By Sevgi Ceren Gokkoyun, Dilara Zengin and Gokhan Ergocun
NEW YORK/WASHINGTON (AA) - A US Supreme Court ruling that said President Donald Trump's "emergency" tariffs are illegal, increased uncertainties about the future of the customs duties collected and trade agreements Washington made with other countries.
The court ruled Friday that the International Emergency Economic Powers Act (IEEPA), on which the tariffs put into effect by President Donald Trump were based, did not grant the president the authority to impose tariffs.
The 6-3 decision emphasized that the authority to impose customs duties belongs to Congress.
Trump imposed "reciprocal" customs duties on almost all US trade partners last year under the IEEPA, and introduced tariffs on China, Canada, and Mexico, citing the flow of fentanyl into the country.
Noting that the government interpreted the IEEPA as a law granting the president the authority to "unilaterally impose unbounded tariffs and change them at will," the court’s decision pointed out that in the half-century history of the law, no president had used the act even to impose any customs duty, let alone tariffs of the size and scope Trump imposed.
The ruling stated that the phrase "regulating" in the law did not sweep Congress's power to "set tariff policy," and the power to “regulate … importation” does not fill that void.
Stating that the IEEPA gives the president the authority to regulate imports on various issues, such as investigating, preventing and prohibiting, the decision noted that customs duties or fees were never mentioned in the long list of special powers.
- Uncertainty for collected tariffs
While the decision puts a legal block on the Trump administration's trade policies, it created a massive cloud of uncertainty regarding the fate of billions of dollars in customs duties recently collected under the IEEPA and the US foreign trade commitments.
According to the Penn Wharton Budget Model, the amount collected for tariffs under the IEEPA that might need to be refunded was estimated to be more than $175 billion.
The decision did not present a concrete roadmap for the refund of the customs duties collected, but the court's release included the opinion of Supreme Court Justice Brett Kavanaugh, who dissented, that the US may be required to refund billions of dollars to importers and refunds of billions of dollars would have significant consequences for the US Treasury Department.
- Trump announces 10% global tariff
Trump, in a news conference held after the ruling, said it was "deeply disappointing" and he was ashamed of some members of the court.
"The good news is that there are methods, practices, statutes and authorities, as recognized by the entire court in this terrible decision — and also as recognized by Congress," said Trump.
Arguing that the Supreme Court's decision made a president's authority to regulate trade and impose customs duties stronger and clearer, Trump explained that he thought the tariffs would generate more revenue than before.
Trump announced that he would sign a decision to implement a 10% global tariff in addition to the currently applied tariffs under Section 122 of the Trade Act of 1974, adding that they would launch various investigations under Section 301 and other articles to protect the US from the unfair trade practices of other countries and companies.
Criticizing the absence of a provision regarding the refund of tariffs in the decision, Trump stated that the situation would be the subject of litigation for years.
Regarding the trade agreements negotiated using IEEPA tariffs, Trump said many deals are valid, some will not be valid and will be replaced by "other alternatives."
US Treasury Secretary Scott Bessent also said that using alternative legal authorities for customs duties would leave tariff revenues "virtually unchanged" in 2026.
Bessent pointed out that the court did not rule against the tariffs, but only that the IEEPA could not be used for that purpose.
- What happens next?
Import companies are expected to file class-action lawsuits for the refund of the taxes they already paid by citing the court’s decision as a precedent.
Reports in the US media indicate that importers have already filed more than 1,000 lawsuits at the Court of International Trade to demand refunds, and a new influx of lawsuits is expected to begin.
Some small importers might give up the potential refund instead of paying thousands of dollars in legal and court fees to file a lawsuit, it was reported.
While experts warn that the process could technically turn into chaos, it is expressed that legal regulations regarding which product group, in which date range, and how much refund the Customs and Border Protection (CBP) unit will make could take months or even years.
