On February 20, 2026, the Supreme Court delivered a landmark 6-3 ruling in *Learning Resources, Inc. v. Trump* (case no. 24-1287), striking down President Trump’s tariffs imposed under the International Emergency Economic Powers Act.
Hours later, Trump fired back with a new 10% global tariff under a different legal authority — Section 122 of the Trade Act of 1974 — which took effect on February 24, 2026. The next day, he raised the rate to 15%, the statutory maximum. The result is a constitutional showdown over trade power that has already triggered billions in refund obligations, a fresh round of legal challenges, and deep uncertainty for American importers and consumers. The Court’s majority opinion, written by Chief Justice John Roberts and joined by Justices Sotomayor, Kagan, Gorsuch, Barrett, and Jackson, held that IEEPA’s “lengthy list of powers is absent any mention of tariffs or duties,” and that “had Congress intended to convey the distinct and extraordinary power to impose tariffs, it would have done so expressly.” The three dissenters — Justices Thomas, Alito, and Kavanaugh — disagreed, but the ruling invalidated two major rounds of IEEPA tariffs: the February 2025 tariffs on Canada, Mexico, and China tied to declared drug emergencies, and the April 2025 “Liberation Day” tariffs targeting the global trade deficit. This article breaks down how the new Section 122 tariffs work, how much they will cost, who is exempt, and what legal battles lie ahead.
Table of Contents
- What Happened When the Supreme Court Struck Down Trump’s Trade Policy in a 6-3 Ruling?
- How Do Trump’s New Section 122 Tariffs Actually Work?
- Which Products and Countries Are Exempt From the New Tariffs?
- What Refunds Are Owed to Importers Who Paid the Illegal IEEPA Tariffs?
- Can the Section 122 Tariffs Survive Legal Challenges?
- How Are Consumers and Businesses Absorbing the Cost?
- What Happens When the 150-Day Clock Runs Out?
- Conclusion
- Frequently Asked Questions
What Happened When the Supreme Court Struck Down Trump’s Trade Policy in a 6-3 Ruling?
The *Learning Resources, Inc. v. Trump* decision was not a narrow procedural ruling. It was a direct rebuke of the administration’s theory that IEEPA — a law originally designed for sanctions, asset freezes, and financial restrictions during national emergencies — could be stretched to cover import tariffs. Learning Resources, a toy and educational supply company, was among the importers that challenged the tariffs after facing steep cost increases on goods manufactured abroad. The Court sided with them and, by extension, with every importer who had paid duties under the now-illegal IEEPA orders. What made the decision particularly striking was its coalition. This was not a liberal-conservative split.
Chief Justice Roberts was joined by two conservative justices — Gorsuch and Barrett — alongside the Court’s three liberal members. Gorsuch, known for his textualist approach, reportedly focused on the fact that Congress has historically treated tariff authority as a specific, enumerated power, not something to be inferred from broad emergency language. The dissent from Thomas, Alito, and Kavanaugh argued for a more expansive reading of executive power in emergencies, but the majority was unmoved. The practical fallout was immediate. U.S. Customs and Border Protection had collected approximately $133.5 billion in IEEPA tariff revenue as of December 14, 2025. With those tariffs now declared unlawful, refund obligations to importers could reach $175 billion. On March 4, 2026, Court of International Trade Judge Richard Eaton ordered the government to begin processing refunds with interest, accruing at an estimated $650 million per month. That is real money leaving the federal treasury at a moment when the administration was counting on tariff revenue to offset spending elsewhere.
How Do Trump’s New Section 122 Tariffs Actually Work?
Within hours of the Supreme Court’s ruling, President trump invoked Section 122 of the Trade Act of 1974 to impose a 10% ad valorem tariff on virtually all imports. The next day, he raised it to 15%. His stated justification was addressing “fundamental international payment problems” — a reference to the persistent U.S. trade deficit. Trump described the Supreme Court majority as “very unpatriotic and disloyal to the Constitution” and called the decision “a disgrace.” Section 122 is a narrower authority than IEEPA, and it comes with hard limits. The tariff rate is capped at 15%, the maximum duration is 150 days (making the current tariffs set to expire on July 24, 2026), and extending them beyond that window requires an Act of Congress.
