The Supreme Court of the United States (SCOTUS) ruled 6-3 on February 20, 2026 tossing the legal basis of President Trump’s tariffs in the lead case of Learning Resources, Inc. v. Trump (tariffs) whether the International Emergency Economic Powers Act (IEEPA) authorizes the president to impose tariffs: “The challengers contended that Trump did not have the power under IEEPA to impose the tariffs.”
The core of the legal case argued before SCOTUS on November 5, 2025, was the IEEPA enacted in 1977. Part of IEEPA states,
. . .the president can invoke it “to deal with any unusual and extraordinary threat, which has its source in whole or substantial part outside the United States, to the national security, foreign policy, or economy of the United States,” if he declares a national emergency “with respect to such threat.”
Under Section 1702 of the law, when there is a national emergency, the president may “regulate … importation or exportation” of “property in which any foreign country or a national thereof has any interest.”
Many Mises Wire and Power and Market articles were constructively critical of Trump’s tariffs given the past 200 years of tariffs being a total loss to all parties involved in international trade. Austrian economics believes tariffs inhibit free trade under the false premise of protecting domestic producers, industries, and consumers.
President Trump’s tariffs executive orders began in February 2025, based on IEEPA. The executive orders implemented two tariff groups. Group one was trafficking tariffs, “. . .targeted products from China, Canada, and Mexico, which, Trump says, have not done enough to stop the flow of fentanyl into the U.S.” The second group were reciprocal tariffs, “. . .imposed an initial tariff of 10% on imports from almost all countries and even higher tariffs on products from dozens of countries.” In imposing the reciprocal tariffs, Trump pointed to large trade deficits as an “unusual and extraordinary threat to the national security and economy of the United States.”
Frank Shostak—associated scholar at the Mises Institute—penned a Mises Wire article in May 2025, entitled, “US Trade Account Balance and the Imposition of Tariffs” debunking the trade deficits threat.
Representing the Trump administration before SCOTUS, US Solicitor General D. John Sauer, “. . . told the justices that IEEPA ‘confers major powers to address major problems on the President,. . .’” “The phrase ‘regulate … importation,’” he added, “plainly embraces tariffs, which are among the most traditional and direct methods of regulating importation.”
Neal Katyal—representing the small businesses—countered that the decision, “It’s simply implausible in enacting IEEPA Congress handed the President the power to overhaul the entire tariff system and the American economy in the process”—as evidenced by the fact that no other president in nearly 50 years “has ever tried to impose tariffs” relying on that law. Indeed, Katyal insisted, “Congress knows exactly how to delegate its tariff powers. Every time for 238 years, it’s done so explicitly, always with real limits.”
Sauer received many questions from Justice Elena Kagan, “. . .for example, emphasized that Congress – not the president – had ‘the power to impose taxes, the power to regulate foreign commerce.’” Justice Kagan understands something about tariffs.
Sauer countered that President Trump’s authority under IEEPA, in imposing the tariffs, was not exercising a power to tax; instead, he said, the tariffs were simply “regulatory.”
Justice Sonia Sotomayor was unconvinced by Sauer’s tariffs as a regulatory argument: “It’s a congressional power, not a presidential power, to tax,” she told Sauer. “And you want to say tariffs are not taxes, but that’s exactly what they are. They’re generating money from American citizens, revenue.” Justice Sotomayor sees tariffs as a tax.
A number of conservative SCOTUS justices were skeptical of D. John Sauer’s arguing that extending the IEEPA language to support President Trump’s executive orders on tariffs was legally logical.
One SCOTUS reporter observed in the oral arguments,
. . .a majority of the justices appeared to agree with the small businesses and states challenging the tariffs that they exceeded the powers given to the president under a federal law providing him the authority to regulate commerce during national emergencies created by foreign threats.
This SCOTUS ruling is a refreshing rebuttal limiting executive branch power to implement President Trump’s troublesome tariffs by executive order through IEEPA. Time will tell if Congress will act on its authority to pass any future tariff legislation. Many Austrian economic followers hope Congress will not take up the topic of tariffs since these are a tax on trade and should be abandoned into the trade policy trash bin.
