The legal world and the global markets were rocked on February 20, 2026, when the U.S. Supreme Court (SCOTUS) handed down its long-awaited decision in Learning Resources v. Trump. In a definitive 6-3 ruling, the Court fundamentally shifted the balance of power regarding international trade, deciding that the President does not have the unilateral authority to impose sweeping tariffs under the International Emergency Economic Powers Act (IEEPA).
If you are an importer, a small business owner, or just a curious citizen watching the “Trade War 2.0,” this decision is the most significant check on executive power in decades. Here is the full breakdown of how we got here, why the Court ruled the way it did, and what happens next.
The Case at a Glance: Why Learning Resources Sued
The primary plaintiff, Learning Resources, is an Illinois-based educational toy company. Like many American businesses, they found themselves in the crosshairs of a massive economic shift when President Trump invoked the IEEPA in early 2025 to address “national emergencies” involving trade deficits and illegal drug trafficking (fentanyl).
The administration implemented a 10% baseline tariff on nearly all global imports and a staggering 25% duty on goods from Canada and Mexico. For a company like Learning Resources, which relies on global supply chains to provide toys to classrooms, these costs were unsustainable. They argued that the President was essentially “taxing” the American people without the consent of Congress—a direct violation of Article I of the Constitution.
The Core Legal Question: Can the President Tax via “Regulation”?
At the heart of the case was a single phrase in the 1977 IEEPA statute. The law allows the President to “regulate… importation” during a declared national emergency.
The government argued that “regulate” is a broad term that includes the power to set prices (tariffs). However, the Supreme Court majority, led by Chief Justice John Roberts, disagreed.
The 6-3 Split
- The Majority: Chief Justice Roberts was joined by Justices Sotomayor, Kagan, Gorsuch, Barrett, and Jackson. They held that “regulating” is not the same as “taxing.”
- The Dissent: Justices Thomas, Alito, and Kavanaugh argued that the President needs “secrecy and dispatch” in foreign affairs and that the IEEPA was intended to be a broad tool for national security.
| Key Aspect | Majority View (SCOTUS) | Government Argument |
|---|---|---|
| Authority | Article I (Congress has the power to tax) | Article II (Executive foreign policy power) |
| Statutory Language | “Regulate” ≠ “Levy Duties” | “Regulate” includes tariffs |
| Precedent | Congress must be explicit in delegating tax power | Historical use of emergency powers |
| Status of Tariffs | Unlawful & Void | Necessary for national security |
Why the “Major Questions Doctrine” Mattered
A significant part of the ruling relied on the Major Questions Doctrine. This legal principle suggests that if an agency (or the President) wants to make a decision of “vast economic and political significance,” they must have clear, specific authorization from Congress.
Chief Justice Roberts noted that “the power to tax is one of the most basic powers of a sovereign.” He concluded that if Congress had intended to give the President the keys to the entire U.S. economy, they wouldn’t have hidden that power in a vague verb like “regulate.”
Immediate Impact: What Drops and What Stays?
It is important to understand that not all tariffs are dead. This ruling specifically targets those imposed under IEEPA.
What is struck down:
- The 10% “Reciprocal” baseline tariffs.
- The 25% “Drug Trafficking” tariffs on Canada and Mexico.
- Emergency “top-ups” on Chinese and EU goods.
What remains in place:
- Section 301 Tariffs: These (mostly on China) were implemented under a different law and remain active for now.
- Section 232 Tariffs: These cover steel and aluminum for “national security” reasons and were not part of this specific IEEPA challenge.
The $264 Billion Question: Will Businesses Get Refunds?
The Treasury collected over $264 billion in IEEPA tariffs in 2025 alone. While the Court ruled the tariffs illegal, it did not provide a “how-to” guide for getting that money back.
Legal experts suggest that businesses should:
- Consult Trade Counsel: Check if your “Protests” were filed with U.S. Customs (CBP).
- Monitor the Court of International Trade (CIT): The case now moves back to lower courts to determine the “reliquidation” process.
- Audit Past Entries: Ensure you have a clear paper trail of all IEEPA duties paid since July 2025.
“The powers to tax, to regulate commerce, and to shape the nation’s economic course must remain with Congress. They cannot drift silently into the hands of the President through inertia.” — Coalition of Constitutional Scholars (Amicus Brief)
Final Thoughts: A New Era for U.S. Trade
Learning Resources v. Trump is a reminder that the “power of the purse” is the ultimate check on the “power of the sword.” While the administration may seek alternative paths—such as Section 122 of the Trade Act—the days of using emergency declarations to rewrite the U.S. tax code overnight appear to be over.
For businesses, this means a period of “chaotic relief.” The costs of goods may drop, but the process of reclaiming what was lost will be a long, legal marathon.
Disclaimer: This article provides general information and does not constitute legal or financial advice. Please consult with a trade attorney regarding specific business impacts.
