U.S. Supreme Court strikes down IEEPA tariffs, doesn’t offer refund mechanism

In a six to three decision made Friday, Feb. 20, the U.S. Supreme Court ruled that the president does not have the authority under the International Emergency Economic Powers Act (IEEPA) to levy a “tax”—in this application, tariffs—on imported goods, only regulate them. 

Put simply, the majority opinion designated the imposed tariffs as a tax and struck them down because the power of taxation falls to Congress, not the president. However, the ruling did not offer a mechanism for businesses that say they are entitled to refunds for illegally collected tariffs, instead punting that back down to a lower court to decide.

These tariffs were created based on two states of emergency declared by the president, the mechanism required for trade to be regulated by the president under IEEPA. The first state of emergency was declared due to the perception of an influx of illegal drugs from Canada, Mexico and China and the second due to a perception that the trade deficits had “hollowed out” the American manufacturing base and undermined domestic supply chains.

Due to this, President Donald Trump had imposed a 25% tariff on most imports from Mexico and Canada and a 10% tariff on most imports from China in response. On the countries with a perceived trade deficit, the president had imposed a minimum 10% duty, with several nations facing higher rates or rates that have been increased or modified since the initial tariffs were imposed.

Tariffs imposed under IEEPA

Trafficking and immigration tariffs

Levied in early 2025, President Trump imposed tariffs on China, Mexico and Canada. Mexico and Canada had tariff rates of 25% imposed with Canadian energy being granted a lower, 10% rate. China had an initial rate of 10% imposed prior to the other countries, but it was doubled to 20% alongside the imposition of these tariffs on Mexico and Canada.on China, Mexico and Canada due to a perception of outsized fentanyl trafficking and illegal immigration from these nations. Mexico and Canada had tariff rates of 25% imposed with Canadian energy being granted a lower, 10% rate. China had an initial rate of 10% imposed prior to the other countries, but it was double to 20% alongside the imposition of these tariffs on Mexico and Canada.

These tariffs were initially levied on all goods coming from these countries but were quickly amended to include carveouts after lobbying and diplomatic relations. For instance, products that qualified for preferential treatment under the United States-Mexico-Canada Agreement were eventually granted an exemption from the tariffs.

‘Liberation Day’ reciprocal tariffs

The most sweeping set of tariffs of the bunch came in the form of “reciprocal” tariffs levied on “Liberation Day”—April 2, 2025. A base 10% tariff went into effect for most trading partners, though larger tariffs were imposed on partners with a greater perceived deficit. Most of those larger tariffs were delayed until August and many of them were revised or reduced under new “framework” executive agreements.

These tariffs were imposed on nearly every good imported from a trading partner, covering most goods on the Harmonized Tariff Schedule. This included industrial components like steel, aluminum and fabricated metals, technology like semiconductors, vehicles and vehicle parts, raw materials like lumber, chemicals and minerals and consumer goods like textiles and pharmaceuticals.

Rates varied from 11% to more than 100% for the countries that had higher duties imposed than the baseline 10%. These rates often ebbed and flowed based on current events and ongoing negotiations, like with China, which originally had a 34% rate imposed before it jumped to 84% and eventually 125%. Higher rates were justified with other countries because of tariffs they impose on the U.S., like the 26% levied against India justified by the 70% tariff they impose on U.S. auto imports.

These further tariffs complicated importing as they could stack, but only in some cases, though that exemption came only after the Trump administration issued an executive order clarifying how these tariffs stacked.

The impacts on public transit

Essentially no matter how it’s examined, these tariffs have raised prices for transit agencies, suppliers, manufacturers and builders. Whether it be the cost of buses rising, having agencies potentially consider pushing off zero-emission upgrades or possibly preventing facility expansions—dollars aren’t going as far.

New Flyer reported last August that it had a backlog of orders totaling more than 16,000 units, or $13.5 billion, and that the price of its buses had risen 2.7% year-over-year and 68% since 2021.

