Emergency Powers and Global Trade: The U.S. Supreme Court Draws a Line on Tariffs

Yesterday (February 20, 2026), the Supreme Court of the United States issued a landmark decision limiting presidential power over trade. In Learning Resources, Inc. v. Trump, the Court ruled that the President does not have authority under a decades-old emergency law to impose sweeping tariffs on imports.

The case addressed a foundational question with global economic consequences: Who controls the power to tax in the United States? More specifically, can the President, acting alone during a declared national emergency, impose tariffs—taxes on imported goods—without explicit approval from Congress?

The Court’s answer was clear: No.

The ruling carries major implications not only for U.S. constitutional law, but also for global supply chains, financial markets, diplomatic negotiations, and the future structure of American trade policy.

 

The Background: Tariffs as Emergency Instruments

Shortly after returning to office, President Donald Trump declared two national emergencies. The first concerned the influx of illegal drugs from Canada, Mexico, and China, which he described as a public health crisis. The second involved what he called “large and persistent” trade deficits that he argued had weakened American manufacturing and exposed strategic supply-chain vulnerabilities.

Invoking the International Emergency Economic Powers Act (IEEPA), a 1977 statute historically used for sanctions, the President introduced a sweeping tariff regime:

• A 25% duty on most imports from Canada and Mexico.
• A 10% duty on most imports from China (later increased to 20%).
• A “reciprocal” tariff of at least 10% on imports from nearly all U.S. trading partners.
• Substantially higher rates on certain countries, with Chinese goods at one point reaching an effective rate of 145%.

The scope was extraordinary. These measures applied broadly across sectors, affecting energy inputs, industrial components, consumer goods, agricultural exports, and technology supply chains.

The economic effects were immediate. Multinational firms faced sudden cost increases and contractual uncertainty. Importers had to reconsider sourcing decisions. Financial markets reacted to the possibility of retaliatory measures and inflationary pressures. Trade partners recalibrated diplomatic and economic strategies.

The administration projected that the tariffs could generate trillions of dollars in revenue and materially alter the trajectory of the federal deficit. At various points, the tariffs were described as tools capable of restructuring international trade relationships on a historic scale.

The legal question quickly reached the courts: Did IEEPA actually authorize such sweeping economic action?

 

What Is IEEPA?

IEEPA was enacted during the Cold War. It allows the President to declare a national emergency in response to “unusual and extraordinary threats” originating primarily outside the United States. Once such an emergency is declared, the President may take a range of economic actions to “deal with” the threat.

In practice, IEEPA has primarily been used to impose sanctions—freezing foreign assets, blocking financial transactions, and restricting trade with hostile governments or terrorist groups. For nearly five decades, it functioned as a sanctions framework. No President had previously used it to impose general tariffs.

 

The Constitutional Foundation: Congress Controls Taxation

The Court began with first principles.

Article I, Section 8 of the U.S. Constitution grants Congress the power “to lay and collect Taxes, Duties, Imposts and Excises.” Tariffs are a type of duty—essentially a tax on imported goods.

The Framers placed the taxing power squarely in the legislative branch. Having fought a revolution against taxation imposed without representation, they ensured that control over revenue would rest with Congress. As James Madison wrote, Congress alone was to have “access to the pockets of the people.”

The government conceded a crucial point: The President has no inherent authority to impose tariffs during peacetime. Any such authority must come from Congress. The administration argued that IEEPA supplied that authority.

 

The Government’s Argument

The government’s position rested on a key sentence in IEEPA:

“[The President may] investigate, block during the pendency of an investigation, regulate, direct and compel, nullify, void, prevent or prohibit, any acquisition, holding, withholding, use, transfer, withdrawal, transportation, importation or exportation of, or dealing in, or exercising any right, power, or privilege with respect to, or transactions involving, any property in which any foreign country or a national thereof has any interest.”

According to the administration, the power to “regulate…importation” includes the power to impose tariffs. Because tariffs influence trade flows and pricing structures, they argued, they fall within the authority to regulate imports. And in times of national emergency, Congress intended to grant the President broad flexibility to respond decisively.

In effect, the executive branch claimed that this broadly worded statute authorized unilateral tariff power of unlimited scope, duration, and economic magnitude.

