On February 20, 2026, the Supreme Court struck down President Trump’s tariff regime in a 6-3 decision, ruling that the International Emergency Economic Powers Act does not grant the president authority to impose tariffs. Hours later, Trump signed a new executive order imposing a 10% “temporary import surcharge” on products from all countries, this time invoking Section 122 of the Trade Act of 1974 — a statute no president had ever previously used for this purpose. The move effectively replaced one legally contested tariff framework with another, raising immediate questions about whether the new order would survive its own legal challenges. The speed of the pivot was striking.
Businesses that had spent months adjusting to the IEEPA-based tariffs — some of which had collectively generated between $175 billion and $179 billion in revenue according to Penn-Wharton Budget Model economists — now faced a fresh set of import duties taking effect just four days later, on February 24. For importers, retailers, and manufacturers who had hoped the Supreme Court ruling would bring relief, the new executive order was a jarring signal that tariff uncertainty was far from over. This article breaks down the Supreme Court’s ruling in *Learning Resources, Inc. v. Trump*, the legal basis and limitations of the replacement tariffs under Section 122, the 24-state lawsuit already challenging the new order, and what consumers and businesses should actually expect over the coming months.
Table of Contents
- What Happened When the Supreme Court Struck Down Trump’s IEEPA Tariffs?
- How Does Section 122 of the Trade Act of 1974 Change the Legal Landscape?
- The 24-State Lawsuit Challenging the New Tariffs
- What This Means for Businesses and Importers Right Now
- Why the 150-Day Clock Creates Unusual Political Pressure
- The Refund Question Nobody Can Answer Yet
- What Comes Next in the Tariff Legal Battle
- Conclusion
- Frequently Asked Questions
What Happened When the Supreme Court Struck Down Trump’s IEEPA Tariffs?
The case, *Learning Resources, Inc. v. Trump* (No. 24-1287), centered on whether Congress had delegated tariff authority to the president through IEEPA. Chief Justice Roberts, writing for the majority and joined by Justices Gorsuch, Barrett, Sotomayor, Kagan, and Jackson, concluded it had not. The ruling invalidated two distinct sets of tariffs: the “Reciprocal Tariffs” first imposed on so-called “Liberation Day” in April 2025 and the “Trafficking and Immigration Tariffs” tied to fentanyl enforcement. Justices Thomas, Alito, and Kavanaugh dissented.
The practical stakes were enormous. The IEEPA tariffs had been in place for nearly a year, and their sudden invalidation raised an immediate question that the Court deliberately left unanswered: what happens to the estimated $175 billion to $179 billion already collected? The majority opinion did not address refunds, instead leaving that issue to the U.S. Court of International Trade. For a company like Learning Resources — a toy and educational product importer that served as the lead plaintiff — the ruling meant the tariffs it had been paying were unlawful, but getting that money back would require a separate legal fight entirely. The 6-3 split was notable for its unusual coalition. Roberts joining with Gorsuch and Barrett alongside the three liberal justices signaled a broad consensus that the executive branch had overstepped, regardless of one’s views on trade policy itself. The dissent argued for a more expansive reading of presidential emergency powers, but the majority treated the tariff question as fundamentally one of congressional authority over taxation and trade — powers the Constitution assigns to Congress, not the president.
How Does Section 122 of the Trade Act of 1974 Change the Legal Landscape?
Within hours of the ruling, the White House announced a new executive order invoking Section 122 of the Trade Act of 1974, a provision designed to let the president impose temporary import surcharges to address balance-of-payments problems. The initial rate was set at 10% on products from all countries, effective 12:01 a.m. on February 24, 2026. Two days later, on February 22, trump announced he would raise the rate to 15%, though as of early March that increase had not yet been formally implemented. The critical limitation of Section 122 is its built-in expiration. Tariffs imposed under this authority are legally capped at 150 days unless Congress votes to extend them.
