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Goodbye, IEEPA Tariffs. What’s Next?
On Friday, February 20, the US Supreme Court ruled that President Trump does not have power to impose tariffs under the International Emergency Economic Powers Act of 1977 (IEEPA). The move struck a major blow to the administration’s trade (and fiscal) policy, but it doesn’t spell the end of tariffs. Here’s what we know about the president’s plans and what might happen next.
The president’s new plan
The president retains extensive powers to impose tariffs using other laws. Tariffs imposed under other legal authority (such as Section 301 or Section 232) remain in effect, and the president quickly announced plans to impose additional tariffs. He appeared ready for the ruling and quickly held a press conference to outline next steps:
- Non-IEEPA tariffs will remain in place.
- The president imposed a universal 10% tariff using powers under Section 122, effective Tuesday, February 24.
- The new 10% tariff is ‘stacked,” meaning imposed on top of current tariffs that remain in place.
- The new 10% would replace about half of the revenue lost from voided IEEPA tariffs.
- It is not clear at this time if the 10% tariff would be imposed on all countries or if countries with free trade agreements would be exempt.
The downside for President Trump is that the Section 122 tariff would expire in 150 days and can only be renewed with the consent of Congress. However, it gives the administration five months to hatch other plans.
Who benefits?
Even if the effective tariff rate ends up mostly unchanged, I believe the end of the IEEPA tariffs will shake up the countries that stand to benefit (or not).
I expect countries who were only subject to IEEPA tariffs to end up where they were in 2024. (After the Section 122 tariffs expire, of course.) I think smaller countries will be the major beneficiaries.
Trump can use non-IEEPA trade laws to go aggressively after imports of vehicles, pharma, steel, aluminum, other metals and semiconductors. Countries that produce and export a lot of those products could end up in a worse position if the sector tariffs are higher than the IEEPA tariffs they replace.
What else?
The ruling has far-reaching implications, affecting existing trade deals, inflation expectations and much more. Here are my thoughts on some of the key variables.
De Minimis Exemptions
Previously, there have been de minimis exceptions to tariffs that allowed businesses and consumers to import small amounts and avoid tariffs.
President Trump closed the de minimis exemption using IEEPA authority. The Court did not explicitly rule on the de minimis exception; the case was not before the court and Trump has vowed to keep the exemptions closed. A challenge about the exemption may have to be filed in court. If that happens, I think the administration is likely to be overruled.
Refunds
The question of refunds remains unanswered, as the Supreme Court did not address the issue. If the federal government is forced to give refunds, it would be a large one-time hit to the budget deficit, possibly in the range of $150-200 billion. That could act as a stimulus for US businesses.
Fiscal Impact
The Committee for a Responsible Federal Budget estimates that, holding all else constant, eliminating the IEEPA tariffs would increase the budget deficit by about $2 trillion over the next ten years.1 That said, I believe the president will impose tariffs via other laws to help minimize the revenue loss from IEEPA tariffs.
Status of Negotiated Trade Deals
A trade deal does not override a Supreme Court ruling. The trade deals were never ratified by Congress and so are not binding federal law. Countries with negotiated trade deals are likely, I think, to comply with the terms of the deals since President Trump has other tools to hurt trade. President Trump has already begun threatening higher tariffs for countries that “play games” after the Supreme Court ruling.
Foreign Relations
The Supreme Court’s ruling means the president has less discretionary power over tariffs. I see this as a reduction in geopolitical risk, even if the effective tariff rate ends up relatively unchanged and uncertainty remains. I expect a lot of heads of government heaved a sigh of relief on February 20.
Inflation
Though President Trump has replaced the IEEPA tariffs with new ones, the impact of tariffs will likely roll off this year. I am maintaining my view that core inflation will return to target gradually.
The Fed
I doubt the ruling will affect the Fed given the president’s plan for new tariffs. Any refunds could be a slight tailwind for the economy. If businesses get cash from refunds they could invest more, distribute more or have some sales for consumers.
Endnote
1 Committee for a Responsible Federal Budget, “SCOTUS Tariff Ruling Could Add $2.4 Trillion to the Debt,” published February 20, 2026.
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Market conditions are extremely fluid and change frequently.
This blog post is provided for informational purposes only and should not be construed as investment advice. Any opinions or forecasts contained herein reflect the subjective judgments and assumptions of the authors only and do not necessarily reflect the views of Loomis, Sayles & Company, L.P. Information, including that obtained from outside sources, is believed to be correct, but Loomis Sayles cannot guarantee its accuracy. This material cannot be copied, reproduced or redistributed without authorization. This information is subject to change at any time without notice.
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