Editor’s note, February 21, 4 pm ET: President Donald Trump said Saturday that he would impose a global tariff of 15 percent to replace the tariffs struck down by the Supreme Court. The following story was originally published on February 20.
The Supreme Court just upended President Donald Trump’s trade war.
In a 6-3 decision, the Court ruled on Friday that the bulk of Trump’s tariffs were unconstitutionally enacted.
Trump had rested his trade agenda on a peculiar interpretation of the International Emergency Economic Powers Act (IEEPA), a statute that empowers the president to “regulate” transactions in response to “unusual and extraordinary” threats amid national emergencies.
In the administration’s view, that law had authorized them to impose tariffs on more or less any nation, since America’s trade deficit constituted an unusual and extraordinary threat to the United States.
But the idea that a trade deficit represented such a calamity was disputed by most economists and legal scholars. And it was never clear that the IEEPA authorized broad tariffs in any case: “Regulating” a transaction is not necessarily the same thing as imposing a tax on imports. Further, many constitutional scholars argued that Congress could not constitutionally give presidents completely open-ended authority to impose new tariffs, given that the legislative branch is supposed to hold the power of the purse.
On Friday, the Supreme Court endorsed this view. “The president asserts the extraordinary power to unilaterally impose tariffs of unlimited amount, duration, and scope,” Chief Justice John Roberts wrote in his majority opinion. “In light of the breadth, history, and constitutional context of that asserted authority, he must identify clear congressional authorization to exercise it.”
The Court’s decision could have profound economic consequences for ordinary Americans — at least, if the president does not find new legal rationales for reconstructing his tariff regime.
The Supreme Court may have just increased your income by $1,000
Since taking office, Trump has massively increased taxes on imports. In January 2025, the average US tariff was 2.5 percent. A year later, it is at about 17 percent — the highest since 1932 — according to the Budget Lab at Yale.
This has taken a toll on the US economy. By taxing various foreign-made industrial inputs — from steel to semiconductors to lumber — Trump has made it more expensive for American companies to produce things. And by taxing imported goods, he’s driven up retail prices. As a result, he has made America’s industries less productive and its households less wealthy than they otherwise would have been.
According to a recent analysis from the Budget Lab, Trump’s tariffs had been poised to slow economic growth by 0.4 percentage points in 2026. If maintained indefinitely, his trade regime would have left the American economy persistently 0.3 percent smaller, effectively shedding $100 billion off our national wealth, year after year.
The tariffs were also likely to raise America’s price level by about 1.3 percent in the short run. This would have effectively cost the average household about $1,750 in annual income, due to higher expenses. Making matters worse, by depressing consumption and investment, the tariffs were set to marginally increase unemployment. In the Budget Lab’s model, joblessness rises by 0.6 percentage points by the end of 2026, relative to its level in a world without the tariffs.
The Supreme Court’s decision has — for the moment — made much of this harm disappear.
According to the Budget Lab’s report released Friday, the Court’s ruling brought America’s average tariff rate down to 9.1 percent. If Trump enacted no further trade restrictions, that would translate into:
The only major benefit of the tariffs has been their impact on federal deficits. Trump’s trade agenda is now poised to raise only $1.2 trillion in revenue over the coming decade; had his IEEPA tariffs remained in place, that figure would have been more than twice as large.
Nonetheless, taken together, the overturning of the tariffs would provide a significant economic stimulus — increasing the average household’s real annual income by nearly $1,000, accelerating growth, and reducing unemployment.
And all that is before accounting for the impact of tariff reimbursement payments: When the government levies an illegal tax, it isn’t allowed to retain that revenue. Rather, every importer that paid a tariff this year is now entitled to a refund — one paid back at a 6 percent annual interest rate, compounded daily. To make full restitution, the government will need to send out more than $100 billion to US businesses.
The stimulative impact of those reimbursements will likely be modest. The government won’t immediately mail out $100 billion in checks. Rather, every affected importer will need to individually apply for relief, a process that could take years. Nevertheless, reimbursements will boost business revenue — and thus potentially, investment — at the margin.
How Trump’s tariffs could rise again
Trump enacted most of his tariffs using the IEEPA for a reason: Since that statute is meant to facilitate swift presidential action during an emergency, it doesn’t require the administration to complete any onerous bureaucratic process before imposing import taxes. By contrast, the White House cannot invoke many other tariff powers without conducting investigations and/or hearings.
Nevertheless, those other powers are considerable. The Trade Act of 1974 authorizes the president to enact duties of unlimited scale on foreign countries that engage in unfair trade practices. Trump is already using this law to place tariffs on Chinese goods.
Separately, that law authorizes the president to impose across-the-board tariffs of up to 15 percent for 150 days, in response to a large trade deficit.
The Trade Expansion Act of 1962, meanwhile, allows the administration to impose tariffs when imports threaten America’s national security. Trump has already interpreted this authority expansively: In the administration’s account, cheap foreign-made cabinets are a threat to the US homeland.
Taken together, these laws — along with a handful of others — could allow Trump to reimpose virtually all of his tariffs. In January, Trump’s top trade negotiator, Jamieson Greer, said that the administration would replace any invalidated emergency tariffs using alternative legal authorities.
But the process of rebuilding Trump’s trade regime could be lengthy and cumbersome.
To enact tariffs in response to unfair trade practices, the US trade representative must conduct an investigation demonstrating such cheating, a process that can take months. Likewise, to impose duties in the name of national security, the Department of Commerce must document the supposed threats in question.
This said, the administration can immediately enact temporary, 15 percent tariffs on any country it wishes. That would buy it 150 days to conduct sham investigations authorizing permanent tariffs through other authorities.
Thus, tariffs will decline slightly in the short term. But in the longer run, they could eventually creep back up to something approaching their current level.
Trump may welcome an excuse to scale back his self-sabotage
All this said, the Trump administration has strong political incentives to pare back its trade war. Americans’ top concern is the cost of living. And they overwhelmingly disapprove of Trump’s handling of both trade and inflation.
Trump may have dismissed such polling as “fake news.” But he appeared to have been rattled by the GOP’s dismal showing in the 2025 elections. The morning after Democrats stomped to victory in Georgia, New Jersey, Virginia, and other states, Trump declared on Truth Social, “Costs are coming way down. Affordability is our goal.”
In this context, the White House might see an adverse Supreme Court ruling as an opportunity to reset its trade policy — without needing to explicitly admit error. By claiming that his hands have been tied by a corrupt judiciary, Trump could seek to replace some, but not all, of his tariffs without losing face.
If Trump wants to make America poorer in service of his economically illiterate trade ideas, however, he can probably still find a way.
Rather, it will just force Trump to pursue such self-sabotage in a more laborious and bureaucratic manner.
