SCOTUS Strikes Down IEEPA Tariffs: A Multi-Billion Dollar Shift for Retailers

The U.S. Supreme Court’s decision on February 20, 2026, to invalidate tariffs imposed under the International Emergency Economic Powers Act (IEEPA) marks a seismic shift in American trade policy and a major victory for the retail and e-commerce sectors. By a 6–3 margin in Learning Resources, Inc. v. Trump, the Court ruled that while the President has broad authority to regulate transactions during national emergencies, that power does not extend to the unilateral imposition of tariffs. This ruling effectively dismantles a key pillar of the trade strategy initiated in 2025, which saw aggressive duties levied against imports from Canada, Mexico, and China to address trade imbalances and illicit drug flows.

For the retail industry, the immediate consequence is the cessation of duty collections by U.S. Customs and Border Protection (CBP) on goods previously targeted under IEEPA. This provides instant margin relief for companies that have been grappling with elevated landed costs for over a year. The Court’s reasoning centered on the constitutional separation of powers, emphasizing that the authority to tax—which includes the setting of tariffs—is a core prerogative of Congress. The majority opinion clarified that without an explicit and limited delegation from the legislative branch, the executive cannot use broad emergency statutes to reshape the economic landscape through taxation.

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By a 6–3 margin in Learning Resources, Inc.

Beyond the immediate halt of new collections, the ruling sets the stage for what could be a multi-billion dollar refund cycle. Justice Brett Kavanaugh’s dissent highlighted the potential for the U.S. government to be forced to return duties collected since the 2025 emergency declarations. While the Supreme Court did not outline a specific refund mechanism, previous filings from the Department of Justice suggest the government may not oppose refund requests if the tariffs were found unlawful. This creates a high-stakes administrative challenge for retailers, who must now navigate the U.S. Court of International Trade (CIT) and CBP processes to recoup these costs. Large-scale importers with sophisticated logistics operations are likely to be the first to file, but the impact will trickle down to smaller e-commerce players who utilized third-party logistics providers to manage these duties.

However, retailers must remain cautious. The ruling is specific to IEEPA and does not invalidate other common tariff frameworks such as Section 301 (trade practices), Section 232 (national security), or Section 201 (global safeguards). Consequently, existing duties on steel, aluminum, and semiconductors remain in force. The distinction is critical for supply chain managers who must now audit their product portfolios to determine which items were hit by the now-invalidated IEEPA duties versus those still subject to other statutory measures. The Hunton Tariff Tracker and similar tools will become essential for identifying these nuances in the coming weeks.

Looking forward, this decision restores a level of predictability to international trade by requiring the executive branch to seek specific congressional approval for future broad-based tariff actions. For the e-commerce sector, which thrives on price stability and long-term planning, the removal of 'emergency' tariff volatility is a welcome development. Nevertheless, the administrative backlog at the CIT and CBP could mean that the actual liquidity from refunds may not hit corporate balance sheets until late 2026 or 2027. Retailers should immediately begin documenting their IEEPA-related payments to ensure they are positioned to claim their share of the impending refund pool.