That puts the expiration date around July 24, 2026. This is a fundamentally different structure than the IEEPA tariffs, which had no such time limit and were imposed under the broad umbrella of a declared national emergency. If Congress does not act, the Section 122 tariffs simply vanish — and given the current political dynamics, extension is far from guaranteed. However, legal experts have raised serious doubts about whether the new tariffs satisfy Section 122’s actual requirements. The statute was written to address balance-of-payments crises — situations where a country is spending far more on imports than it receives from exports in a way that threatens currency stability. Using it as a general-purpose trade weapon to replicate the scope of the struck-down IEEPA tariffs is, according to multiple trade law analysts, a stretch that invites the same kind of legal challenge that just succeeded at the Supreme Court. If the administration cannot demonstrate a genuine balance-of-payments emergency, the new tariffs may be just as vulnerable as the old ones.
The 24-State Lawsuit Challenging the New Tariffs
On March 5, 2026, attorneys general and governors from 24 states filed suit in the U.S. Court of International Trade, directly challenging the legality of the Section 122 tariffs. The lawsuit argues that the administration is misusing a narrow, emergency-oriented statute for broad trade policy purposes — essentially the same species of argument that prevailed at the Supreme Court against the IEEPA tariffs, applied to a different law. The coalition of states spans political lines to some degree, though it is predominantly led by states with significant import-dependent industries. Port states, agricultural exporters facing retaliatory threats, and states with large manufacturing sectors that rely on imported components are all represented.
For a state like California, where the ports of Los Angeles and Long Beach handle roughly 40% of all U.S. containerized imports, the tariffs have immediate economic consequences that the state government argues it has standing to challenge. The choice of the Court of International Trade as the venue is significant. This is the same court the Supreme Court pointed to for resolving refund questions from the IEEPA tariffs, and it has specialized jurisdiction over trade disputes. A ruling here could come relatively quickly by federal court standards, potentially before the 150-day clock runs out in late July. That creates a scenario where the tariffs could be struck down judicially even before they expire by statute — or where the court could issue a preliminary injunction pausing them while litigation proceeds.
What This Means for Businesses and Importers Right Now
For businesses currently importing goods, the practical reality is a confusing layering of obligations. The IEEPA tariffs were struck down, meaning they should no longer be collected at the border. But the Section 122 tariffs impose a new 10% surcharge on broadly the same goods, with a potential increase to 15% still pending formal implementation. The net effect for many importers is a reduction from the higher IEEPA rates but not the elimination of tariff costs they may have been hoping for. The tradeoff for the administration is clear: Section 122 offers a faster, less legally contested path to reimposing some tariff pressure, but at the cost of a lower rate and a hard time limit. The IEEPA tariffs had allowed rates well above 10% on many categories of goods, particularly those from China.
A flat 10% global surcharge is a blunter and less potent instrument. Canada being largely exempt from the new tariff further narrows its scope, which may reflect both political calculation regarding the USMCA relationship and an acknowledgment that broader exemptions might be needed to survive legal scrutiny. For companies that paid IEEPA tariffs over the past year, the refund question looms large. The Supreme Court ruled those tariffs unlawful, but it did not order refunds. Importers who want their money back will need to pursue claims through the Court of International Trade, a process that could take years and whose outcome is uncertain. The government collected an estimated $175 billion to $179 billion under the now-invalidated authority, and the scale of potential refunds makes this one of the largest trade law disputes in American history.
Why the 150-Day Clock Creates Unusual Political Pressure
The 150-day statutory limit on Section 122 tariffs creates a dynamic that did not exist under the IEEPA framework. Trump cannot simply maintain these tariffs indefinitely by executive action alone — he needs Congress to vote for an extension, or the tariffs expire around July 24, 2026. This shifts significant leverage to Congress, including members of the president’s own party who may have reservations about broad-based import surcharges. This timeline also creates complications for businesses trying to plan. A company deciding whether to absorb the tariff cost, pass it to consumers, or restructure its supply chain faces a different calculus when the tariff might only last five months versus when it appeared permanent.
Many importers may choose to simply eat the cost in the short term rather than make expensive supply chain changes for a tariff that could disappear by summer. But if Congress does extend the tariffs, or if the administration finds yet another legal authority to impose new ones, those companies will have lost valuable time. The warning for consumers is straightforward: prices on imported goods are likely to remain elevated through at least the spring and into summer, regardless of what happens in court. Even if the Section 122 tariffs are struck down or expire, businesses that have already raised prices rarely lower them immediately. The tariff turbulence of the past year has created a ratchet effect on consumer prices that will take time to unwind, if it unwinds at all.