Unlike the IEEPA tariffs, which the administration had treated as indefinite and adjustable at will, Section 122 forces a countdown clock. If Congress does not act by late July, the tariffs vanish automatically. However, there is an important caveat: even within these constraints, the economic impact is substantial. The Committee for a Responsible Federal Budget projects the Section 122 tariffs will generate roughly $35 billion in net new revenue over 150 days at the 10% rate, rising to approximately $50 billion at 15%. If the tariffs were somehow extended or replicated through new legislation, revenue could reach $900 billion to $1.3 trillion over FY2026–2036. That is a significant sum, but it still falls short of what the IEEPA tariffs were generating — the new tariffs replace over half of the lost IEEPA revenue at 10%, and over three-quarters at 15%. The gap matters for an administration that had built budget projections around tariff income.
Which Products and Countries Are Exempt From the New Tariffs?
Not everything is subject to the 15% levy, and understanding the exemptions matters for businesses trying to calculate their exposure. USMCA-qualifying goods from Canada and Mexico are exempt, meaning products that meet the rules-of-origin requirements under the United States-Mexico-Canada Agreement will not face the new duties. This is a meaningful carve-out — it incentivizes compliance with USMCA sourcing rules and effectively rewards companies that had already restructured their supply chains to qualify. Beyond USMCA goods, the administration exempted several categories outright: certain critical minerals, energy products, pharmaceuticals, specified electronics, vehicles and auto parts, and CAFTA-DR-qualifying textiles from Central American and Dominican Republic trade partners.
The logic behind most of these exemptions is straightforward — taxing pharmaceutical imports or critical minerals needed for defense and technology production would create obvious domestic pain points. The vehicle and auto parts exemption likely reflects the political sensitivity of car prices, particularly in an environment where the administration has already faced criticism over consumer costs. For importers whose goods do not fall into these categories, the 15% tariff applies broadly. A small electronics manufacturer importing components from Taiwan, a furniture retailer sourcing from Vietnam, or a food distributor buying specialty ingredients from Italy — all face the same flat rate. The lack of country-specific targeting is both a feature and a limitation: it avoids the diplomatic messiness of singling out nations, but it also means allied trading partners are treated the same as adversaries.
What Refunds Are Owed to Importers Who Paid the Illegal IEEPA Tariffs?
The refund question is one of the most consequential and practically complicated outcomes of the Supreme Court ruling. With up to $175 billion potentially owed back to importers who paid IEEPA tariffs, the logistics of processing those refunds are staggering. Judge Richard Eaton’s March 4, 2026 order from the Court of International Trade did not leave room for delay — the government was directed to provide refunds with interest, and that interest is accruing at roughly $650 million per month. For individual importers, the process depends on the records they maintained. Companies that documented their IEEPA-related duty payments, filed proper entries, and can demonstrate what they paid under the now-invalidated tariffs are in the strongest position.
Those that absorbed the costs without detailed tracking — particularly smaller businesses — may face a harder road. The refund process is also creating a cash flow issue for the federal government, which had already spent much of the collected revenue. The tradeoff here is real. Every dollar refunded is a dollar the government cannot spend elsewhere, and the administration faces pressure from multiple directions — importers demanding their money back, budget hawks pointing to the fiscal hole, and courts enforcing the refund order. The $650 million monthly interest accrual creates a strong incentive for the government to process refunds quickly rather than drag its feet, but the sheer volume of claims means delays are likely. Importers should be preparing documentation now rather than waiting.
Can the Section 122 Tariffs Survive Legal Challenges?
The new tariffs are already under legal attack, and the challenges raise serious questions about whether Section 122 is being used as intended. Twenty-four states filed a lawsuit in March 2026 arguing that the statutory conditions required to invoke Section 122 — specifically, the existence of “fundamental international payment problems” — do not apply in the current economic context. The Trade Act of 1974 was written with balance-of-payments crises in mind, not routine trade deficits. Meanwhile, on the legislative front, Senators Tim Kaine and Raphael Warnock introduced the Reclaim Trade Powers Act, which would repeal Section 122 entirely.
Whether that bill can gain traction in the current Congress is uncertain, but its introduction signals that at least some lawmakers view the administration’s use of Section 122 as an end-run around the Supreme Court’s ruling — essentially swapping one questionable legal authority for another. The Court of International Trade has scheduled a three-judge panel for April 10 to hear the states’ challenge, with a decision potentially coming by the end of April 2026. If the court issues an injunction, the tariffs could be suspended before their 150-day expiration. Importers and businesses should be aware that the legal landscape is fluid — planning around a tariff that may not survive its own legal challenges requires flexibility. Companies that locked in contracts assuming 15% duties may find themselves overpaying if the tariffs are struck down, while those that waited may benefit from a shorter-than-expected tariff window.
