Businesses said the Trump administration got the law wrong by using the International Emergency Economic Powers Act, or IEEPA, to impose broad tariffs that Congress had not authorized under that statute. That claim is no longer just an allegation. On February 20, 2026, the Supreme Court held that IEEPA “does not authorize the President to impose tariffs.” The challenged measures included a reciprocal tariff of at least 10% on every trading partner, with higher rates for dozens of countries, as well as tariffs tied to drug-trafficking emergencies. The dispute was not over whether tariffs can ever be imposed by a president.
It was over whether IEEPA supplied the authority for these particular tariffs. Educational-product importers offered a concrete example of the consequences: companies sourcing toys and learning materials from China, Taiwan, Korea, Vietnam, Thailand, and India said the additional duties threatened sales, customer relationships, and goodwill because the companies could neither absorb the costs nor pass all of them to buyers. The Supreme Court resolved the central IEEPA question on statutory grounds. It did not declare IEEPA unconstitutional, invalidate every presidential tariff, or hold that the executive branch can never respond to an economic emergency. A newer lawsuit challenging the administration’s subsequent worldwide import surcharge under Section 122 of the Trade Act of 1974 presents different legal questions and remains unresolved on appeal.
Table of Contents
- What Did Businesses Claim the Trump Administration Got Wrong About Tariff Authority?
- Why the IEEPA Tariffs Raised Separation-of-Powers Concerns
- How Importers Said the Tariffs Caused Irreparable Business Harm
- What Importers Should Know About Tariff Refund Claims
- The New Section 122 Lawsuit and Its Different Legal Questions
- The APA and Nondelegation Claims Businesses Also Raised
- Why Jurisdiction Changed the Result in the Consolidated Cases
What Did Businesses Claim the Trump Administration Got Wrong About Tariff Authority?
The businesses’ main argument was straightforward: IEEPA permits the president to “regulate” importation during specified emergencies, but it never mentions tariffs or duties. The administration treated that regulatory language as authority to impose taxes at the border. The importers argued that Congress would not hide a power as consequential as tariff-setting inside a general authorization to regulate international transactions. The Supreme court agreed. In Learning Resources, Inc. v.
Trump, the Court concluded that the word “regulate” did not silently include a power to impose tariffs. The comparison with other trade laws was significant: when Congress has delegated tariff authority elsewhere, it has done so expressly and with defined limits, conditions, or procedures. IEEPA contained no comparable tariff language. That distinction matters because a tariff is not merely an import rule. It requires an importer to pay money to the government. A regulation might restrict when a product can enter the country or prohibit transactions involving a sanctioned party; a tariff permits entry but attaches a tax. Treating both actions as interchangeable would allow a general regulatory term to carry a fiscal power that Congress addressed more specifically in other statutes.
Why the IEEPA Tariffs Raised Separation-of-Powers Concerns
The lawsuits also challenged the scale of the power asserted by the administration. Under its interpretation, the president could set tariffs across the world, pause them, restore them, change their rates, and differentiate among countries based on emergency declarations. businesses argued that this amounted to effectively unlimited tariff authority without the detailed boundaries Congress normally places on delegated trade powers. The Supreme Court described the asserted authority as extraordinary and required clear congressional authorization for it. Finding no such authorization in IEEPA, the Court rejected the administration’s interpretation.
The reciprocal tariff illustrated the breadth of the claim: it began at no less than 10% for all trading partners and applied higher rates to dozens of countries rather than targeting a narrow set of prohibited transactions. There is an important limitation to the ruling. The Court’s dispositive holding was statutory, not constitutional. Businesses had argued in the alternative that an interpretation granting such broad tariff power would violate nondelegation principles, but the Court did not need to decide that issue. Describing the decision as a ruling that all presidential tariffs are unconstitutional would therefore overstate what the Court held.
How Importers Said the Tariffs Caused Irreparable Business Harm
The educational-toy plaintiffs described injuries that went beyond writing larger checks to Customs and Border Protection. According to the record credited by the U.S. District Court for the District of Columbia, the companies depended heavily on manufacturers in China, Taiwan, Korea, Vietnam, Thailand, and India. The new duties affected inventory that was central to their existing business models. The companies said they could not simply absorb the added charges because doing so would damage their finances.
