US Supreme Court strikes down Trump’s ‘Liberation Day’ tariffs: What it means for prices & trade

The US Supreme Court has issued a sharp rebuke against the Trump administration and ruled against the legality of the president’s sweeping global tariffs.  

In a 6-3 decision, the court ruled that International Emergency Economic Powers Act (IEEPA) – a 1977 statute which grants the president authority to regulate or prohibit certain international transactions during a national emergency – does not authorize the president to impose the tariffs.  

The ruling deals a major blow to President Donald Trump’s aggressive trade strategy, which leaned heavily on the International Emergency Economic Powers Act to justify near-global “reciprocal” tariffs and separate duties tied to the alleged trafficking of deadly drugs into the US.  

Countries affected by the IEEPA tariffs included Canada, China, Mexico, India, Brazil and dozens of others facing higher “reciprocal” duties — underscoring the global sweep of a policy now curtailed by the court’s 6-3 ruling. 

Legal setback for White House tariff strategy  

The administration had argued that IEEPA’s provision allowing the president to “regulate … importation” during a declared national emergency empowered him to levy tariffs. Critics countered that the law does not permit unilateral tariffs of any size, on any country, at any time — a view earlier endorsed by a federal trade court and a federal appeals court before the case reached the Supreme Court of the United States.  

IEEPA duties accounted for the majority of U.S. tariff revenue last year, making the court’s decision a direct hit to a central pillar of Trump’s trade architecture.  

Trump’s warnings & revenue claims  

Trump had cast the tariffs as both leverage and lifeline — a tool to extract concessions from foreign governments on trade, immigration, drug enforcement and military conflicts, and a revenue stream he claimed could eventually replace the income tax. He also floated sending Americans $2,000 tariff dividend checks.  

"WE'RE SCREWED!" if the high court overturns the tariffs, Trump said on social media Jan. 12.  

He had also warned the country would face an "economic disaster" unless the tariffs remained in place and called the case a matter of "LIFE OR DEATH.”  

Impact on consumer costs  

Economists say the tariffs have already pushed up prices. In 2025, duties on imports — from furniture and clothing to food, electronics and cars — added about $1,000 in costs for the average household, according to a CNBC report citing Tax Foundation data. For 2026, that added burden was projected to rise to between $1,300 and $1,700.  

With the IEEPA tariffs now struck down, analysts estimate household costs could drop roughly in half next year, trimming $600 to $800 from the projected 2026 burden. Prices, however, are unlikely to return to pre-2025 levels, as other tariffs imposed under separate statutes remain in place.  

Alternative legal routes still open  

The Trump administration has indicated it could pivot to other authorities, including Section 232 of the Trade Expansion Act, to preserve parts of its tariff regime. Treasury Secretary Scott Bessent had said alternative statutory tools are available if the IEEPA-based tariffs are invalidated, though Trump has argued none are as straightforward or as potent.  

Uncertainty over refunds & legal fallout  

It remains unclear whether businesses — or consumers — will receive refunds for tariffs collected under IEEPA. Some economists believe companies may seek compensation through the courts, but direct payments to consumers would likely require congressional action, despite Trump’s earlier talk of $2,000 “dividend” checks.  

“If the Supreme Court is silent on this issue and the Administration doesn’t provide compensation, there will likely be significant legal actions by businesses, that the Court will ultimately need to adjudicate on,” Mark Zandi, chief economist at Moody’s, told CNBC.