Trump Tariffs Blocked by the Supreme Court (What’s Next?)

Last Friday, the Supreme Court struck down President Trump’s IEEPA tariffs in a landmark 6-3 decision. In this episode of The Deduction, hosts Kyle Hulehan and Erica York break down what the ruling actually means, from how collections could be refunded to how the administration is already scrambling to put new tariffs in place. Erica walks through why businesses may face even more uncertainty in the near term as a messy patchwork of replacement tariffs takes shape.

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TIMESTAMPS:
0:00 – Weekend tariff chaos and IEEPA "pdu"
2:00 – What the Supreme Court decided on IEEPA tariffs
4:36 – Which tariffs were struck down (Liberation Day, fentanyl, and more)
5:42 – Will importers get refunds on $160 billion in unlawful collections?
7:54 – Does the ruling improve the economic outlook?
9:00 – What tariff authority does the president still have?
9:42 – Updated Tax Foundation tariff model numbers
12:00 – Section 122 explained: 150-day tariffs and legal questions
14:00 – Section 232, Section 301, and the coming patchwork of tariffs
15:42 – The compliance and administrative waste of tariff policy
17:00 – Can Congress step in and reclaim tariff authority?

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RESOURCES:
Tax Foundation Tariff Tracker: https://taxfoundation.org/research/all/federal/trump-tariffs-trade-war/
Tax Foundation IEEPA Tariff Analysis: https://taxfoundation.org/tags/ieepa/

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CONTACT:
Email: podcast@taxfoundation.org
Twitter/X: @DeductionPod
Twitter/X: @EricaDYork 
Drop a comment below with your tax questions.

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ABOUT:
The Deduction is a podcast by the Tax Foundation, the world's leading independent tax policy nonprofit. The Tax Foundation has been providing trusted, nonpartisan tax research and analysis since 1937.

Transcript

Kyle Hulehan 0:00

So Erica, how was your weekend?

Erica York 0:03

It was good and it was full of tariffs. Um, my colleague Alex Durante and I stayed up almost till midnight Friday night. the, the new tariffs that the president announced after the SCOTUS decision. And then I was at a birthday party Saturday morning and a little notification went off on my phone the president had increased the tariffs to 15%. Um, so then that afternoon we worked again on the tariff math, um, to, to see what, what the 15% rate meant. And now just today, we learned that was all for naught because when the new tariffs went into effect, they actually went into effect at. The first announced 10% rate, not the truth. Social announced 15% rate. So it's been a lot of tariff math, um, for, for a lot of days.

Kyle Hulehan 0:47

You gotta be careful about the, uh, those two social tweet, those tweets, those posts.'cause you don't know whether they're gonna come to fruition or not. And I, I do have to say, you just yank your kids outta the birthday party? You were like, oh my God, we got the update and birthday party over now.

Erica York 1:02

We kept partying. We kept partying. And then as soon as we got home and they started their naps, then, then the tariff math started. But I, I also had my daughter listening to a, my daughter six, and she was listening to a tariff briefing that I was tuning into yesterday, and she just kept giggling from the backseat of the van. And I was like, what is so funny about this? I don't get it. And then finally she says, mom. What are pdu because she was hearing it say IEEPA duties, but in her 6-year-old brain, IEEPA and duties aren't separate words. And so she kept hearing all these people talking about pdu and I just thought that was hilarious.

Kyle Hulehan 1:41

That's really funny. I do have to say, this actually brings up another question for me then. What is the right age to talk to your kids about tariffs? They're pretty scary, so

Erica York 1:50

you've gotta start'em young. You know,

Kyle Hulehan 1:52

gotta start.

Erica York 1:52

3-year-old, if I ask him what tariffs are, he's like, they're mean. So he, he gets it conceptually, but you

Kyle Hulehan 1:58

Okay. Okay. So he, he kind of understands, he get, he gets what's going on. We'll, we'll bring him into the podcast later. Maybe like seven, eight. We'll get him on as guests. Um, right, so is the Deduction Podcast, and we are here today with my wonderful co-host, Erica York, to talk about tariffs. Now, unless you've been living under a rock, potentially, um, basically the Supreme Court ruled that. The emergency tariffs are a lever at which Trump can no longer maybe willy-nilly pull, um, in the way that he has. Um, but we're gonna walk through the, the legal reasoning and some of the policy fallout of this. Um, so Erica, could you walk us through did the court decide?