How Are Consumers and Businesses Absorbing the Cost?
The real-world impact of tariffs is never abstract. When a 15% duty hits imported goods, someone pays — and it is rarely a foreign government. Importers either absorb the cost, cutting into margins, or pass it along to retailers and ultimately consumers.
For a mid-size retailer importing $10 million in goods annually, a 15% tariff represents $1.5 million in additional costs that did not exist a month ago. That money comes from somewhere: higher shelf prices, reduced hiring, delayed expansion, or thinner profits. The exemptions soften the blow in targeted sectors, but for the broad middle of American commerce — consumer goods, industrial supplies, raw materials not on the exemption list — the tariff functions as a across-the-board cost increase during a period when inflation has only recently moderated. Businesses that had just finished adjusting to the IEEPA tariffs now face a different tariff at a different rate under a different legal authority, with a 150-day clock ticking and no certainty about what comes next.
What Happens When the 150-Day Clock Runs Out?
The most important date on the calendar is July 24, 2026 — the day the Section 122 tariffs expire by law unless Congress passes legislation to extend them. The administration has limited options. It cannot simply reissue the tariffs under Section 122; the statute was designed as a temporary measure, not a renewable subscription. Any extension requires an Act of Congress, which means navigating a legislative process that includes members from both parties who have expressed skepticism about unilateral trade actions.
If the tariffs lapse without replacement, the U.S. would revert to pre-IEEPA tariff rates on most goods — a significant reduction that would reshape import costs overnight. If Congress does act, the terms of any new tariff legislation will be subject to negotiation and compromise, likely resulting in something quite different from the current 15% flat rate. Either way, the era of executive-branch tariff policy by emergency declaration appears to be closing. The Supreme Court drew a line, and the 150-day window on Section 122 is a countdown to a decision point that Congress can no longer avoid.
Conclusion
The Supreme Court’s 6-3 ruling in *Learning Resources, Inc. v. Trump* reshaped the legal landscape for American trade policy in a single day. By holding that IEEPA does not authorize tariffs, the Court invalidated billions in collected duties and forced the administration to pivot to a narrower, time-limited authority under Section 122.
The resulting 15% global tariff is generating significant revenue — potentially $50 billion over 150 days — but it comes with a hard expiration date and faces its own legal challenges from 24 states. For importers, the immediate priorities are clear: document all IEEPA-related payments and pursue refunds, understand whether your goods qualify for Section 122 exemptions, and plan for the possibility that the current tariffs may not survive legal challenge or their July 24 expiration. For consumers, the takeaway is that trade policy remains volatile and prices on imported goods will continue to reflect that uncertainty. The next major inflection point comes in late April, when the Court of International Trade rules on the states’ challenge, and again in late July, when Congress must decide whether to let the tariffs expire or take the politically fraught step of codifying them into law.
Frequently Asked Questions
Are the IEEPA tariffs still in effect?
No. The Supreme Court struck them down on February 20, 2026, in a 6-3 decision. Both the February 2025 tariffs on Canada, Mexico, and China and the April 2025 “Liberation Day” tariffs were invalidated. Importers who paid those tariffs are entitled to refunds with interest.
What is the current tariff rate on imports?
As of February 24, 2026, a 15% ad valorem tariff applies to most imports under Section 122 of the Trade Act of 1974. The rate was initially set at 10% and raised to 15% the following day. USMCA-qualifying goods from Canada and Mexico, certain critical minerals, energy products, pharmaceuticals, specified electronics, vehicles and parts, and CAFTA-DR textiles are exempt.
How long will the Section 122 tariffs last?
Section 122 limits tariffs to a maximum of 150 days. The current tariffs are set to expire on July 24, 2026, unless Congress passes legislation to extend them.
How do I get a refund for IEEPA tariffs I already paid?
The Court of International Trade ordered the government on March 4, 2026, to process refunds with interest. Importers should ensure they have complete documentation of all IEEPA-related duty payments and entries filed with U.S. Customs and Border Protection. Interest is accruing at approximately $650 million per month across all claimants.
Could the new Section 122 tariffs be struck down too?
They face a serious legal challenge. Twenty-four states have sued, arguing the statutory conditions for invoking Section 122 do not apply. A three-judge panel at the Court of International Trade is scheduled to hear the case on April 10, 2026, with a decision possible by end of April.
What happens if Congress does nothing by July 24?
The Section 122 tariffs expire automatically. The U.S. would revert to pre-IEEPA tariff rates on most imported goods, which would represent a significant reduction from current levels.