The Supreme Court’s February 20, 2026 decision striking down the president’s use of the International Emergency Economic Powers Act (IEEPA) for broad reciprocal tariffs has reshaped the U.S. trade landscape. The ruling removed a major portion of the tariffs introduced in 2025 but left other trade measures in place, meaning the overall tariff burden remains elevated compared to pre-2025 norms. This shift continues to influence prices, revenue, and economic activity across the country.
What the Supreme Court’s Ruling Means
The Court found that using IEEPA to impose wide-ranging reciprocal tariffs exceeded the authority granted under the law. As a result, many of the tariffs enacted under this statute were invalidated. However, tariffs authorized under separate laws remain, so businesses and consumers are still navigating a trade environment with higher-than-normal barriers.
Following the ruling, the average effective tariff rate now sits at roughly 9%. While this is lower than the mid-teen rates reached at the height of the IEEPA measures, it remains significantly above the low-single-digit averages seen before 2025.
How Tariffs Work in the Modern Economy
A tariff is essentially a tax on imported goods. Although the importer pays the tax at the border, the cost often moves through the supply chain. Businesses may accept lower margins or raise prices, and consumers may ultimately feel the impact through higher costs. Because today’s economy relies heavily on global production networks, tariffs can affect everything from input prices and profitability to overall inflation trends.
Fiscal Implications and Revenue Effects
The IEEPA tariffs generated billions in federal revenue during 2025 alone. While remaining tariffs are still expected to bring in substantial revenue over the next decade, total collections will be lower than they would have been under the expanded policy.
Traditional revenue estimates often overlook the broader economic drag caused by tariffs. When accounting for reduced economic output and related tax collections, the net revenue gain is smaller than conventional assumptions suggest.
Price, Output, and Employment Effects
Current tariff levels are projected to increase the overall price level by about 0.5% in the near term. For households, this represents several hundred dollars per year in reduced purchasing power, with lower-income households feeling the greatest strain.
Long-term GDP is also expected to be roughly 0.1% smaller than it would be in a no-tariff scenario—equivalent to tens of billions of dollars in lost economic activity. Labor market projections indicate a slightly higher unemployment rate as well. Had the broader IEEPA tariffs remained, these impacts would have been significantly larger.
Industry-Level Impacts
The effects of tariffs vary across sectors. Some manufacturing industries may experience modest gains due to reduced foreign competition. However, higher input costs can constrain industries such as construction, agriculture, and services. These ripple effects highlight the interconnected nature of the U.S. economy and the trade-offs embedded within tariff policy.
Refund Uncertainty and Potential Economic Boosts
Because the IEEPA tariffs were invalidated, companies that paid those duties may be eligible for refunds. The timeline and administrative details remain unclear, but refunds—if issued—could offer a short-term financial lift for affected firms. How businesses choose to use these funds may influence broader economic outcomes.
Looking Ahead: Future Trade Policy Questions
The administration still has other legal avenues for imposing tariffs, some requiring investigations and procedural steps, others allowing temporary measures. Future policy adjustments could influence inflation expectations, market sentiment, business investment, and effective tariff rates.
While the ruling reduces tariff intensity from its 2025 peak, it does not signal a return to pre-2025 trade conditions. Elevated tariff levels will continue shaping both market dynamics and financial planning considerations.
Overall, the Supreme Court’s decision removed a major component of recent tariff expansion but left a complex tariff framework in place. Current economic effects appear modest but meaningful, and future developments—such as refunds or new tariff actions—will determine how trade policy continues to evolve in the years ahead.