Erica York 2:41

So the question before the court was. pretty simple actually. Does this law, IEEPA, allow a president to impose tariffs? And what the court decided was no. Um, the different justices kind of used different legal reasoning to get to that. No. Uh, but it was a, a six three decision, um, that said very clearly. IEEPA does not permit a president to impose any tariffs. And if you look at the language of the statute, it doesn't use the word tariff. It doesn't use the word duty, it doesn't use the word, um, tax. And so because, uh, the, the decision says because taxing power is an article one power that rests with congress, Congress has to very clearly delegate that to the president. If the president's going to do it. And so because there is no clear delegation of taxing power, taring power, um, in the language of the statute, the president can't use this statute to impose his tariffs. Um, there were dissenting opinions saying that. You know, this falls under the foreign affairs umbrella, and so we should give more deference to the president here, the majority said no. This is very clearly taxing power, and it's very clearly not given to the president in IEEPA. If you look at other statutes that let the president impose tariffs, they have very clear guidelines like. Maximum rates or duration or steps you have to go through before you impose tariffs. IEEPA has none of that, and so that struck down all of these tariffs that the president had imposed under IEEPA..

Kyle Hulehan 4:21

Now, and those tariffs are inclusive of like the liberation day. We all saw, like, you know, he, the photo that he was holding up or, or that big board that President Trump was holding up. That's an iconic photo at this point. Those liberation day tariffs are struck down. And then the i, I think that the border security, the fentanyl tariffs, those are struck down too. So those were the ones, the main ones that people have talked about.

Erica York 4:43

That's right. Liberation Day, the Fentanyl tariffs. So those were applied to Canada, Mexico, China, the liberation Day plus. The baseline tariffs were applied to virtually every US trading partner. There were a couple others, um, related to oil and India and Russia. Those are now gone in all. Um, through December of 2025, the government collected about$134 billion of those different IEEPA tariffs. We estimate that through when the decision was made, and those tariffs have now come off here in late February. It's probably something like$160 billion in unlawful tariff collections now, um, across all of those different tariffs that have been struck down.

Kyle Hulehan 5:27

So what is happening with all of the money then? There was tariffs. We're collected. Uh, if you saw the last podcast that, uh, we had on tariffs, I mentioned that I had to pay$70 tariff on some converse that I ordered from Japan. I need to know, am I getting this money back? I.

Erica York 5:49

So there's a lot of noise right now. A lot of news articles about this, a lot of speculation, but the answer should very clearly be yes. The importer of record should get the money back. Um, this was an unlawful collection. The tax has been struck down, so the people who paid the tax should rightfully get that money back. Now, there may be a difference between, like in your case, the consumer who bore the burden of the tax and who is actually the importer of record with customs. That paid the bill. Um, so there can be mismatches, right? Like if, if a business paid the tariff and then passed the cost onto the consumer, the consumer. not legally owed any money. Um, now the business may decide like, oh, we feel bad. Oh, there's political pressure or social pressure to share some of that refund. But as far as process, um, the government will give. The money should give the money back to the importer. We've already seen some big headlines of companies suing. Um, there's precedent in the past for these refunds happening automatically when tariffs have been struck down, uh, but not at this large of a scale, right? We're talking something on the order of$160 billion. That's a lot more than. What's typically refunded for tariff overpayments? Um, so it is a process question, but it should not be a question of is it happening? It's just how is it going to happen? Do people have to, um, you know, go through a certain paperwork process? Do they have to go through litigation? And that's where we don't quite have the answer yet.

Kyle Hulehan 7:29

So in my case, Erica, is getting my$70.

Erica York 7:33

Yeah, yeah. Whoever legally filled out that paperwork and paid the tariff, unfortunately.

Kyle Hulehan 7:40

Okay. It's fine. I'll be fine. I'll be fine without my$70. It's okay. It's not a big deal. It's whatever. Um, all right, I'll, I'll keep us on track and I won't, I won't just make this about my, my loss of$70, but anyway, um, so if we're thinking about, you know. With removing tariffs, uh, is sort of addition by subtraction. Um, this will improve our economic outlook, right?

