The Supreme Court’s Decision

On February 20, 2026, the U.S. Supreme Court ruled that the President lacks the authority to impose tariffs under the International Emergency Economic Powers Act (IEEPA), the statute on which President Trump based many of his most significant tariff actions over the first year of his current term. 

The Supreme Court’s decision came in cases challenging the tariffs imposed on Canadian, Mexican, and Chinese goods in February and March of 2025 in connection with fentanyl trafficking, and the worldwide “reciprocal” tariffs imposed in April of 2025. However, the decision’s reasoning extends to all other tariffs that the President imposed under IEEPA.

The Supreme Court’s decision only concerns tariffs imposed under IEEPA. Tariffs imposed under other statutes, such as tariffs imposed on steel, aluminum, copper, and lumber under Section 232 of the Trade Expansion Act of 1962, as well as tariffs imposed on Chinese goods under Section 301 of the Trade Act of 1974, are not affected by the Supreme Court’s decision.

The President’s Response

Hours after the Supreme Court issued its decision, the President took steps to replace tariffs imposed under IEEPA with a new tariff under Section 122 of the Trade Act of 1974.

Pullback of IEEPA Tariffs

The President issued an Executive Order providing that IEEPA duty orders shall no longer be in effect and directing that collection of IEEPA duties be terminated “as soon as practicable.” U.S. Customs and Border Protection (CBP) issued Cargo Systems Messaging Service (CSMS) guidance stating that CBP will no longer collect IEEPA tariffs for goods that enter on or after 12:00 a.m. EST on Tuesday, February 24. This lined up the end of IEEPA tariff collections and the beginning of the new tariff imposed under Section 122.

The New Section 122 Tariff

The President also issued a Proclamation imposing a new across-the-board 10% tariff under Section 122. Section 122 authorizes the President to levy duties of up to 15% (in addition to those already imposed) to, among other things, “deal with large and serious United States balance-of-payments deficits.” The Proclamation bases the new section 122 tariff on a Presidential finding that there are “fundamental international payments problems.”

The new tariff, which applies on top of base rates, took effect at 12:01 a.m. on Tuesday, February 24.While the President stated on social media on February 21 that the rate would be increased to 15%, he took no action to implement that change before the tariff took effect on February 24. Accordingly, importers will face the 10% rate until further notice.

Similar to the IEEPA tariff regime struck down by the Supreme Court, the new section 122 tariff has a variety of exceptions. These include:

• products of Canada and Mexico that meet the United States-Mexico-Canada Agreement (USMCA) rules of origin;
• products (or parts of products) subject to duties under section 232 (such as the section 232 duties on steel, aluminum, copper, autos, lumber, and upholstered furniture); and
• numerous other products specified in annexes to the February 20, 2026, proclamation.

Certain U.S. trading partners, such as the European Union, Japan, South Korea, and Switzerland, had negotiated to have the combination of the IEEPA tariff and base rate set at the greater of 15% or the base rate. For these countries, because the new section 122 tariff applies on top of the base rate, the change from the IEEPA tariff to the new 10% section 122 tariff decreases the overall tariff burden for products with base rates under 5% but increases the overall tariff burden for products with base rates in excess of 5%. 

Looking Long-Term

Section 122 tariffs can be maintained for only 150 days. Accordingly, if the President seeks to maintain widespread tariffs in the long run, he will need to look rapidly to alternative sources of authority.

In a February 20, 2026, press release, the Office of the U.S. Trade Representative (USTR) provided an indication of the administration’s longer-term plans for maintaining tariffs. USTR indicated that it will initiate investigations under Section 301 of the Trade Act of 1974 into unreasonable or discriminatory trade practices of foreign countries, and that these new section 301 investigations are expected to “cover most major trading partners.” When USTR identifies unreasonable or discriminatory foreign trade practices in a section 301 investigation, the U.S. Trade Representative can impose tariffs in response. USTR will likely run these investigations on a faster-than-usual timeframe, with the aim of making findings and having resulting section 301 tariffs in place before the end of the 150-day period in which the section 122 tariffs can be maintained. 

IEEPA Tariff Refunds

The Supreme Court’s decision does not address questions about refunds of IEEPA tariffs unlawfully collected from importers over the past year. While refunds should be available for importers who have paid IEEPA tariffs, the administration has indicated that it will not provide them automatically and that it may take steps to oppose refund rights or delay payments. For instance, at a press conference shortly after the Supreme Court’s decision, President Trump stated that the disposition of money collected pursuant to IEEPA tariffs would have to “get litigated for the next two years.”

Consistent with the President’s comments, CBP has thus far offered no guidance on administrative steps that importers can take to obtain refunds. It remains unclear whether CBP will grant refunds to importers who seek them by filing post-summary corrections (PSCs) (for unliquidated entries) or protests (for liquidated entries). 

To the extent that CBP denies refund requests, resulting litigation will play out in the first instance in the U.S. Court of International Trade (USCIT). However, even if the USCIT orders CBP to make refunds broadly available via existing administrative processes, the government could appeal, leading to delays as the litigation is considered by the U.S. Court of Appeals for the Federal Circuit and, potentially, the U.S. Supreme Court. Importers may wind up needing to file individual cases in the USCIT to obtain refunds.

The coming days will provide greater clarity on the government’s position and, therefore, on available pathways for importers seeking refunds. Importers hoping for refunds should monitor developments, gather information on their IEEPA tariff payments and the associated entries, and consult with counsel.

Cozen O’Connor’s international trade attorneys will be monitoring developments closely and are available to consult with you on strategies for navigating the refund process and for managing the new and fluid tariff landscape.