The United States Supreme Court has delivered a significant legal setback to the Trump administration by blocking the use of the International Emergency Economic Powers Act (IEEPA) for imposing broad import tariffs, while in a 6-3 ruling, the court determined that the administration exceeded its legal authority by utilizing this specific act to generate revenue through trade duties. Following the verdict, President Donald Trump described the decision as "very bad" and immediately announced a 10% global tariff under Section 122 of the Trade Act of 1974, asserting that the new measures would take effect immediately through an executive order.
The Supreme Court Ruling and Judicial Limits
The Supreme Court's majority opinion clarified that the International Emergency Economic Powers Act of 1977 doesn't grant the executive branch the power to raise revenue. The justices ruled that while the act provides broad powers to regulate international economic transactions during a declared national emergency, it can't be used as a mechanism for tax or tariff collection, while this ruling effectively nullifies the administration's primary legal justification for its recent tariff expansions. The court emphasized that the power to levy duties remains a legislative function, and the executive must operate within the specific constraints defined by Congress in emergency statutes.
Shift to Section 122 and Alternative Legal Authorities
In the wake of the judicial defeat, the Trump administration has pivoted to Section 122 of the Trade Act of 1974. This provision allows the President to impose a temporary import surcharge of up to 15% for a duration of 150 days to address balance-of-payments deficits. President Trump stated that he would sign an executive order to implement a 10% global tariff under this authority. Treasury Secretary Scott Bessent further noted that the administration would also use Section 232 and Section 301 tariff authorities. Section 232 deals with national security concerns, while Section 301 addresses unfair trade practices, both of which have been validated through numerous prior legal challenges.
Treasury Department's Stance on Revenue Impact
Speaking at the Dallas Economic Club, Treasury Secretary Scott Bessent addressed the financial implications of the court's ruling. He maintained that the shift to alternative legal frameworks would ensure that tariff revenue projections for 2026 remain largely unchanged. According to Treasury estimates, the combination of Section 122 authority with potentially expanded Section 232 and Section 301 tariffs will compensate for the loss of the IEEPA-based duties. Bessent criticized what he termed as misinformation regarding the ruling, asserting that the administration remains committed to its trade policy goals despite the change in legal tactics.
Understanding IEEPA: History and Presidential Powers
The International Emergency Economic Powers Act (IEEPA) was enacted in 1977 to define and limit the powers of the President during national emergencies. According to the Library of Congress, the act was a response to the increasing amount of emergency power granted to the executive branch over several decades. IEEPA allows the President to regulate international commerce, freeze foreign assets, and block transactions with entities or nations deemed a threat to US national security or the economy. It requires the President to declare a national emergency under the National Emergencies Act of 1976 and provides for transparency through reporting requirements to Congress.
Historical Application and National Emergencies
Since its inception, IEEPA has been a cornerstone of US foreign policy and economic sanctions. Its first major application occurred during the Iran hostage crisis when President Jimmy Carter used the act to freeze Iranian government assets held in the United States. As of last September, US Presidents have declared 77 national emergencies using IEEPA to address issues ranging from terrorism to foreign interference. While traditionally used for targeted sanctions against specific regimes or individuals, the Trump administration's attempt to use it for broad-based tariffs represented a significant expansion of its application, which has now been curtailed by the Supreme Court's intervention.