Erica York 8:07

Yes. But, um, so. We estimated that the IEEPA tariffs would shrink long run GDP by about 0.3%. So they were clearly having a drag on the economy. Removing that is good for the economy, full stop, but we don't know what's coming next. And I'd also add like. In terms of, was the ruling good? Absolutely. We should view the ruling as a victory. Um, you know, it, it affirmed what the Constitution says as far as who has the authority to tax. Um, so in terms of the rule of law, this was a really good outcome in terms of what's happening with the economy. It has less power because it was a really narrow ruling. It was just looking at, does this one statute let President Trump impose tariffs? No, it doesn't. But however, outside of that, we have a lot of other statutes that the president can use to impose tariffs. And so really uncertainty is going to be higher here in the near term because we don't exactly know what the president will use his attempts to replace the tariffs that have now been ruled, um, unlawful.

Kyle Hulehan 9:17

So what are, from your perspective, what are, what are the numbers? Like what, what's changed your numbers wise? We obviously have a model and we, we work on this and, and, and talk about this. Could you walk us through that?

Erica York 9:27

Yes, so. Right before the ruling, um, when the IEEPA tariffs were still in effect, we estimated that over the next decade they were going to raise about$1.4 trillion of revenue. They lifted the applied tariff rate on all US imports together with all the other tariffs to about 13.8%, which is a very high, um, compared to where that's been historically, around one to 2%. And we estimated that in 2026, um, all the tariffs together would cost households an average of$1,300. So that's where we were sitting right before the decision. After the decision when the tariffs were struck down, um, all of that fell right. We estimated that the, um, average tax burden fell to about$400 and the applied tariff rate fell to about 6.7%. So you can see that the Supreme Court decision the bulk of the tariffs. But Friday afternoon, uh, president Trump announced new tariffs under section 122 of 10% and. can only last 150 days. So while they were in effect, we estimate that that would have made up about 50% of the lost revenue when President Trump threatened to take those to 15% instead of 10%. Um, that would make up about 70% of the revenue. So where we've landed numbers wise is that. At least during the next 150 days, they're making up about half of what they lost. With IEEPA on an average basis, households will still face a$600 tax increase. This year, the applied tariff rate will still be somewhere between 10 to 12%. Um, so while, yes, it's good, the IEEPA tariffs are gone, um, they are working their hardest to try to replace that, and so that economic drag will just come right back when they do.

Kyle Hulehan 11:17

And this obviously creates a lot of uncertainty for people and, and this is something where, that we've talked about before our different podcast is, is not good for businesses because they, they don't really know what to do then, right.

Erica York 11:29

Now imagine that you're a business and you have like cargo. Coming off of a ship over the weekend, does it face the IEEPA tariff rate? Does it face a 10% section, 122 rate? Does it face a 15% section, 122 rate? There was a period of a couple days where businesses didn't know, and that can be the swing of like tens of thousands of dollars depending on how much you're trying to bring in. Um, so it absolutely undermines like the ability for businesses to plan, to make decisions, um, and then. Even when you do know what the tariff is, then you simply just know your added cost. So it's not like it's a good thing to have the tariffs in place. It's a good thing to have certainty so you can plan around it, but you're planning around an added cost. Um, so it's, it's really unfortunate that the pivot is going to be toward more tariffs rather than toward a rethink of the tariff policy itself.

Kyle Hulehan 12:24

Then could you briefly explain maybe some of the mechanisms that Trump, so we have the IEEPA, the emergency tariffs that are, uh, struck down by the Supreme Court, which is great, but could you explain, you mentioned section 122 and maybe there's section 232. What, what mechanisms can he, is he gonna be able to pull on now?

