What the Supreme Court ruling means for tariffs...and what it doesn't

Summary

• As expected, the Supreme Court struck down the presidents authority to levy tariffs under the International Emergency Economic Powers Act (IEEPA). President Trump was quick to announce new tariffs. The bottom line is these actions did not deliver complete relief to affected importers, but it did ease their burden even if refunds will take awhile.
• The ruling invalidates the legal basis for IEEPA tariffs, but it does not trigger automatic refunds. Importers must pursue refunds individually through established claims processes.
• Potential refunds are large, but unlikely to be fully realized. Roughly $264B in tariff revenue was collected last year, and we estimate about half—around $130B—was collected under IEEPA. The true total may be somewhat higher once January–February collections are included, but refunds will be handled case by case, meaning not all IEEPA tariff revenue is likely to be returned.
• Any refunds will arrive gradually. Payments are expected to trickle in over months, if not years, and should be delivered directly to the importers who originally paid the tariffs.
• The administration retains the ability to re‑impose tariffs, but nothing grants the President the same broad power with immediate effect as IEEPA would have.
• President Trump announced a 10% global tariff under Section 122 of the Trade Act of 1974 "effective immediately". He also announced starting Section 301 investigations.
• • Section 122, Trade Act of 1974: President can impose tariffs up to 15% for 150 days to address balance-of-payments issues. Tariffs can be extended indefinitely with Congressional approval. No federal investigation required.
  • Section 301, Trade Act of 1974: U.S. Trade Representative can impose tariffs for four years, under the President's direction, if it finds unjustifiable, unreasonable or discriminatory action against U.S. businesses and/or a violation of trade agreements. Tariffs may be imposed indefinitely, if continuation is requested and extended every four years.
• This action keeps the 10% baseline global tariff effectively active, but lowers the higher IEEPA tariff burden for countries exposed to 'reciprocal' tariffs under IEEPA. These actions result in a lower total tariff burden. We estimate the average U.S. effective tariff rate is now around 13% in the wake of today's actions, rather than the ~16% based on policy as of yesterday.
• Tariffs weighed on U.S. goods imports last year as firms were cautious about committing to foreign sourcing amid unsettled and frequently changing tariff policy. Some shifts in trade flows signal some rejiggering of sourcing, though permanent effects may be overstated thus far.

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