The Refund Question Nobody Can Answer Yet
Perhaps the most consequential unresolved issue from the Supreme Court ruling is what happens to the money already collected. Penn-Wharton economists estimate IEEPA tariff collections at $175 billion to $179 billion. The Supreme Court declared the tariffs unlawful but explicitly left the refund question to the Court of International Trade. This means importers — and by extension, the consumers who ultimately paid those costs through higher prices — are in legal limbo.
Historically, successful challenges to unlawful tariffs have sometimes resulted in refunds, but the process is slow and the government typically fights them aggressively. The sheer scale here is unprecedented. A full refund of $175 billion or more would represent a massive fiscal event, and the government has strong incentive to argue that refunds should be limited or delayed. Importers who want to preserve their claims should be consulting trade counsel now, because procedural deadlines for filing refund protests at Customs and Border Protection may apply regardless of the broader litigation timeline.
What Comes Next in the Tariff Legal Battle
The next several months will determine whether the administration’s Section 122 strategy can survive judicial review and whether Congress has the appetite to extend or codify the tariffs into permanent law. The 24-state lawsuit is the most immediate threat, but additional challenges from importers, trade associations, and foreign governments are likely. The Court of International Trade could act quickly enough to resolve the legal question before the 150-day clock expires.
Looking further ahead, the broader constitutional question raised by this saga — how much unilateral trade authority the president actually has — is likely to continue generating litigation regardless of what happens with Section 122. The Supreme Court’s IEEPA ruling drew a clear line, but it also revealed how many other statutes the executive branch might try to invoke. Congress may ultimately need to pass comprehensive trade authority reform if it wants to prevent future presidents from cycling through different legal justifications for tariffs that the legislature never specifically authorized.
Conclusion
The sequence of events on February 20, 2026, encapsulated the deepening conflict between executive power and constitutional limits on trade policy. The Supreme Court’s 6-3 ruling in *Learning Resources, Inc. v.
Trump* definitively shut down the use of IEEPA as a tariff vehicle, but the administration’s same-day pivot to Section 122 demonstrated that the underlying policy objective — maintaining broad import surcharges — was not going to be abandoned without a fight. With $175 billion to $179 billion in potentially unlawful tariff collections hanging in the balance and a new 10% surcharge already in effect, the financial stakes for businesses and consumers remain enormous. For anyone affected by these tariffs, the practical next steps are clear: monitor the 24-state lawsuit in the Court of International Trade, consult with trade attorneys about potential refund claims from the IEEPA period, and plan for the possibility that the Section 122 tariffs either expire in July or get extended by Congress. The legal landscape is shifting rapidly, and the only certainty is that more litigation is coming.
Frequently Asked Questions
Were Trump’s original IEEPA tariffs ruled unconstitutional?
The Supreme Court ruled 6-3 in *Learning Resources, Inc. v. Trump* that the tariffs were unlawful because Congress did not delegate tariff authority through IEEPA. The ruling focused on statutory interpretation rather than a broader constitutional holding.
Will I get a refund on tariffs already paid under the IEEPA orders?
The Supreme Court did not address refunds, leaving that question to the U.S. Court of International Trade. Importers who paid IEEPA tariffs will need to pursue refund claims through that court, and the process is expected to be lengthy. Penn-Wharton estimates total collections at $175 billion to $179 billion.
How long can the new Section 122 tariffs last?
Section 122 tariffs are legally capped at 150 days unless Congress votes to extend them. The current tariffs took effect February 24, 2026, which means they would expire around July 24, 2026, without congressional action.
Is Canada affected by the new 10% global tariff?
Canada has been reported to be largely exempt from the new Section 122 tariff, though the specific terms of the exemption may evolve.
Has the tariff been raised to 15%?
Trump announced on February 22, 2026, that he would raise the tariff from 10% to 15%, but as of early March 2026, the increase had not yet been formally implemented.
Who is challenging the Section 122 tariffs in court?
A coalition of attorneys general and governors from 24 states filed suit on March 5, 2026, in the U.S. Court of International Trade, arguing that Section 122 does not authorize the kind of broad trade tariffs the administration has imposed.