Erica York 12:42

So he's going to primarily be looking at different statutes that come from the Trade Act of 1974. Um, section 122 is one that people were probably not familiar with and have, have really had to like look into lately. Section 122 allows temporary tariffs of up to 150 days at rates of up to 15% if the United States has an international payments problem. Um, so there are a couple of tests or factors that the US would have to meet in the statute, um, like a balance of payments deficit or a sudden, and like really large deterioration. Uh, of the US currency, um, either like a, a fast depreciation or a fast appreciation if, if the president was gonna take the opposite action. you look at the US economy, that's clearly not the case right now. There is no international payments problem. So we're already running into the question of are these new tariffs unlawful? Um. is likely gonna be challenged in court, but that litigation probably won't be able to play out in the next 150 days while those tariffs are scheduled to be in effect, the tariffs could extend beyond that 150 day period, but it would require congress. Approving them, and most lawmakers have already said like, no, there's not enough support in Congress to do that. So this is really a bridge to get to what the administration's going to do next, which is probably rely on some other statutes like Section 232, are National Security Tariffs section 301, which are tariffs that look at. Unfair trade practices of foreign countries. There's also section 201, and then there are the remaining, um, like anti-dumping countervailing duties that are going on on a continual basis at at the Commerce department. There, there's lots of other avenues that the president's going to use to try to recreate the broad tariffs under IEEPA. It runs into problems though, because these statutes as, as I kind of mentioned, are all narrow. They have some type of limitation, whether it's on rate or duration or scope. They require investigations, they require comment periods. Um, they require reports with findings of facts. So it's not as simple as what the president was trying to do under IEEPA. Which was a broad tariff, at any rate, on any, anyone on any product whenever he wanted. Um, we've already seen reporting that in addition to the dozen section, 232 investigations that are already underway into things like steel, autos, pharmaceuticals, semiconductors, the administration is looking at another half dozen of those investigations. So we'll likely end up with a patchwork of tariffs across all these different statutes in their attempt to recreate what they had done under IEEPA.

Kyle Hulehan 15:36

It just, it seems like so much work for, you know, you could do something else. You could do something that's not. Tariffs. You know, this has sort of become his signature policy, but he could have a different signature policy that the time and effort and everything that's getting put in the tariffs, it, it, it feels like a bit of a waste.

Erica York 15:53

It's a huge waste. Uh, it's a, it's a waste in terms of the compliance and administrative costs. So we've, we've heard reports already of, you know, importers bringing in the same product at different times, um, and facing wildly different tariffs because of the interpretation of stacking order. That's likely to compound if we have an even larger patchwork of tariffs. So that's wasted time on the part of businesses attempting to. Figure out what their tax bill is when they bring something into the country. It's a waste in terms of government administration enforcing all of these very complicated tariff rules. It's a waste of lobbying as we're likely to see more firms lobbying to get their competition protected or their product protected, or get out of under tariffs if there's an input they need that they don't wanna pay tariffs on. All of it could be ended. If Congress would stand up and assert itself and say, this is enough. This has gotten too crazy. We're going to revoke these tariff powers. Um, we're going to look at reforms to the tax code, you know, to. Boost manufacturing or make us more competitive, which tariffs have very clearly failed to do. Um, but it takes an act of Congress to do that. And so right now I think we're waiting for that and it's not necessarily likely to come, but if things get, you know, bad enough, maybe, maybe that will be the incentive. Congress needs to finally pull back this power.

Kyle Hulehan 17:17

An act of Congress or an act of God, I don't know which will come first. I mean, it's hard to say at this point who will move first? Um, yeah. You know, I, I'd like to think that this episode was going to be the, like, very optimistic, you know, like, Hey, tariffs got struck down. We've been talking about this. We've been like, but somehow still found a way for it to be a little bit pessimistic.

Erica York 17:40

Optimistic take is that maybe this is the push for tax reform. Uh, but the realistic take is that we know President Trump wants to impose more tariffs, and long as there are statutes there that allow him to do some form of tariff, that's, that's what he's going to use.

Kyle Hulehan 17:58

No one can deny the man loves his tariffs. At the end of the day, he just really does. So Erica, thank you for being on today. Thank you for all the information that you've provided us here. before we sign off, I just wanna let you guys know if you have any burning questions about taxes, you can send them our way. You can drop a comment here on YouTube. You can email us at podcast@taxfoundation.org. You can slide into our dms on Twitter at Deduction Pod. And thank you for listening.