Supreme Court Tariff Ruling Reshapes Global Trade Landscape
Author: Fabien Yip, Market Analyst, IG
Publication Date: February 24, 2026
The Ruling and Its Scope
On February 20, 2026, the U.S. Supreme Court (SCOTUS) delivered a 6-3 decision ruling that the International Emergency Economic Powers Act (IEEPA) does not grant the president the authority to impose tariffs. This ruling invalidates the administration's extensive country-level reciprocal tariffs and fentanyl-related levies, which had accounted for about half of all U.S. customs duties since their introduction in early 2025. The Penn Wharton Budget Model estimates that cumulative IEEPA tariff collections reached approximately $165 billion through January 2026, with potential refund exposure of up to $175 billion. The Supreme Court did not address the mechanics of refunds, leaving this to renewed proceedings before the Court of International Trade (CIT).
Washington's Response: Section 122 as the New Vehicle
In response to the ruling, President Trump quickly issued a proclamation imposing a 10% 'temporary import surcharge' on all countries under Section 122 of the Trade Act of 1974, effective February 24, 2026, for 150 days. He later announced plans to raise this rate to the statutory maximum of 15%. Section 122 includes important exemptions for USMCA-qualifying goods from Canada and Mexico, critical minerals, pharmaceuticals, and certain electronics. Tariffs under Section 232 on metals and vehicles remain unaffected by the SCOTUS ruling.
Marginal Relief on Effective Burden
Despite the landmark ruling, U.S. importers and consumers still face a high tariff landscape. The Yale Budget Lab indicates that the elimination of IEEPA tariffs would reduce the average effective tariff rate from 16.0% to 9.1% if Section 122 tariffs expire after 150 days, still the highest level since 1947, excluding 2025. If Section 122 tariffs are extended indefinitely, the effective rate could rebound to 13.7%. The temporary tariff regime is expected to lead to a short-run consumer price increase of 0.6%, translating to an average household income loss of approximately $800 in 2025 dollars.
Winners and Losers
The ruling significantly alters competitive positions among trading partners. Countries like China and India, which previously faced tariffs above 15%, benefit from the ruling, while the UK and Australia, which had negotiated lower rates, now face higher tariffs. Other partners such as the EU, Japan, South Korea, and Taiwan see their competitive positions weakened despite unchanged headline rates.
Sectoral Implications and Things to Watch
The partial unwinding of tariffs provides relief primarily to importers of consumer goods, including apparel, footwear, toys, and electronics from China. The extent of duty refunds will depend on CIT proceedings, which may experience delays due to high claim volumes. Factors to monitor include Trump's warnings about punitive responses to trading partners, the EU's decision to pause ratification of its trade deal with the U.S., and Trump's planned visit to Beijing, which could impact U.S.-China trade dynamics.
Market Reaction
The uncertainty surrounding trade policy has contributed to volatility in global equity markets, although the magnitude of fluctuations has been less severe than in April 2025. The U.S. 500 index rebounded quickly following a minor correction, maintaining a medium-term uptrend. However, technical momentum has weakened, and the index is expected to trade within a tight range before establishing its next decisive move.
Conclusion
The Supreme Court's ruling marks a significant shift in U.S. trade policy, with far-reaching implications for importers, consumers, and global markets. The new tariff landscape, while offering some relief, still presents challenges and uncertainties that stakeholders must navigate.