The Supreme Court delivered a significant setback to President Donald Trump on Friday, ruling 6-3 that his use of the International Emergency Economic Powers Act (IEEPA) to impose sweeping tariffs exceeded presidential authority, while Wall Street rallied on the prospect of reduced trade uncertainty.
Chief Justice John Roberts, writing for the majority and joined by Justices Neil Gorsuch and Amy Coney Barrett along with the Court's three liberal members, concluded that the 1977 statute did not authorize unilateral tariff action.
"The president asserts the extraordinary power to unilaterally impose tariffs of unlimited amount, duration and scope," Roberts wrote. But the Trump administration "points to no statute" in which Congress previously said IEEPA's language applied to tariffs. "We hold that IEEPA does not authorize the president to impose tariffs," he added.
Justices Clarence Thomas, Brett Kavanaugh and Samuel Alito dissented.
The ruling invalidates two major categories of Trump's tariff regime:
- Country-specific "reciprocal" tariffs, including rates as high as 34% on China and a 10% baseline for other nations
- A 25% tariff on certain goods from Canada, China and Mexico, tied to allegations those countries failed to curb fentanyl flows
Other tariffs imposed under different statutes-such as those on steel and aluminum-remain intact.
The decision potentially affects roughly $130 billion in duties collected under IEEPA as of mid-December, according to U.S. Customs and Border Protection. In dissent, Justice Kavanaugh noted the fiscal implications. "The Court says nothing today about whether, and if so how, the Government should go about returning the billions of dollars that it has collected from importers," he wrote.
Trump had defended the policy as essential. "Without tariffs, this country would be in such trouble right now," he said Thursday, as arguments over the legality of the duties intensified.
The Constitution assigns the power to set tariffs to Congress. Trump invoked IEEPA's authority to "regulate" imports and exports in response to what the statute calls an "unusual and extraordinary threat." No prior president had used IEEPA to impose tariffs.
The case consolidated lawsuits brought by businesses including V.O.S. Selections Inc., Plastic Services and Products and educational toy companies, along with a coalition of states led by Oregon. Lower courts had ruled against the administration, prompting both sides to seek Supreme Court review.
Financial markets responded positively to the clarity. The Dow Jones Industrial Average rose 128 points, or 0.3%. The S&P 500 gained 0.4%, while the Nasdaq Composite advanced 0.5%, supported by a 2% increase in Alphabet shares.
For the week:
- Dow: up 0.1%
- S&P 500: up 0.7%
- Nasdaq: up more than 1%, snapping a five-week losing streak
The gains came despite weaker-than-expected economic data. Fourth-quarter GDP grew 1.4%, below the 2.5% consensus forecast and down from the prior quarter's 4.4% pace. The Commerce Department attributed roughly one percentage point of drag to the government shutdown during the quarter.
Inflation remained elevated. The personal consumption expenditures price index showed core PCE at 3% in December, above the Federal Reserve's 2% target.
Federal Reserve officials remain divided. Minutes from January's meeting indicated that some policymakers want more evidence inflation is cooling before endorsing additional rate cuts.
Alternative asset managers faced pressure amid concerns over private credit exposure. Shares of Blue Owl Capital fell 5% after gating redemptions from one of its funds, while Blackstone and Ares Management each declined 3%.
