Trump's Latest Tariffs Face New Legal Challenges in Federal Courts

On the morning of February 20, 2026, the Supreme Court of the United States handed President Donald Trump the most significant legal defeat of his second term. In a 6-3 ruling in Learning Resources, Inc. v. Trump, the justices declared that the International Emergency Economic Powers Act — the 1977 statute Trump had invoked to impose sweeping tariffs on nearly every U.S. trading partner — "does not authorize the President to impose tariffs" [1]. The decision wiped out the most ambitious unilateral trade action any president had attempted since Smoot-Hawley, immediately terminating duties that had been applied to roughly $3.5 trillion in annual imports.

But the ruling did not end America's tariff saga. It merely opened a new chapter — one defined by a $175 billion government refund liability, an untested replacement statute now under its own legal assault, and a looming 150-day cliff that could reshape U.S. trade policy by midsummer. Three weeks later, the legal battles are multiplying, not receding.

The Supreme Court Ruling That Changed Everything

The path to the Supreme Court began with small businesses. V.O.S. Selections, a New York wine importer, and Learning Resources, an Illinois toy company, led the charge against Trump's "Liberation Day" tariffs — the April 2025 executive orders that imposed duties of 10% or more on imports from virtually all countries, justified as an emergency response to trade deficits and fentanyl trafficking [2].

Chief Justice John Roberts, writing for a majority that included Justices Sotomayor, Kagan, Gorsuch, Barrett, and Jackson, concluded that IEEPA's grant of authority to "regulate … importation" does not encompass the power to impose revenue-raising tariffs. The majority invoked the major questions doctrine, reasoning that the power to tax imports is "very clearly a branch of the taxing power" reserved to Congress under Article I of the Constitution [3]. If Congress had intended to delegate such a foundational authority, Roberts wrote, "it would have done so expressly" — a standard IEEPA plainly does not meet [1].

Justices Thomas, Kavanaugh, and Alito dissented, arguing the majority had read the statute too narrowly and that IEEPA's broad emergency powers should encompass tariff authority in the context of national security threats [4].

The scope of the decision was sweeping. It invalidated not just the specific tariffs challenged in court — the "Liberation Day" reciprocal tariffs and the fentanyl-related duties — but all tariffs imposed under IEEPA. However, it left untouched tariffs imposed under other statutory authorities: Section 301 of the Trade Act of 1974 (covering China-specific duties), and Section 232 of the Trade Expansion Act of 1962 (covering steel, aluminum, copper, automobiles, and other sectors) [5].

The $175 Billion Reckoning

The financial consequences of the ruling have been staggering. By the time the Supreme Court issued its decision, U.S. Customs and Border Protection had collected approximately $166 billion in IEEPA tariffs from more than 330,000 importers across some 53 million entries [6]. With interest, the total refund liability is estimated to reach $175 billion — the largest single-event government refund in U.S. history, according to the Penn Wharton Budget Model [7].

Source: Penn Wharton Budget Model / Congressional Research Service

Data as of Mar 15, 2026CSV

On March 4, Senior Judge Richard Eaton of the U.S. Court of International Trade ordered CBP to begin the process of "reliquidation" — essentially recalculating and refunding every cent of illegally collected duties, plus interest, to every affected importer [8]. The logistics are daunting. CBP told Judge Eaton on March 6 that it simply could not comply with the original timeline, disclosing that it needed to build entirely new functionality in its Automated Commercial Environment (ACE) platform [6]. The agency was granted 45 days — putting the system's target completion around mid-April — to begin processing what will be the most complex customs refund operation ever attempted.

A federal appeals court subsequently rejected the Trump administration's push to delay the start of the refund process further, underscoring the judiciary's impatience with foot-dragging [9].

Meanwhile, the number of companies filing lawsuits to recover their duties has exploded. By early March, more than 2,000 companies had filed claims, up from roughly 1,000 at the time of the Supreme Court argument in January [10]. Major corporations including FedEx — which filed suit on February 23 seeking a "full refund" [11] — have joined small importers in the legal queue. And the litigation has spawned a new front: consumer class actions. On March 11, a Costco member filed a class-action lawsuit in Illinois federal court seeking a declaration that the retailer must pass along any tariff refunds it receives to customers who bore the costs through higher prices [12]. The suit alleges that allowing Costco to keep both the refund and the elevated prices would constitute a "double recovery."

Section 122: The Untested Backup Plan

Within hours of the Supreme Court decision, the White House pivoted. On February 22, President Trump signed a proclamation invoking Section 122 of the Trade Act of 1974 — a provision that authorizes the president to impose temporary tariffs of up to 15% to address "fundamental international payments problems" [13]. No president had ever used Section 122 to impose tariffs before [14].

The initial proclamation set a 10% global tariff effective February 24, stacking on top of existing Section 301 and Section 232 duties. Within 24 hours, Trump raised the rate to 15% — the statutory maximum [15]. The White House's stated justification was the U.S. goods trade deficit, which it characterized as a fundamental balance-of-payments problem requiring emergency intervention.

The result is a patchwork tariff regime that has bewildered importers and trade compliance officers. According to the Tax Foundation's Tariff Tracker, the overall average effective U.S. tariff rate stood at 13.7% in February 2026 — down from the 15.8% peak under the IEEPA regime, but still roughly six times the pre-Trump baseline of 2.4% [16].

