Supreme Court’s ruling is about more than tariffs. It is about the limits of emergency presidential power. IEEPA has been used dozens of times to impose sanctions, freeze assets, and restrict transactions with hostile nations. The Trump administration’s attempt to use it for tariffs represented a dramatic expansion — treating a sanctions statute as a blank check for trade policy. The Court’s rejection of that interpretation draws a line that constrains future presidents of either party. However, the ruling also exposed a gap.
Congress has not passed major trade legislation in years, and the existing statutory framework — including Section 122 — was not designed for the kind of broad, aggressive tariff policy that the current administration favors. If Section 122 tariffs are struck down or expire, the administration would need to go to Congress for new tariff authority, and passing trade legislation through a divided Congress is a slow and uncertain process. The practical effect may be a period of reduced tariff rates and increased policy uncertainty, which creates its own problems for businesses trying to plan import strategies. The dissent, authored by Thomas with Kavanaugh and Alito joining, argued that IEEPA’s broad language — authorizing the president to “regulate” and “prohibit” any transaction in foreign commerce — was sufficient to encompass tariffs. This reading would have given the executive branch nearly unlimited tariff power with no congressional check. That three justices endorsed this view is a reminder that the legal landscape could shift with future Court appointments.
The Consumer Impact — Who Actually Paid These Tariffs?
One persistent misconception is that tariffs are paid by foreign countries. They are not. Tariffs are paid by the importing company at the U.S. border, and those costs are then passed along through the supply chain. Studies of the IEEPA tariffs found that the vast majority of costs were borne by American businesses and consumers in the form of higher prices.
A family buying a washing machine, a contractor purchasing steel, a restaurant sourcing imported ingredients — all were paying more because of tariffs that the Supreme Court has now declared were never legally authorized. The refund process will return money to importers, not directly to consumers. Whether lower import costs translate back into lower retail prices depends on competitive dynamics in each industry. In highly competitive markets, companies that receive refunds may lower prices to gain market share. In less competitive sectors, companies may simply pocket the refund as recovered margin. Consumers who paid higher prices during the IEEPA tariff period are unlikely to see direct restitution.
What Comes Next — The 150-Day Clock and Beyond
The most immediate timeline to watch is July 24, 2026 — the date the Section 122 tariffs expire unless Congress acts. If Congress does not vote to extend them, the United States will have no broad-based tariff regime beyond the traditional duties that predate the current administration’s trade policy. The administration would need to either persuade Congress to pass new tariff legislation or find yet another statutory basis for import taxes, and the Supreme Court’s ruling significantly narrows the available options. The refund litigation will likely take longer.
Even if the CIT’s order stands on appeal, the logistics of processing refunds for every IEEPA tariff payment made over the life of the program are enormous. The Penn Wharton Budget Model’s estimate of $175 to $179 billion in total collections gives a sense of scale. With interest accruing at $650 million per month, the federal government faces a growing financial incentive to resolve refund claims quickly — but also a budgetary nightmare in doing so. This fight will play out in courts, in Congress, and in federal agency budgets for years to come.
Conclusion
The Supreme Court’s 6-3 decision striking down IEEPA tariffs is one of the most consequential rulings on executive power in recent memory. It invalidated more than $160 billion in tariff collections, triggered a refund obligation that could exceed $175 billion with interest, and forced the administration into an untested legal backup plan under Section 122. For businesses, the ruling creates both an opportunity — potential refunds of every dollar paid under IEEPA tariffs — and continued uncertainty, as the replacement tariffs face their own legal challenges and a built-in expiration date.
The bottom line for importers: document your IEEPA tariff payments, consult a trade attorney, and monitor the appeals process. The CIT has ordered refunds for all importers, but the government will fight that order. For consumers, the impact depends on whether businesses pass savings back through lower prices — history suggests the results will be mixed. And for the country, the larger question is whether Congress will step in to create a durable, constitutional framework for trade policy, or whether the next round of tariffs will end up back before the Supreme Court.