Market Minute: February 20, 2026 - Supreme Court Strikes Down Tariffs, Reshaping Trade Policy

Well, there goes that idea!

The Supreme Court struck down most of President Donald Trump’s sweeping tariffs, ruling 6–3 that he exceeded his authority under the International Emergency Economic Powers Act (IEEPA), a 1977 law intended for true national emergencies. The decision invalidates large portions of Trump’s global tariff program, including his “reciprocal” tariffs and many duties imposed on countries such as Canada and China.

Why the Ruling Matters

• Massive financial implications: Companies may now seek billions of dollars in refunds, though the Court offered no guidance on how that process should work. Even one of the dissenting justices warned the refund process could become a “mess.”

• Executive power reined in: The ruling is a rare instance of the conservative-led Court limiting Trump’s use of emergency powers. Chief Justice Roberts and two conservative justices joined the three liberals in the majority.

• International reaction: U.S. trading partners in the EU, U.K., and Canada welcomed the decision but cautioned that uncertainty remains, especially since other tariff tools (such as Section 232 national security tariffs) are still available to the administration.

What Still Stands

Not all tariffs were struck down. The ruling applies specifically to tariffs imposed under IEEPA. Tariffs targeting products tied to national security concerns under other authorities remain in place for several industries.

President Trump publicly called the ruling a “disgrace” and claimed he has a “backup plan,” signaling that tariff policy will remain a political flashpoint.

Key Impacts of the Supreme Court Tariff Ruling

1. Billions in Refund Claims

Companies that paid the now-invalidated tariffs are expected to pursue massive refund requests, potentially worth billions of dollars. However, the Court provided no guidance on how refunds should be processed, and even Justice Kavanaugh warned the process could become a “mess.”

This means that importers may face long, complex refund battles, and U.S. Customs and Border Protection may need to unwind years of payments, bonds, and collateral.

2. A Huge Hole in Federal Revenue

The overturned tariffs were projected to generate $2.5 trillion over the next decade. Losing this revenue creates a major gap in Trump’s budget and deficit‑reduction plans.

This could force a rewrite of spending priorities and increase pressure on Congress to find replacement revenue or cut programs.

3. Reduced Executive Leverage in Global Negotiations

Trump used these tariffs as a bargaining tool in negotiations over trade, immigration, drug enforcement, and even military issues. The ruling removes a major source of presidential leverage.

This will likely shift U.S. trade strategy and increase reliance on Congress-approved trade tools, which could hamper the President.

4. Business Relief and Lower Costs

Many business owners argue the ruling will lower their costs and potentially lead to refunds. Tariffs had raised prices on imported goods, squeezing margins.

Lower input costs for manufacturers could eventually translate into price relief for consumers.

5. Uncertain Immediate Effects on Prices

Some regions have reported uncertainty about how quickly the ruling will translate into lower prices. Existing supply chains, contracts, and inventory pipelines could delay any meaningful impact.

6. International Reaction and Trade Dynamics

Trading partners, including Canada and the EU, view the ruling as positive but are still assessing the implications for ongoing trade relationships. Saskatchewan officials, for example, called it “good news” but remain cautious.

7. Constitutional and Political Ramifications

The Court reaffirmed that Congress controls tariff authority, limiting the President’s use of emergency powers under IEEPA. This marks a rare instance of a conservative-led Court curbing Trump’s executive power.

The President has already stated that he plans to implement a new 10% tariff under Section 122 on top of the existing tariffs. There will be more hand-wringing, and we will need to evaluate the impact in the coming weeks.

At some point, our collective federal officials will need to get serious about the debt and the deficit. Both continue to grow and will hamper long-term economic growth. There is plenty of blame on both sides of the aisle on this item.

I recently read a report that if we dialed back federal spending to pre-pandemic levels, current tax receipts would essentially provide a balanced budget. Seems like a reasonable place to start!

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