Source: Tax Foundation Tariff Tracker

Data as of Mar 15, 2026CSV

A Fresh Wave of Lawsuits

The Section 122 tariffs lasted barely two weeks before facing their own legal gauntlet. On March 5, attorneys general from 24 states filed a challenge in the U.S. Court of International Trade, arguing that Trump's proclamation fails to meet Section 122's statutory requirements [17]. Their core contention: the administration conflated the U.S. goods trade deficit with a balance-of-payments deficit, when the statute requires the latter — a measure that must account for all cross-border financial flows, not just merchandise trade. On that broader measure, many economists argue, the United States does not have a deficit at all [18].

Four days later, the Liberty Justice Center — the same organization that brought V.O.S. Selections — filed Burlap and Barrel, Inc. v. Trump in the same court, attacking the Section 122 tariffs on both statutory and constitutional grounds [19]. California separately sued on March 5, with Governor Gavin Newsom's office calling the new tariffs "unlawful use of tariffs — again" [20].

Legal scholars have identified several vulnerabilities in the Section 122 framework:

The 150-Day Clock. Section 122 explicitly limits any tariff imposed under it to 150 days unless Congress acts to extend it [14]. That puts the expiration date at July 24, 2026. Given the current political dynamics — with Democrats opposing the tariffs and many congressional Republicans uneasy about their economic effects — passage of an extension appears far from assured.

The "Fundamental Payments Problem" Question. The statute was designed to address acute balance-of-payments crises, not chronic trade deficits. As Lawfare's analysis notes, the conditions required to trigger Section 122 may not currently exist, making the legal basis "vulnerable to getting knocked down by courts, too" [18].

Consistency Requirements. The statute mandates that tariffs be applied "consistently" — a requirement that critics say is undermined by the large number of carve-outs and exceptions the administration has built into its proclamation [18].

The Bridge Strategy: What Comes After July

Administration officials have privately described the Section 122 tariffs as a "bridge" — a stopgap measure designed to buy time while the White House pursues more legally durable tariff authorities [21]. The strategy involves three parallel tracks.

First, the administration has accelerated ongoing Section 301 investigations targeting specific countries and sectors, including semiconductors, green energy products, and pharmaceuticals. Second, it has expanded its use of Section 232 national security tariffs, applying them to an ever-widening list of products. Third, Trump has publicly urged Congress to pass legislation granting him broader permanent tariff authority, though no such bill has gained traction [16].

The bridge strategy carries significant risks. If the Section 122 tariffs are struck down before July — or simply expire — the administration could face a period in which its only tariff tools are the pre-existing Section 301 duties on Chinese goods and the Section 232 duties on specific commodities. That would represent a dramatic reduction in the scope of Trump's trade war.

Economic Crosscurrents: Tariffs Meet the Iran War

The tariff legal battle is unfolding against the backdrop of the U.S.-Israel war with Iran, which has sent oil prices from roughly $67 per barrel in late February to nearly $95 by early March, disrupted global shipping, and injected enormous uncertainty into an already fragile economy [22].

The Tax Foundation estimates that even after the Supreme Court ruling reduced the effective tariff rate, the remaining duties will slow U.S. real GDP growth by 0.4 percentage points in 2026 [16]. Consumer prices are projected to rise by an additional 2.3% due to tariff passthrough, costing the average American household approximately $1,500 this year [23]. With Iran war-driven energy inflation layering on top of tariff-driven goods inflation, the Federal Reserve faces an extraordinarily difficult policy environment.

For the administration, the Iran war has also created a political complication. The White House has invoked the Defense Production Act to restart oil drilling along the California coast, arguing that the energy crisis justifies emergency action — the same kind of expansive emergency-powers argument that the Supreme Court just rejected in the tariff context [24]. Legal observers note that the court's reasoning in Learning Resources — particularly its skepticism of "reliance on alleged emergencies to infringe on powers reserved for Congress" — could have ripple effects well beyond trade policy [3].

The Constitutional Stakes

What makes this moment historically significant is not any single lawsuit but the cumulative picture. Over the span of 14 months, the Trump administration has attempted to use three different statutory authorities to impose global tariffs — IEEPA, Section 122, and expanded Section 232 — and each has drawn immediate legal challenge. The Supreme Court's IEEPA ruling established a clear principle: the power to tax imports belongs to Congress, and vague statutory language will not be read to transfer that power to the executive branch [1].

That principle now hangs over every remaining tariff authority. If the Court of International Trade applies the same skepticism to Section 122 that the Supreme Court applied to IEEPA, the administration's bridge strategy could collapse before July.

"The administration keeps playing whack-a-mole with statutory authorities," said one trade attorney involved in the Section 122 litigation, speaking on condition of anonymity. "But every time they pop up with a new one, the courts are applying the same constitutional framework. The taxing power belongs to Congress. Full stop."

The implications extend far beyond trade policy. The Learning Resources decision's application of the major questions doctrine to emergency economic powers represents a significant constraint on executive authority — one that could affect everything from sanctions policy to energy regulation. It is, as the Council on Foreign Relations noted, a ruling that "clipped Trump's tariff powers and opened new trade battle fronts" simultaneously [25].

For the 330,000 importers awaiting their refunds, for the 24 states challenging the replacement tariffs, and for the consumers caught between rising prices and legal uncertainty, the only certainty is that the courts will remain at the center of American trade policy for months — and possibly years — to come.