The U.S. Supreme Court is inching toward a pivotal decision that could dismantle President Donald Trump‘s emergency tariff powers—but economists warn that even a legal defeat may not roll back the trade barriers Americans now face.
In oral arguments held Wednesday, a majority of justices appeared skeptical that Trump's use of the International Emergency Economic Powers Act (IEEPA)—a 1977 law meant to address national security threats—gave him the authority to impose sweeping tariffs on U.S. trading partners.
If the Court rules against the tariffs, it could invalidate up to $145 billion in levies collected under this legal framework.
Prediction markets moved swiftly. On Kalshi, the odds of the Supreme Court upholding Trump’s tariffs plunged to 21% on Thursday, a sharp drop of 36 percentage points from the day before.
Why Are Trump's Tariffs Under Fire?
At the heart of the case is the IEEPA, which gives presidents emergency powers to restrict or block international commerce. Trump invoked the act to justify tariffs on a wide range of imports, arguing that global trade imbalances posed an economic emergency.
But the justices—across ideological lines—challenged whether the law gives the president authority to raise revenue through tariffs, traditionally a congressional power.
In report shared Thursday, Goldman Sachs economist Alec Phillips said the justices appear largely unconvinced that the IEEPA grants the president sweeping authority to impose import tariffs.
While Phillips expects a ruling between December 2025 and January 2026, he noted the financial implications could take far longer to resolve.
The government is expected to have collected $115–$145 billion in IEEPA-based tariffs by the time of the decision, and any refunds would likely be delayed for months and require court intervention. Still, even if the IEEPA authority is struck down, Phillips believes the Trump administration is unlikely to retreat from its tariff agenda.
"We would expect the administration to use other authorities to impose substantially similar tariffs," he said, pointing to tools like Section 122 or Section 301 of the Trade Act of 1974, which offer more legally durable grounds.
What Happens If the Court Blocks Trump’s Tariffs?
If the Court rules against Trump's use of the IEEPA, the administration is likely to lean on alternative statutes to restore similar trade restrictions, according to the expert.
These include:
- Section 122 of the 1974 Trade Act, allowing temporary tariffs up to 15% without a formal investigation
- Section 301, used to retaliate against unfair trade practices
- Section 232, already used by Trump to impose tariffs on steel, aluminum and other goods
- Section 338 of the 1930 Tariff Act, an unused authority allowing up to 50% tariffs on discriminatory nations
Phillips estimated that IEEPA tariffs account for about 7.6 percentage points of the total 11-point increase in effective U.S. tariff rates since 2017.
A Section 122-based replacement could offset most of that impact—especially on large partners like China, Mexico and Canada—but would be capped at 15%.
Are Tariff Refunds Coming? Maybe—But Not Soon
Kim Wallace, head of 22V Washington Policy Research, said even if the tariffs are ruled illegal, refunds of U.S. custom revenue that had already been collected won't be automatic.
Importers would need to apply for relief, and disputes would likely head to the Court of International Trade.
Estimates suggest $115 billion to $145 billion in tariffs would be eligible for refund, but those payments might take months or even years to process.
Final Ruling Expected by January
The Supreme Court is expected to deliver a decision by December 2025 or January 2026, with markets, trade partners and importers anxiously watching.
But even if IEEPA-based tariffs fall, the battle over U.S. trade policy—and who controls it—is far from over.
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