What Supreme Court ruling against Trump tariffs means for your money

2026-02-20 18:15:59

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People walk in front of the U.S. Supreme Court building on their way to attend oral arguments on President Donald Trump’s bid to preserve sweeping tariffs after lower courts ruled that Trump overstepped his authority, in Washington, Nov. 5, 2025.

Nathan Howard | Reuters

The Supreme Court struck down a centerpiece of President Donald Trump’s tariff agenda on Friday — and that could be good news for consumers’ wallets, according to economists.

But much of the financial impact will depend on what the Trump administration does next, economists said.

Tariffs are a tax on imports. Tariffs have made everything from furniture to clothing, food, electronics and cars more expensive, according to the Yale University Budget Lab.

“Ultimately, this showed up as a price increase for consumers,” said Rathna Sharad, CEO of FlavorCloud, a cross-border shipping and logistics firm.

The Tax Foundation found that Trump’s tariffs cost each U.S. household $1,000 in 2025, and would cost each household $1,300 in 2026.

Now, economists say consumers’ cost burden may fall.

What could be next for tariffs

Trump used the International Emergency Economic Powers Act of 1977 to impose tariffs broadly on U.S. trading partners, pushing up the nation’s tariff rate to its highest since before World War II. It was the first time a president had used the law to levy tariffs.

In a 6-3 decision, the high court ruled that IEEPA doesn’t authorize the president to impose tariffs.

“The Government reads IEEPA to give the President power to unilaterally impose unbounded tariffs and change them at will,” according to the court’s opinion in the case, Learning Resources, Inc. v. Trump.

“That view would represent a transformative expansion of the President’s authority over tariff policy,” according to the opinion. “It is also telling that in IEEPA’s half century of existence, no President has invoked the statute to impose any tariffs, let alone tariffs of this magnitude and scope.”

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Supreme Court strikes down Trump tariffs, rebuking president’s signature economic policy

Squawk on the Street

In announcing the tariffs last year, Trump said an influx of illegal drugs from Canada, Mexico and China had created a public health crisis, and that large and persistent trade deficits had undermined U.S. manufacturing.

He declared national emergencies and used IEEPA to levy tariffs on imports to manage the perceived crises, including a 10% baseline tariff on all U.S. trading partners and even higher duties on select nations.

Before the ruling, the Trump administration said it would use other pathways to impose new tariffs — and get to the “same place” — should the Supreme Court strike down IEEPA tariffs.

For example, it’s likely the White House will use Section 122 of the 1974 Trade Act, wrote Paul Ashworth, chief North America economist at Capital Economics, wrote in a research note on Friday. Section 122 caps the maximum tariff rate at 15% and only for 150 days — but can be done without congressional approval, Ashworth wrote.

Trump might also invoke Section 338 of the 1930 Smoot-Hawley Tariff Act, which lets the president levy tariffs of up to 50% on nations that “discriminate” against the U.S., Ashworth wrote. However, such a move would also likely invite legal challenges, he said.

Or the president may rely on “old tariff workhorses” like Section 232 of the 1962 Trade Expansion Act, which rests on national security grounds, and Sections 201 and 301 of the 1974 Act, which rest on anti-competitive grounds, Ashworth wrote.

Indeed, the Trump administration has used Section 232 to put product-specific tariffs on steel, aluminum, copper, cars, trucks and wood products.

Consumers will still feel some tariff burden

Prior to the Supreme Court ruling, the U.S. average effective tariff rate was 16.9%, the highest since 1932, according to Yale University Budget Lab’s Ricco.

The rate now falls to 9.1% without IEEPA tariffs, according to the Budget Lab — still significantly higher than the roughly 2% rate before Trump started his second term in office.

The consumer burden doesn’t fall to zero because the Trump administration has other tariffs on the books that rely on different legal authorities — and many stand on firmer legal ground, economists said.

The tariffs that are still on the books impact households differently based on income, economists said.

For example, the bottom tenth of households by income would lose $430 due to tariffs in 2026, about 1.1% of their after-tax income, according to the Yale Budget Lab. By comparison, the top tenth of households would lose about $1,800, accounting for a smaller share of their income, about 0.8%, the analysis found.

Consumers would feel these price increases most when buying metal products, electronics and vehicles, it found.

Trump tariff ‘dividends,’ consumer refunds unlikely

It’s unclear what the ruling means for potential tariff refunds that the Trump administration may have to pay to businesses and consumers.

“The Supreme Court did not rule on whether the administration must refund the more than $130bn in tariffs already paid under those [IEEPA] declarations, which will likely trigger a prolonged legal battle,” Michael Pearce, chief U.S. economist at Oxford Economics, wrote in a note Friday.

There are ample questions so far left unanswered about potential tariff refunds, such as who is eligible and how they would be able to apply, said FlavorCloud’s Sharad.

“The refunds are going to be really difficult, because there’s no precedent to this,” Sharad said.

However, consumers may be left out of the equation, she said.

“Likely, consumers are not going to see relief from the refunds,” she said. “They will see relief in terms of prices.”

Additionally, it’s unclear how the Supreme Court ruling might affect so-called tariff “dividend checks” that President Trump had floated sending to households using tariff revenue.

Mark Zandi, chief economist at Moody’s, said it’s unlikely consumers will get such checks. That would have been the case, too, even if the Supreme Court had ruled in the Trump administration’s favor, he said.

“This would require legislation, and I don’t see Congress passing it, even under reconciliation,” Zandi wrote in an e-mail.

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