Passing the entire cost to retailers or consumers was also not a workable solution because higher prices could reduce orders and send customers to competitors. The district court credited evidence of threatened lost sales, customers, and goodwill—harms that may be difficult to repair through a later damages award. A toy importer provides a practical example. If it has already negotiated seasonal prices with retailers, an unexpected border charge can arrive after product orders and shipping commitments have been made. Raising the retail price may jeopardize the customer relationship, while keeping the promised price forces the importer to bear a cost that was not included in its margin. Even a later tariff refund would not automatically restore a canceled order or a lost shelf placement.
What Importers Should Know About Tariff Refund Claims
The Supreme Court’s rejection of the IEEPA tariffs did not by itself resolve every importer’s refund. Liability and remedy are separate legal questions, and customs procedures can depend on the status of individual entries, including whether they have been liquidated. Businesses should preserve entry records, duty-payment data, liquidation notices, protests, and communications with brokers rather than assuming Customs will identify every affected transaction without importer involvement. The experience of Atmus Filtration shows how refund issues moved into separate litigation. After the Supreme Court decision, Atmus sought relief concerning IEEPA duties.
The Court of International Trade ordered Customs and Border Protection to liquidate or reliquidate covered entries without those duties and to report on refunds with interest. Atmus then voluntarily dismissed its individual action on April 6, 2026. There is a practical tradeoff between waiting for uniform agency procedures and taking steps to protect a company’s own claims. Litigation can be expensive and may be unnecessary when administrative relief is available, but missed customs deadlines can create separate problems. CBP acknowledged the Supreme Court ruling on February 20, 2026, said it was examining implementation, and stated that technical guidance would be provided to filers. Importers evaluating their position may need advice tailored to their entries rather than relying on general announcements alone.
The New Section 122 Lawsuit and Its Different Legal Questions
After the IEEPA ruling, Burlap and Barrel and Basic Fun challenged a subsequent 10% worldwide import surcharge imposed under Section 122 of the Trade Act of 1974. Unlike IEEPA, Section 122 expressly addresses import surcharges. It permits a temporary surcharge of no more than 15% and limits the measure to 150 days when specified international-payments conditions exist. That textual difference means the new case is not simply a replay of the IEEPA litigation. The IEEPA plaintiffs prevailed because the statute did not authorize tariffs at all.
A Section 122 challenge instead requires courts to examine whether the statute’s stated conditions, rate limit, duration limit, and other legal requirements were satisfied. The existence of express surcharge authority makes the statutory question narrower but does not place the administration’s action beyond judicial review. The Section 122 dispute remained unresolved on appeal as of July 25, 2026. Businesses should not treat the Supreme Court’s IEEPA decision as an automatic judgment against the newer surcharge. The two measures may create similar costs at the border, but they rest on different statutes with different language and limits.
The APA and Nondelegation Claims Businesses Also Raised
The toy and educational-product importers did not rely on only one theory. Their complaint argued first that IEEPA authorized no tariffs, alternatively that it did not authorize these tariffs, and also that the implementing actions violated the Administrative Procedure Act. They further argued that reading IEEPA to grant such expansive power would create a nondelegation problem by giving the president legislative authority without an adequate congressional standard.
Those alternative claims illustrate why a lawsuit can contain several legal paths to the same requested relief. A court may decide a case on the narrowest sufficient ground and leave broader constitutional questions unanswered. That is what happened here: the Supreme Court resolved the dispute through statutory interpretation, so the nondelegation theory remained raised but undecided.
Why Jurisdiction Changed the Result in the Consolidated Cases
The Supreme Court’s February 20, 2026 decision handled the consolidated cases differently for jurisdictional reasons. It affirmed the result in V.O.S. Selections while vacating the judgment in Learning Resources because the latter case had proceeded in the wrong judicial forum. The jurisdictional ruling did not reverse the Supreme Court’s central interpretation of IEEPA; the Court still held that the statute did not authorize the challenged tariffs.
That procedural distinction matters for businesses considering tariff litigation. Import disputes often fall within the specialized jurisdiction of the U.S. Court of International Trade, and filing in a federal district court can produce a jurisdictional defect even when the plaintiff’s substantive statutory argument is correct. In Learning Resources, the businesses prevailed on the core meaning of IEEPA, but the district-court judgment itself was vacated on jurisdictional grounds.