Mar 01, 2026

I recently heard that the U.S. Supreme Court ruled that the previous use of tariffs under the International Emergency Economic Powers Act (IEEPA) was illegal. The Court’s decision focused on the fact that the law does not explicitly authorize the president to impose tariffs, which are effectively taxes and fall under Congress’s authority. While IEEPA does grant broad powers to regulate foreign transactions during emergencies, it does not extend to imposing import taxes without clear congressional approval.

Following this ruling, the administration has turned its attention to Section 122 of the Trade Act of 1974 as a legal basis for imposing new tariffs. This section explicitly allows the president to impose tariffs or quotas, but only under strict conditions such as facing serious balance-of-payments deficits or threats to the dollar’s value. There is, however, debate among experts about whether these conditions will realistically exist by 2026 to justify such measures. The law also restricts the rates and duration of tariffs to prevent arbitrary or protectionist actions.

Historically, tariffs have been used to manage balance-of-payments issues, and international frameworks like GATT and organizations such as the IMF recognize that countries may impose import restrictions to protect external financial stability. After World War II, this approach was part of a broader effort to balance open trade with the need to address currency and payment crises. The U.S. itself has a mixed record on this, having used similar measures during the Nixon and Johnson administrations under wartime authorities extended to economic challenges.

The current debate is not just about whether tariffs are legal but also about their effectiveness. Even if Section 122 tariffs are legally permissible, many argue they may be ineffective or even harmful in addressing today’s or future balance-of-payments issues. The original lawmakers seemed uncertain about the practical impact of these measures, and economic conditions now are quite different from when tariffs were more commonly used as macroeconomic tools.

Overall, the U.S. is navigating a complex legal and economic environment regarding tariffs as a response to international payments problems. The Supreme Court ruling has curtailed executive power under emergency statutes, pushing the administration to rely on narrower legal provisions like Section 122. Whether tariffs will be implemented in 2026 depends on how economic conditions evolve, but the history and legal framework suggest that while tariffs remain a recognized tool, their future usefulness for the U.S. is far from certain.

Stay Well!