 

The Supreme Court’s Response

The Court rejected that interpretation.

Chief Justice John Roberts, writing for the majority, emphasized that the Constitution assigns the taxing power to Congress. If Congress intends to delegate such an extraordinary authority, it must do so clearly and explicitly.

When Congress has authorized tariffs in other statutes, it has used unmistakable language—referring directly to “duties” or “tariffs”—and has imposed strict constraints:

• Caps on tariff rates,
• Time limitations,
• Mandatory investigations,
• Formal findings by executive agencies.

IEEPA contains none of those safeguards. It does not mention tariffs or duties at all.

If Congress had intended to hand over authority to impose tariffs affecting trillions of dollars in trade, the Court reasoned, it would have said so plainly.

 

The “Major Questions Doctrine”

A central feature of the ruling was the Court’s application of the “major questions doctrine.”

This principle requires clear congressional authorization when the executive branch claims authority over issues of vast economic and political significance.

The stakes here were substantial. The tariffs altered the price structure of imported goods across the U.S. economy. They influenced corporate margins, consumer prices, cross-border capital allocation, and global supply-chain decisions. They also affected diplomatic leverage in ongoing trade negotiations.

The administration itself projected multi-trillion-dollar fiscal and economic effects.

Granting the President unilateral authority to reshape global trade through emergency declarations, the Court concluded, would represent a “transformative expansion” of executive power. Such a consequential economic shift is not something Congress would delegate through vague statutory language.

 

What This Means for Sri Lanka and South Asia

For export-dependent economies such as Sri Lanka, the ruling carries practical significance. The United States is a major destination for Sri Lankan exports, particularly apparel, rubber products, tea, and increasingly services. A legal environment in which broad tariff regimes can be imposed suddenly by executive order introduces considerable uncertainty for exporters operating on thin margins.

The Court’s decision reduces that uncertainty.

While U.S. trade policy will remain subject to political shifts, large-scale tariff changes of the kind attempted under IEEPA will now require clearer statutory authority or congressional action. That makes abrupt, across-the-board tariff shocks less likely.

For Sri Lanka’s apparel industry—deeply integrated into U.S. retail supply chains—predictability in U.S. tariff policy is critical. Investment decisions in factories, logistics, and compliance systems depend on relatively stable access to major markets.

More broadly, in a geopolitical environment shaped by competition between the United States and China, smaller economies must navigate shifting trade alignments carefully. The Court’s ruling reinforces the institutional limits within which U.S. trade strategy operates. That institutional predictability can be as important as tariff rates themselves.

For policymakers in Colombo, the message is not that U.S. trade policy will become less strategic. Rather, it is that structural changes to tariff regimes will more likely move through Congress—where negotiation, compromise, and political accountability play larger roles.

 

Possible Congressional Responses

The ruling does not end the debate over U.S. trade authority. It shifts it back to Congress.

Several outcomes are possible:

1. Congress could clarify or amend IEEPA, either narrowing or explicitly expanding its scope.
2. Legislators could strengthen existing trade statutes, providing more defined emergency tariff mechanisms with procedural safeguards.
3. Congress could reassert greater direct control over tariff-setting, reducing executive discretion across the board.

In the near term, legislative gridlock may make sweeping reform unlikely. But the decision increases pressure on Congress to define the boundaries of executive trade power more precisely.

For foreign governments and exporters, this means U.S. trade policy may become more procedurally complex—but also more institutionally anchored.

 

The Bigger Constitutional Picture

At its core, Learning Resources v. Trump is about separation of powers.

The U.S. Constitution divides authority among three branches:

• Congress makes the laws.
• The President executes them.
• The courts interpret them.

Taxation lies at the heart of legislative power. Yesterday’s ruling reaffirms that this authority cannot be transferred implicitly or exercised unilaterally through emergency declarations.

As Chief Justice Roberts concluded, the Court claims “no special competence in matters of economics or foreign affairs.” Its role is more basic: to ensure that constitutional boundaries are respected.

For Sri Lanka, South Asia, and other export-oriented economies, the decision underscores an important reality: however powerful the United States may be, its trade policy operates within constitutional constraints.

In an era of rising geopolitical competition and supply-chain realignment, institutional stability remains one of the most significant economic signals of all.