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In a significant decision with immediate global trade ramifications, the U.S. Supreme Court has invalidated a series of sweeping tariffs imposed under the International Emergency Economic Powers Act (IEEPA).
In a 6–3 ruling, the Court held that IEEPA—a 1977 statute allowing the president to "regulate" economic activity in response to a national emergency—did not authorize the broad-based tariffs introduced last year on goods from nearly every country. The measures initially targeted Mexico, Canada and China before expanding dramatically in April.
While it is not known precisely when U.S. customs will cease collection of the tariffs, the 35% tariff on Canadian products not qualifying under CUSMA (10% for energy products) is anticipated to be lifted. Tariffs on steel, aluminium, copper, lumber and automobiles imposed under another U.S. statute will not be impacted.
The decision opens the door to potentially billions of dollars in tariff refunds for affected importers and represents a notable judicial constraint on the use of emergency powers for large-scale trade policy. However, the trade landscape remains fluid.
Administration signals new tariff pathways
Immediately following the ruling, Mr. Trump stated that he intends to rely on alternative statutory authorities to reintroduce tariffs.
Among the measures announced:
- Section 122 of the Trade Act of 1974: Mr. Trump indicated he would impose a 10% global tariff under this provision. Section 122 allows the President to implement tariffs of up to 15% for 150 days, after which congressional approval is required to extend them. Importantly, it is not known whether CUSMA qualifying goods will be exempt from this new tariff, which could have a significant impact on Canadian exporters who currently enjoy duty free treatment.
- Expanded use of Section 232 (Trade Expansion Act of 1962): The administration signalled increased reliance on sector-specific tariffs justified on national security grounds. The U.S. Department of Commerce has already initiated additional Section 232 investigations in industries including aircraft, critical minerals and pharmaceuticals.
What this means for businesses
While the Court has curtailed the use of IEEPA as a sweeping trade instrument, the administration retains multiple tools capable of reshaping global trade flows. For Canadian and international businesses with U.S. exposure— particularly in sectors such as manufacturing, energy, mining, aerospace, automotive and life sciences—the decision marks not a retreat from tariff policy, but a potential shift in legal strategy.
Implications include:
- Potential refunds and claims activity: Importers may be able to seek recovery of duties paid under the struck-down IEEPA tariffs, though timing, process requirements and potential further litigation will shape how and when relief materializes. Administrative processes may be made available but are expected to be challenging, and if not available, an application to the U.S. Court of International Trade will be necessary.
- Tariff uncertainty shifts, not disappears: The administration is signalling a pivot to other legal tools (notably Section 122 for a time-limited global tariff and Section 232 for sector-focused actions), suggesting continued volatility in the months ahead.
- Sector risk intensifies: With new Section 232 investigations already underway (including aircraft, critical minerals and pharmaceuticals), certain industries could face targeted measures even if broad tariffs are constrained.
- Commercial and supply-chain impacts: Companies may need to revisit pricing models, sourcing strategies and contract terms (including tariff pass-through, change-in-law clauses and Incoterms) to manage sudden duty changes and compressed planning timelines. Depending on refund processes arising from the decision, business partners who incurred tariff costs may seek to be compensated and those who paid higher prices to suppliers to account for tariffs may be entitled to recompense.
The decision, of course, does not directly impact the CUSMA negotiations between Canada and the U.S., with the effect that Canadian manufacturers and exporters should be actively engaging in strategic efforts to influence trade policy.
Read the original article on GowlingWLG.com
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