SCOTUS Strikes Down IEEPA Tariffs: A $175B Regulatory Crisis for Trade Law

The U.S. Supreme Court’s 6-3 decision in the IEEPA tariff case represents one of the most significant judicial constraints on executive trade authority in decades. By ruling that the International Emergency Economic Powers Act (IEEPA) does not grant the President the power to impose tariffs, the Court has effectively dismantled a central pillar of the current administration’s reciprocal trade strategy. Chief Justice John Roberts, writing for the majority, emphasized a strict constitutional boundary: while the executive may regulate commerce during emergencies, the power to tax—which includes the imposition of duties—remains a core legislative function reserved for Congress. This distinction creates an immediate and profound shift in the regulatory landscape for global trade compliance and corporate legal departments.

The core of the legal dispute centered on the interpretation of the word regulate. The administration had argued that the broad emergency powers granted under IEEPA allowed for the use of tariffs as a tool to address national security and economic threats. However, the Court found that in no other federal statute has regulate been interpreted to include the power to levy taxes. Historically, when Congress intends to delegate tariff authority, it does so with explicit language—using terms like duty or surcharge—and includes specific constraints such as rate caps and expiration dates. The absence of such language in IEEPA led the Court to conclude that the tariffs imposed since early 2025, including those targeting drug trafficking and general reciprocal trade, were unlawful from their inception.

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The immediate fallout of this decision is a projected $175 billion fiscal and administrative crisis.

The immediate fallout of this decision is a projected $175 billion fiscal and administrative crisis. While the Court was silent on the specific mechanism for restitution, the sheer scale of the potential refunds is unprecedented. Justice Brett Kavanaugh’s dissent, which described the upcoming refund process as a mess, highlights the logistical nightmare facing U.S. Customs and Border Protection (CBP). Importers of record, who bore the direct cost of these duties, now face a complex path to recovery that will likely be mediated by the U.S. Court of International Trade (CIT). The government’s stance remains combative; despite prior filings suggesting they would comply with a SCOTUS ruling, President Donald Trump has indicated that the administration intends to litigate the refund issue, potentially delaying payouts for years.

From a RegTech perspective, this ruling places an immediate premium on data integrity and historical trade records. Importers must now pivot to a defensive posture, meticulously auditing their entries within the Automated Commercial Environment (ACE) system. The distinction between liquidated and unliquidated entries will be the primary battleground for refund eligibility. Entries that have already been liquidated—meaning the final calculation of duties has been processed and closed by CBP—may require formal protests or specialized litigation to reopen, whereas unliquidated entries might see more streamlined relief. Legal departments must also navigate the complexities of supply chain contracts, as many companies further down the line may attempt to claw back costs from importers of record based on the unlawful status of the original payments.

Furthermore, the ruling creates a diplomatic vacuum. Trade agreements negotiated with the European Union and Japan over the last year were often predicated on the removal or modification of these IEEPA-based tariffs. With the legal basis for those tariffs now gone, the leverage used to secure those deals has evaporated, potentially forcing a renegotiation of broader trade terms. However, it is critical to note that this ruling does not touch tariffs imposed under Section 232 (national security) or Section 301 (unfair trade practices), which rely on different statutory authorities. This creates a bifurcated trade regime where some tariffs remain on solid legal ground while others have been rendered void.

Looking ahead, the focus shifts to the Court of International Trade, which will likely be tasked with designing the refund framework. For the RegTech industry, the demand for automated protest filing and duty drawback software is expected to surge as thousands of importers seek to reclaim their share of the $175 billion pool. The ruling serves as a stark reminder that even in an era of expanded executive power, the structural constraints of the Constitution regarding taxation and commerce remain a potent check on trade policy. Importers should prepare for a protracted period of administrative uncertainty and prioritize the consolidation of their 2025-2026 import data to ensure they are positioned for recovery when the CIT eventually issues its implementation orders.