SCOTUS Strikes Down IEEPA Tariffs; Trump Pivots to Trade Act Section 122

The Supreme Court’s decision to strike down the administration's use of the International Emergency Economic Powers Act (IEEPA) for broad-based tariffs marks a significant constitutional check on executive trade authority. By a 6-3 margin, the Court held that the 1977 Act does not explicitly grant the President the power to levy duties—a function the Constitution reserves for Congress under Article I. Chief Justice John Roberts, joined by Justices Neil Gorsuch and Amy Coney Barrett along with the three liberal justices, emphasized a strict textualist interpretation, signaling that broad delegations of emergency power cannot be stretched to encompass the power to tax imports without clear legislative intent.

This ruling creates an immediate vacuum in trade policy that the administration has already moved to fill. Vice President JD Vance’s public criticism of the decision as "lawlessness from the courts" reflects a growing tension between the executive and judicial branches over the limits of the administrative state. For the Legal and RegTech sectors, this rhetoric suggests a period of heightened regulatory volatility. The administration’s pivot to Section 122 of the Trade Act of 1974 is a calculated legal maneuver. Unlike the IEEPA, Section 122 specifically allows for a temporary import surcharge of up to 15% for 150 days to address balance-of-payments deficits. However, the 150-day limitation introduces a "ticking clock" that will require either a congressional extension or a new legal justification once the period expires.

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Unlike the IEEPA, Section 122 specifically allows for a temporary import surcharge of up to 15% for 150 days to address balance-of-payments deficits.

From a compliance perspective, the shift is jarring. Trade attorneys and RegTech platforms must now pivot from managing IEEPA-based duty structures to a new regime under Section 122, while simultaneously maintaining existing Section 232 (national security) and Section 301 (unfair trade practices) tariffs which remain in effect. The legal community is particularly focused on the "balance-of-payments" justification required by Section 122. If the administration cannot provide empirical evidence of a systemic deficit that necessitates a global 10% surcharge, this new executive order will likely face immediate challenges in the U.S. Court of International Trade.

The inclusion of conservative justices like Gorsuch and Barrett in the majority is a critical detail for legal analysts. It suggests that the Court’s current majority is more committed to the separation of powers and the "major questions doctrine" than to executive deference, even on matters of national economic policy. This trend implies that any future trade actions will need to be meticulously tied to specific, narrow statutory authorizations rather than broad emergency declarations. For global supply chain managers, the primary takeaway is that trade policy has entered a phase of "litigation-heavy" implementation, where the legal basis for a tariff is just as important as the rate itself.

Looking ahead, the 150-day window for the new Section 122 tariffs will be a period of intense lobbying and legislative maneuvering. If the administration intends to make these 10% global tariffs permanent, they will likely need to secure a formal grant of authority from Congress—a tall order in a polarized political environment. RegTech providers should prepare for a surge in demand for tools that can track these rapidly shifting legal foundations and provide real-time updates on duty drawbacks should the IEEPA ruling result in retroactive refunds for previously paid tariffs.