The US Supreme Court has struck down Trump's tariffs, and the government may have to compensate businesses and consumers for the losses.

By a vote of 6-3, the US Supreme Court ruled that Trump cannot use the 1977 International Emergency Economic Powers Act (IEEPA) to impose import taxes on nearly every country in the world, writes Air forceNow businesses and consumers will have to repay approximately $130 billion.

The issue of duty refunds is likely to be the subject of new legal proceedings.

Which duties were deemed illegal and why?

The Supreme Court's February 20 ruling applies only to tariffs Trump imposed under the IEEPA, the law that gives the president the authority to regulate trade in response to an emergency.

On the subject: Trump's tariffs are almost entirely paid for by Americans, economists conclude.

He first invoked it in February 2025 to tax goods from China, Mexico, and Canada. At the time, the president declared the trafficking of fentanyl from these countries an "emergency."

A few months later, on what became known as Liberation Day, Trump went much further, imposing tariffs of 10% to 50% on goods from almost every country in the world. In this case, Trump claimed, the US trade deficit (when the country imports more than it exports) posed an "extreme threat."

The court held that the authority to impose new taxes rests with the US Congress, not the president, and that the regulations under the IEEPA are not intended to raise revenue.

However, a number of tariffs imposed by Trump over the past year were not related to the emergencies declared under the IEEPA and may remain in place regardless of the court's decision.

These include sectoral tariffs on steel, aluminum, timber, and automobiles imposed under Section 232 of the Trade Expansion Act of 1962, citing national security concerns.

Trump imposes new temporary tariffs under another law

Following the Supreme Court's February 20 ruling, Trump issued an executive order imposing 10 percent tariffs on nearly all U.S. imports under a previously unused provision known as Section 122.

Section 122 is a section of the Trade Act of 1974 that gives the President of the United States temporary authority to interfere with foreign trade without prior approval from Congress.

The idea behind this provision is that if the United States has serious balance of payments problems (such as a persistent trade deficit, where the country systematically imports more than it exports), the president can unilaterally impose import restrictions.

Section 122 allows for the introduction of additional import duties of up to 15% or the establishment of quantitative restrictions on imports (quotas) for a maximum period of 150 days.

These measures are temporary. After 150 days, the administration is required to either terminate them or obtain further congressional approval to extend them.

Historically, Section 122 has been rarely used. It was intended as an emergency mechanism in the event of a currency or trade crisis, not as a permanent trade policy instrument.

On February 21, the president announced on the social network Truth Social that he would increase trading fees from 10% to 15%.

Section 122 gives him the power to impose tariffs of up to 15% for up to 150 days, after which Congress must intervene.

However, there's a chance Trump could circumvent lawmakers. Section 122 doesn't explicitly prohibit the president from declaring a new emergency after 150 days to reimpose tariffs.

According to the White House, Trump is using Section 122 "to address fundamental international payments problems" and restore the U.S. trade balance, while exploring the possibility of imposing tariffs under Section 301 of the Trade Act of 1974.

This law allows the U.S. Trade Representative (currently held by Jamison Greer) to investigate the trade practices of other countries. Tariffs can then be imposed if such practices are found to be "discriminatory" or "unfair."

In addition, the administration may continue to impose tariffs under Section 232.

Treasury Secretary Scott Bessent said the combination of Section 122 duties with enhanced Section 232 and Section 301 levies "will result in essentially flat tariff revenues in 2026," effectively offsetting the elimination of IEEPA tariffs.

Will consumers and businesses receive refunds?

One of Trump's arguments in favor of imposing tariffs was that the proceeds go to the US Treasury and contribute to the country's economic development.

The US government has collected tens of billions of dollars from companies importing foreign products, with the total estimated at around $130 billion.

While the Supreme Court's decision found the IEEPA fees illegal, it did not provide instructions on how to refund those fees to those who paid them.

Trump told reporters that any potential refunds could be blocked by legal proceedings for years.

After the decision was published, Bessent noted that the issue of refunding the funds could drag on for years.

Speaking at an event in Dallas, he said revenue already collected through IEEPA duties was "disputed" because the Supreme Court had not issued any guidance on refunds.

Experts say any refunds will likely go to larger companies, as small businesses lack the resources to complete all application stages.

Illinois Governor J.B. Pritzker has demanded that the White House issue every American household a $1700 check to compensate for illegal customs duties.

What is in effect now?

According to the White House, the new duties were set to take effect on all imports into the US, regardless of country of origin, starting February 24 at 00:01 a.m. ET (05:01 GMT).

Certain goods will be exempt from the tax "due to the needs of the U.S. economy" or to more accurately apply the duties.

These categories include certain critical minerals, metals, energy products, natural resources, food crops, pharmaceuticals, electronics, cars and trucks, and aerospace products.

Additionally, "information materials (such as books), donations and accompanied baggage" will also be tax-exempt.

Another important exception concerns goods covered by the USMCA, the trade agreement between the United States, Mexico, and Canada.

Textiles and clothing from Costa Rica, the Dominican Republic, El Salvador, Guatemala, Honduras and Nicaragua will remain duty-free under the Dominican Republic-Central American Free Trade Agreement.

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At the same time, Trump stated that he would maintain tariffs on low-value goods. Last year, he eliminated the so-called de minimis exception, which allowed goods priced under $800 to enter the US duty-free.

Hours after the decision was published, Trump signed an executive order using an alternative provision of the law—Section 122 of the Trade Act of 1974—which allows him to impose a new temporary 10% tariff on goods from all countries. On February 21, he wrote on social media that he would increase these new duties to 15%.

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Trump wants to abolish the income tax by offsetting its revenue with tariff profits.

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