February 20, 2026, marks a significant shift in U.S. trade policy: the U.S. Supreme Court invalidated previous broad-based tariffs, while the Trump administration, in an emergency press conference immediately afterward, announced the implementation of a new 10% across-the-board tariff on all imports and the activation of legal mechanisms to maintain protective measures. The developments are expected to affect both the U.S. market and international trade flows.
Legal Basis of the Court Decision
The Supreme Court, with a 6-3 majority, ruled that the horizontal tariffs (10%-50%) applied by the government since 2025 were unconstitutional.
Limitation of Presidential Authority: The ruling notes that the administration had relied on the International Emergency Economic Powers Act (IEEPA) to implement permanent tariffs. The Court concluded that using an emergency powers law to regulate trade exceeds executive authority, as the constitutional power to levy taxes and tariffs belongs to Congress.
Retroactive Effect and Refunds: The verdict renders the collection of these tariffs from the date of their application illegal. Analysis by The Budget Lab at Yale estimates that the government may need to refund approximately $175 billion to importing companies that had already paid the tariffs. The process involves submitting formal protests, customs documents, and payment receipts, while cases rejected at the administrative level can be appealed to the United States Court of International Trade.
Immediate Economic and Trade Implications
Reduction in Import Costs: The removal of tariffs is expected to immediately lower the cost of imported raw materials and consumer goods, which led to a temporary rise in stock market indices.
Retention of Targeted Measures: The ruling does not affect tariffs imposed under other provisions, such as Section 301 (intellectual property) or Section 232 (national security for steel and aluminum), which remain in force. Measures affecting key sectors, such as copper and automobiles, are also excluded.
Government Response: Section 122
In a press conference immediately following the ruling, the administration announced its new plan to maintain protective measures:
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New 10% Horizontal Tariff: An executive order to impose a new 10% tariff on all imports.
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Legal Basis: The measure relies on Section 122 of the Trade Act of 1974, which grants the President the authority to impose temporary tariffs or quotas for up to 150 days to address severe balance-of-payments deficits.
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Temporary Nature: The tariffs will remain in effect for up to 150 days, with notification to Congress. Any extension beyond this period requires legislative approval.
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Other Actions: The administration also announced the launch of new trade investigations under Section 301 to support future tariffs in specific sectors.
Outlook and Next Steps
The use of Section 122 is considered a transitional solution, while the further development of trade policy will depend on Congressional decisions regarding the permanent adoption of new tariff measures. International markets are closely monitoring the situation, as these decisions affect both imports and trade flows to and from the U.S.