As Kavanaugh expressed in his opinion, it is reported that the ruling did not completely eliminate the president's authority to impose tariffs, but only ruled that he chose the wrong legal option by imposing customs duties under the IEEPA.
As Trump also stated, it is noted that the US administration can use other federal laws in the upcoming period, such as Section 232 of the Trade Expansion Act of 1962, citing national security, Section 301 of the Trade Act of 1974, authorizing action against unfair trade practices of foreign countries, or Section 122 targeting foreign trade deficits.
However, unlike the IEEPA, those laws require more complex bureaucratic and procedural steps, such as additional investigations, public comments and reports from specific institutions.
-Are trade agreements in danger?
While the Trump administration used IEEPA tariffs as a bargaining chip in trade diplomacy with many countries, the Supreme Court's decision also creates uncertainty for the fate of trade agreements worth trillions of dollars that have already been signed or are under negotiation.
Experts state that trade partners will now increasingly price in the risk that "agreements made with the US President can be overturned by the judiciary.”
It is also noteworthy that Kavanaugh included the statement in his dissenting opinion: "The IEEPA tariffs have helped facilitate trade deals worth trillions of dollars—including with foreign nations from China to the United Kingdom to Japan, and more.
"The Court’s decision could generate uncertainty regarding those trade arrangements."
Spokespersons for the EU and the UK governments stated that they would be in contact with the US to gain more clarity about the effects of the decision.
-Another bout of trade policy uncertainty
Ryan Sweet, chief global economist at Oxford Economics, told Anadolu that the ruling immediately lowers the effective tariff rate sharply, from 12.8% to 8.3%.
Sweet noted that any boost to the economy from lowering tariffs in the near-term is likely to be partly offset by a prolonged period of uncertainty, and with the administration likely to rebuild tariffs through other, more durable means, the overall tariff rate may yet end up settling close to current levels.
Sweet stated that the 6-3 ruling was unambiguous in striking down the emergency declaration underpinning much of the reciprocal by-country tariffs put in place last year.
He added that the Supreme Court did not rule on whether the administration must refund the more than $130 billion in tariffs already paid under the declarations, which will likely trigger a prolonged legal battle.
Sweet highlighted that the administration has frequently emphasized other powers it could use to rebuild much of the tariff regime struck down by the decision.
The White House may turn to Section 122 to immediately implement an up to 15% tariff on all imports for as many as 150 days before requiring congressional approval for an extension, he said.
That could serve as a bridge while the administration pursues other trade authorities, which require investigations but are more legally durable, he stated.
"Even if the administration is able to replicate the overall level of tariffs using other means, the by-sector and by-country implications could end up looking very different, which will create another bout of trade policy uncertainty for business, investors, and households," said Sweet.
He warned that the uncertainty is a key downside risk that could ding, rather than derail, growth this year.
- Decision puts trade agreements at risk
Olu Sonola, head of US economic research at Fitch Ratings, stated that the 10% tariff may ultimately help reduce uncertainty once the dust finally settles.
Sonola noted, howeverm that at this point, it is still unknown whether the 10% blanket tariff is truly a blanket -- whether it will spare consumer electronics, pharmaceuticals, oil and gas, and the many other sectors previously exempted under the IEEPA.
Pointing out that the refund process is likely to be vigorously litigated in the months ahead, Sonola said the Supreme Court’s decision gives companies and consumers a clear legal basis to demand their money back.
The ruling also puts trade agreements with tariff rates above 10% at real risk, Sonola mentioned.
Emphasizing that countries negotiating the deals are not the ones paying the bill but rather corporations and consumers are, he stated that if the tariff is deemed illegal, there is no legal justification for continuing to charge rates higher than the 10% allowed under Section 122.
Noting that global markets will probably shrug it off for now, Sonola said that may change as there is greater clarity on how it plays out.
"In fact, the decision could ultimately benefit many Asian and European countries that currently face IEEPA tariff rates in excess of 10%," he added.