The tariff cascade — IEEPA, the 10% surcharge, and the trade-court reversal

In late February 2026, the Supreme Court ruled 6-3 in Learning Resources, Inc. v. Trump that the International Emergency Economic Powers Act does not authorize the president to impose tariffs. By the time the opinion was issued, Trump-administration tariffs had generated more than $200 billion in revenue. The ruling was one of the most consequential separation-of-powers decisions of the second Trump term.

It also kicked off a three-month sequence of legal-authority pivots that have illuminated the structure of executive trade authority more clearly than most academic treatments of the subject.

The IEEPA tariffs and their fate

The first Trump administration had used Section 232 (national security) and Section 301 (foreign unfair trade practices) tariffs at significant scale during the 2018-2020 trade war. The second Trump administration, beginning January 2025, tried something different: it invoked IEEPA — a 1977 statute generally used for sanctions against hostile foreign governments — to impose broad tariffs framed as responses to fentanyl trafficking, immigration concerns, and trade deficits.

The legal theory was novel. IEEPA permits the president to “regulate, prevent, or prohibit” various transactions during a declared national emergency. Whether “regulate” includes “tariff” had never been authoritatively decided.

Chief Justice Roberts wrote the Learning Resources majority joined by Sotomayor, Kagan, Gorsuch, Barrett, and Jackson. Kavanaugh dissented, joined by Thomas and Alito. The majority held that IEEPA does not authorize tariffs and cannot be construed to do so consistent with the major-questions doctrine. The decision vacated tariffs on Canada, Mexico, China, and many other trading partners.

What it did not decide was the question of refunds for tariffs already paid. That issue remains in active litigation.

The 10% surcharge and its fate

Within hours of the Supreme Court ruling on February 20, the Trump administration pivoted. Executive Order 14388 imposed a “Temporary Import Surcharge to Address Fundamental International Payments Problems” — a 10% global import surcharge — under Section 122 of the Trade Act of 1974.

Section 122 is a different and narrower statutory authority. It permits the president to impose temporary surcharges of up to 15% for up to 150 days to address balance-of-payments deficits or imminent dollar depreciation. The administration framed the order as a stopgap while it pursued alternative authorities.

On May 7, 2026, the US Court of International Trade ruled 2-1 that the Section 122 surcharge was not authorized as imposed. The court held that Section 122’s preconditions — a balance-of-payments emergency or imminent dollar depreciation — were not met by the conditions cited in the executive order. The relief was limited to the named plaintiffs: the State of Washington, Burlap & Barrel, and Basic Fun! Other importers continue to pay the surcharge through July pending appeal.

Section 301 and Section 232: the alternatives

The administration has not been silent during the period of legal challenge. Two parallel tracks have proceeded:

Section 301 investigations. USTR opened new Section 301 investigations on March 11, 2026 into “structural excess capacity” across China, the EU, Korea, Vietnam, Taiwan, and a dozen other economies. Section 301 is the same authority used for the 2018-2020 China tariffs. The investigations are time-consuming — typically six months to a year — but produce tariffs on firmer legal footing.

Section 232 tariffs. On April 2, 2026, the administration imposed 100% tariffs on imports of patented small-molecule and biologic drugs and their active ingredients under Section 232 of the Trade Expansion Act. Generics, biosimilars, and orphan drugs are exempt. The tariffs take effect July 31 for large pharmaceutical manufacturers and September 29 for others. Companies that sign Most-Favored-Nation pricing agreements and submit approved domestic manufacturing onshoring plans receive a 0% rate through January 20, 2029.

Section 232 is also the authority being doubled for steel and aluminum: on March 11, the administration announced doubling those tariffs to 50% before walking the change back hours later. The 25% baseline remains.

What the cascade reveals

Three observations.

First, IEEPA is not a general tariff authority. The Learning Resources ruling closes that path. Future administrations of either party will not have access to IEEPA tariffs without congressional action.

Second, Section 122 is not a substitute. The Court of International Trade ruling, even with its appeal pending, signals that the surcharge approach is on weak ground. Section 122’s preconditions are too narrow to support a sustained, broad-based tariff regime.

Third, the durable tariff authorities — Section 301 and Section 232 — require longer time horizons and more specific factual showings. They cannot be invoked overnight. They cannot easily be applied to dozens of countries simultaneously. They are tools designed for targeted action, not for broad-based trade policy.

The structural implication is that an administration that wants to impose broad tariffs needs Congress. Trade authority delegated to the executive is less expansive than recent practice has suggested. Congress can grant broader authority statutorily, and has done so repeatedly throughout the twentieth century. Whether it will do so now — or whether the courts’ tightening of executive trade authority will hold — is one of the central political questions of the second Trump term.

What the tariffs accomplished and didn’t

Even with the legal reversals, the IEEPA tariffs were collected for roughly thirteen months. Approximately $200 billion entered Treasury accounts. Some of that money will be refunded; much of it likely will not be. The economic effects on importers, exporters, supply chains, and consumer prices were substantial during the period of imposition.

The pharmaceutical tariffs, the steel and aluminum tariffs, and the Section 301 investigations now in progress will continue to shape the trade environment regardless of how the IEEPA and Section 122 litigation resolves.

What the cascade has not produced is the comprehensive, durable trade-policy reorientation that the administration’s broader rhetoric has promised. That kind of reorientation — one with institutional durability rather than legal fragility — requires Congress. And Congress has not, in this session, shown the inclination to provide it.

What to watch

• The CIT 10% surcharge appeal. Likely to reach the Federal Circuit and possibly the Supreme Court.
• The pharmaceutical tariff implementation in late July. First-effect evaluation of the Section 232 framework.
• Section 301 investigation outcomes. Tariff impositions are expected late 2026 or 2027.
• Refund litigation. Hundreds of billions in collected duties remain in legal limbo.
• Congressional trade legislation. Periodic proposals for new tariff authorities have appeared. Whether any advance to enactment is the operative question.

The structural fight is not over. The legal authorities have narrowed. The political fight over what the United States wants its trade policy to be — and who should set it — is just beginning.