“We were directly impacted by tariffs on the imports of steel and aluminum to the U.S. and Canada,” New Flyer CEO Paul Soubry said of the second quarter of 2025 to Smart Cities Dive. 

“It’s changing every bloody day,” Soubry said. “A tariff yesterday was X on one country, and now it’s Y. So, you can just imagine how fluid the thing is.”

While striking down the IEEPA tariffs did help some with raw material costs, they were often facing multiple tariff streams, including tariffs of 10 to 25% from IEEPA, 25 to 50% Section 232 tariffs (depending on timing) and in some cases, a third 25% Section 301 tariff if the raw material was coming from China.

To combat these rising costs, the Federal Transit Administration (FTA) also reminded transit agencies that they could ask the FTA for more funding to be able to amend their contracts to pay the higher prices. The administration also issued a rule amendment that allowed transit agencies to change their zero-emission projects to low-emission projects to help absorb the increased costs the tariffs imposed on the new technology.

These tariffs came at a time when transit agencies across the country are facing budgetary shortfalls and fiscal cliffs when costs are already soaring on fixed expense,  maintenance and stock and facility upgrades. It can be an even tighter squeeze for agencies who can’t safely delay some maintenance, like the Southeastern Pennsylvania Transportation Authority, which is currently working out a long-term funding solution to its recent budgetary crisis at a time where it faces ongoing maintenance with its Silverliner IV stock.

It could take time for the relief to be felt in the transit industry though, as the Supreme Court is leaving the initial refund mechanism from the U.S. Customs and Border Protection to the tariffed vendors up to lower courts to decide. Further, it is providing no guidance whatsoever on how the tariff, if passed to the final consumer, would be returned.

Replacement tariffs

What stays

Only about half of all the tariffs the Trump Administration has levied were carried out under IEEPA. This means that tariffs issued under other statues, like Section 232 tariffs spun up on the basis of national security, are still in effect and will continue to apply to items like steel, aluminum, copper and vehicle parts. It also didn’t impact earlier tariffs, like those levied against China in 2018 under Section 301.

New immediate tariffs

After the Supreme Court struck down the IEEPA tariffs, President Trump quickly hosted a press conference in which he announced a new 10% global tariff that was being applied under Section 122 as a global surcharge. In a Truth Social post, Trump upped the charge to 15% a day later, the maximum allowed by law. This went into effect on Feb. 24 and will last for 150 days—through July 24, then either ceasing or having to be approved by Congress to continue. 

The Section 122 tariff does, however, create a carveout for “passenger vehicles, certain light trucks, certain medium and heavy-duty vehicles, buses and certain parts of passenger vehicles, light trucks, heavy-duty vehicles and buses,” in the proclamation.

New long-term tariffs

In an effort to replace specific, high-rate tariffs, the Trump Administration has pledged to launch new investigations under Section 301 to implement permanent, country-specific tariffs that don’t need congressional approval to remain in place.

In the 2026 State of the Union address, President Trump said that “…almost all countries and corporations want to keep the deal that they already made… knowing that the legal power that I, as president, have to make a new deal could be far worse for them and therefore they will continue to work along the same successful path that we had negotiated before the Supreme Court’s unfortunate involvement.”

Trump didn’t specify what countries or corporations he may have been referring to, though he made a bevy of executive agreements after introducing the IEEPA tariffs last year, including with countries like China and the United Kingdom, and with companies like Hyundai.

For trading partners that didn’t make or keep executive agreements, the new proclamation outlines how the administration will carry out those Section 301 investigations.

“In addition to today’s actions, the President has directed the Office of the United States Trade Representative to use its section 301 authority to investigate certain unreasonable and discriminatory acts, policies and practices that burden or restrict U.S. commerce,” the proclamation reads in part.

The proclamation didn’t outline what countries the trade representative office may be investigating, how much the administration would like to levy or when consumers could expect updated policies.