Trump “May Be Required to Refund Billions of Dollars” After Supreme Court Overturns Tariffs, Hurts ‘Trillions of Dollars’ in Trade Deals

In a landmark decision on Feb. 20, 2026, the U.S. Supreme Court ruled that the president does not have authority under the International Emergency Economic Powers Act (IEEPA) to impose broad, sweeping tariffs, a policy centerpiece of the recent administration’s trade strategy. The 6–3 majority held that IEEPA does not empower the executive branch to impose tariffs without explicit congressional authorization, effectively invalidating much of the tariff regime imposed on imports from China, Mexico, Canada and other trading partners.

The decision, handed down in Learning Resources, Inc. v. Trump and V.O.S. Selections, Inc. v. Trump, represents a significant judicial check on presidential unilateral trade authority. Chief Justice John Roberts, writing for the majority, emphasized that tariff power historically resides with Congress under Article I of the Constitution and that vague language in emergency statutes cannot substitute for that authority.

Justice Brett Kavanaugh, dissenting, specifically expressed concerns about what this means for the future of the country. He specifically wrote that “...the interim effects of the Court’s decision could be substantial. The United States may be required to refund billions of dollars to importers…even though some importers may have already passed on costs to consumers.” This highlights an important inequity: consumers paid billions of dollars, but corporations will get the refund windfall. He further contested under the idea that the refund process is likely to be a “mess” and “the IEEPA tariffs have helped facilitate trade deals worth trillions of dollars,” adding that this ruling will “generate uncertainty” around those deals.

For markets and investors, the ruling introduces a mix of clarity and uncertainty. Major indexes saw modest, but positive, initial reactions, with the S&P 500 ($SPX) up 0.3%, and Nasdaq ($NASX) up 0.5%, drifting modestly higher even as the Dow ($DOWI) slipped slightly before rebounding, suggesting that many institutional investors had priced in at least the possibility of such an outcome. Treasury yields were steady, reflecting continued caution amid mixed macroeconomic data.

Tariff Revenue and Legal Limbo

Central to the economic implications is the fate of hundreds of billions in tariff revenue collected under the struck-down policies. In the 2025 fiscal year alone, U.S. Customs and Border Protection reported roughly $133.5 billion in duties collected under the emergency tariff regime, accounting for a majority of the roughly $200 billion total tariff revenue that year. Legal experts and trade lawyers immediately flagged refund claims as the next major legal battleground, with lower courts expected to determine whether importers are entitled to claw back monies paid under tariffs now deemed unauthorized.

Those funds had at times been touted by the administration as potential ammunition for deficit reduction, direct rebates, or sectoral support programs. With the legal foundation invalidated, federal budget planners face a new set of pressures, particularly if courts eventually mandate refunds on past tariff payments.

Sector and Corporate Impact

From an investing perspective, the ruling recalibrates risk and opportunity across a range of industries. Retailers, consumer goods companies and import-dependent sectors had been squeezed by heightened duties, a cost frequently passed along to consumers. With the legal basis for such tariffs dismantled, cost structures for companies reliant on imported components may ease, potentially boosting margins if supply costs fall as duties unwind. Analysts tracking recent tariff-induced price “tax effects” noted that a significant portion of tariff costs were borne by U.S. importers and consumers, not foreign producers, meaning relief here could translate directly into improved margins or pricing flexibility.

Industrial and materials plays tied to domestic substitutes for previously tariffed goods could experience volatility. Companies that had pivoted capacity or supply chains to domestic producers on the assumption of a prolonged tariff environment may need to reassess those strategic investments. Conversely, sectors that had suffered from higher import costs — including apparel, electronics components, and auto parts — may see competitive conditions normalize.

International Trade and Diplomatic Fallout

The ruling also has geopolitical and trade ramifications. Many of the tariffs struck down were framed as “reciprocal” duties aimed at addressing trade imbalances or alleged unfair practices by major trading partners. With those measures invalidated, the U.S. must engage allies and rivals through formal trade negotiations or pursue tariffs under statutes for which Congress has clearer delegation authority, such as Section 301 of the Trade Act or Section 232 of the Trade Expansion Act.

Foreign markets reacted with a mixture of relief and caution. European and Asian exchanges exhibited mixed trading patterns, reflecting uncertainty about future U.S. trade policy direction. A key question for global investors is how rapidly a new, congressionally authorized trade framework might emerge and whether it will be more predictable than the unilateral regime now struck down.

Policy and Legislative Outlook

The Court’s decision is likely to embolden legislative efforts to clarify tariff-setting authority and oversight. Bipartisan proposals in Congress, such as the Trade Review Act, seek to reassert congressional control over tariff decisions, requiring notification and approval for significant new duties. Such legislative efforts could create a more stable and transparent trade policy environment, a positive signal for longer-term capital allocation decisions.

What Investors Should Watch Next

Over the coming weeks and months, market attention will likely focus on several key developments:

• Refund litigation: How lower courts handle claims from importers seeking repayment of duties paid under the invalidated regime.
• New tariff authorities: Whether Congress passes new legislation to grant clearer trade powers to the executive branch or establish joint congressional oversight.
• Sector rotation: Performance differentials between import-dependent sectors and those that benefited from tariff protection.
  Macro impact: Whether reduced tariff uncertainty moderates inflationary pressures and influences Federal Reserve policy on interest rates.

In the short term, the markets appear to view the Supreme Court’s action as a correction rather than a crisis. Over the longer horizon, clarity around trade authority and tariff policy could unlock capital previously held back by regulatory uncertainty and open fresh opportunities in sectors sensitive to import cost structures.