Planet Money

The Supreme Court struck down a bunch of Trump's tariffs. Now what?

February 21, 2026

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  • The U.S. Supreme Court ruled that President Trump's sweeping tariffs imposed under the International Emergency Economic Powers Act (IEPA) are illegal because the statute's language ("regulate importation") cannot legally support such broad tariff actions. 
  • Businesses that paid the now-illegal tariffs face a complex path to refunds, which may involve existing customs correction processes (with time limits), filing lawsuits, or waiting for a potential, but slow, official government refund process. 
  • A new, speculative market has emerged where hedge funds buy potential tariff refund claims from importers at a discount (previously around 20%, now closer to 40%) to profit from the eventual, uncertain refund payout. 
  • President Trump immediately announced a new 10% across-the-board tariff under a different, untested law, Section 122, which allows tariffs for 150 days to address balance of payments deficits, signaling that tariff uncertainty continues for businesses like small business owner Cara Dyer. 

Segments

Supreme Court Ruling on Tariffs
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(00:00:22)
  • Key Takeaway: The Supreme Court invalidated President Trump’s sweeping tariffs imposed under IEPA because the statute’s vague language could not legally support such broad actions.
  • Summary: The Supreme Court ruled that the International Emergency Economic Powers Act (IEPA), which President Trump used for sweeping tariffs, does not grant the authority to impose such tariffs. The Chief Justice stated the words “regulate importation” cannot bear the weight of creating giant, across-the-board tariffs. This ruling definitively declared these specific tariffs illegal.
Path to Tariff Refunds
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(00:07:03)
  • Key Takeaway: Obtaining refunds for the illegal tariffs is a long process with no immediate guidance from the Supreme Court, likely requiring consultation with customs lawyers.
  • Summary: Companies seeking refunds for the over $100 billion collected under the illegal tariffs face uncertainty, as the Supreme Court offered no guidance on the refund mechanism. One option involves filing a post-summary correction with customs within 300 days, or alternatively, filing a lawsuit against the U.S. government. A third possibility is waiting for the administration to create an official, easy refund process.
Market for Tariff Refund Claims
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(00:12:12)
  • Key Takeaway: A new market developed where hedge funds buy potential tariff refund claims from importers at a discount to eliminate the importer’s uncertainty risk.
  • Summary: Importers, unwilling to wait for uncertain future refunds, sold their potential claims to hedge funds, which specialize in litigation-based or complex financial bets. Before the ruling, these claims were sold for about 20% of their potential value; after the ruling, the price jumped to around 40%, reflecting the increased probability of a payout despite the expected administrative mess.
Remaining Tariffs and New Threats
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(00:19:08)
  • Key Takeaway: Tariffs imposed under other laws like Section 301 and Section 232 remain in place, and the administration immediately pivoted to using Section 122 for a new 10% tariff.
  • Summary: The Supreme Court decision only invalidated tariffs created under IEPA; tariffs based on other ’three-digit’ laws, such as those under Section 301 (covering specific Chinese goods), are unaffected. President Trump announced a new 10% tariff under Section 122, a Cold War-era law intended for balance of payments deficits, which has never been used before and is expected to face lawsuits after its 150-day limit.
Impact on Small Business Owner
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(00:22:56)
  • Key Takeaway: Tariff volatility forced small business owner Cara Dyer to scale back large orders and redesign her business strategy, though the ruling provided immediate cost relief on a planned large order.
  • Summary: Cara Dyer, who sells toys, scaled back large orders over the past year due to tariff unpredictability, avoiding potentially illegal deals offered by suppliers to under-report inventory value. The ruling eliminated an expected $15,000 tariff on her first large order of 12,000 storybooks since the tariffs began, but she remains frustrated by the need to constantly rethink her business strategy.