At first glance, the Supreme Court’s ruling on Friday morning, February 20, against the Trump Administration regarding its use of the 1977 International Emergency Economic Powers Act (IEEPA) to impose tariffs on over 90 nations worldwide sounded like a big win for the retail marketplace and for U.S. businesses, in general, but a deeper dive into the financial implications and the Administration’s next move could simply prolong the uncertainty for businesses and consumers for another year or more.

The Supreme Court ruled, in a surprising 6-3 decision penned by Chief Justice John Roberts, that President Trump exceeded his authority when he imposed tariffs on nearly every U.S. trading partner over the last year. The Court’s ruling invalidates the sweeping tariffs imposed in 2025 and into 2026 and could require the U.S. government to refund billions in collected duties.

At issue is a 1977 law that gives the president broad economic powers during a national emergency, known as the International Emergency Economic Powers Act, or IEEPA. President Trump has invoked the law to justify imposing new or larger import tariffs on dozens of trading partners.

In its opinion, the Court said that “Based on two words separated by 16 others in Section 1702(a)(1)(B) of IEEPA — ‘regulate’ and ‘importation’ — the President asserts the independent power to impose tariffs on imports from any country, of any product, at any rate, for any amount of time. Those words cannot bear such weight.”

Joining Chief Justice Roberts in his opinion were Justices Amy Comey Barrett, Neil Gorsuch and the three liberal Justices who were expected to side with the plaintiffs in the case.

The case, which has traveled through three lower courts on its way to the Supreme Court, was originally brought by wine and liquor importer V.O.S. Selections, Inc. (Victor Schwartz) and others that joined the suit included Plastic Services and Products, LLC (dba Genova Pipe), MicroKits, LLC, FishUSA, Inc., Terry Precision Cycling, LLC, and a coalition of U.S. states led by Oregon. Over 700 lawsuits were reportedly filed by businesses, consumers and state governments challenging the duties at the U.S. Court of International Trade. High-profile companies seeking refunds through litigation include Costco, Revlon and Goodyear Tires.

How Did We Get Here?
On February 1, 2025, President Trump used the IEEPA for the first time to impose tariffs on Mexico, Canada and China, citing national emergencies surrounding the fentanyl crisis and illegal immigration, according to a synopsis generated by the American Action Forum, a center-right policy institute. On April 2, 2025, President Trump declared a U.S. “liberation” from foreign products by imposing tariffs of up to 50 percent on all U.S. trade partners, once again citing IEEPA, a presidential authority never used for tariffs before. According to American Action Forum research, initial “Liberation Day” tariffs imposed annualized costs of $366.5 billion to $391.6 billion on U.S. businesses and consumers.

Since then, there have been various tariff pauses and trade deals that have slowly clawed back the scope of the IEEPA tariff policy, but there have also been specific cases in which the President acted unilaterally with tariffs based on personal disputes or arguments with foreign leaders. For instance, Trump last year signed an Executive Order implementing an additional 40 percent tariff on Brazil, bringing the total tariff amount to 50 percent, to “deal with recent policies, practices, and actions by the Government of Brazil that constitute an unusual and extraordinary threat to the national security, foreign policy, and economy of the United States.”

Implications
Reuters reported on Friday morning, February 20, that more than $175 billion in U.S. tariff collections may have to be refunded if the U.S. Supreme Court ruled against the Trump tariffs, according to Penn-Wharton Budget Model (PWBM) economists. The estimate, produced at a request from Reuters, was said to be derived from a ground-up forecasting model that uses tariff rates by product and country for specific duties imposed by Trump, including those under the IEEPA, according to Lysle Boller, senior economist for PWBM, which is a non-partisan fiscal research group at the University of Pennsylvania.

A paper published last week by researchers at the Federal Reserve Bank of New York states that U.S. firms and consumers bore “the bulk” — roughly 90 percent — of the economic burden of tariffs imposed in 2025.

Working through the question of refunds for hundreds of thousands of businesses affected by the tariffs. The Cato Institute estimated that roughly 301,000 U.S. importers paid tariffs under the IEEPA in 2025, spread across approximately 34 million individual entries. So it’s a lot of companies generating a lot of import traffic that paid a lot extra to conduct business in the U.S. since April 2025. And the U.S. Supreme Court just ruled those tariffs illegal.

The questions will be where does that money come from, and what will the process be to secure a refund from the U.S. Customs and Border Patrol Service, assuming those funds aren’t sitting under a couch somewhere in the White House?

Steve Lamar, president and CEO, American Apparel & Footwear Association, said he was confident in CBP’s ability to move quickly and provide clear guidance to American businesses on how to obtain refunds for tariffs that were unlawfully collected, suggesting that CBP’s recently modernized, fully electronic refund process should help to expedite this effort. Read Mr. Lamar’s full statement below.

The Path Ahead
The U.S. currently has an average effective tariff rate of 16.9 percent, the highest since 1932, according to John Ricco, associate director of policy analysis at the Yale University Budget Lab. With the Administration continuing to negotiate reciprocal tariff deals with individual countries, the numbers remain a moving target.

For instance, the White House announced a reciprocal trade agreement with Indonesia on Thursday, February 19, while the country’s president, Prabowo Subianto, was in Washington. The White House said the agreement calls for Southeast Asia’s largest economy to eliminate tariffs on 99 percent of American exports, while the U.S. will maintain tariffs on most

Indonesian goods at 19 percent, the same rate the U.S. has set for Cambodia and Malaysia.

Indonesia also agreed to address non-tariff barriers to U.S. goods and to remove restrictions on exports to the U.S. for critical minerals and other industrial commodities, the White House said.

A White House statement called it a “great deal” and said it “will help both countries to strengthen economic security, promote economic growth, and thereby continuously lead to global prosperity.”

As this type of reciprocal agreement does not cite the IPEEA, will it stand going forward?

The Consumer
CNBC reported on Friday morning, prior to the ruling that if the Supreme Court ruled that certain tariffs are unconstitutional, it could yield financial relief for consumers, who have at least partly borne the cost of those import taxes through higher prices, according to economists. Will they now catch a break?

However, it would be hard to imagine that vendors and retailers in the U.S. market would suddenly cut prices that were raised due to the imposition of tariffs. Most companies providing financial guidance for 2026 over the last month or two did so with the caveat of “what we know now” or a variant of that statement when forecasting sales, margins and profits for the year ahead.

Business and consumer advocacy group Tariffs Cost Us published a statement from Alex Wolf, founder of Spielcraft Games in Omaha, NE, which reads: “Today’s decision is welcome news for businesses and American families who have struggled with unpredictable trade policy. By restoring limits and accountability to how tariffs are imposed, the Court has taken an important step toward greater stability and clarity for American businesses and families,” Wolf wrote. “The ruling opens the door to a more thoughtful and transparent approach to trade policy. With congressional oversight and decisions grounded in economic reality, tariff policy can provide the predictability businesses need to plan, invest, hire, and keep prices down for consumers.”

Most see no scenario where U.S. consumers will be able to recoup their increased costs over the last year.

The Industry
Numerous trade groups, as expected, loudly applauded the Supreme Court decision.

David French, EVP of Government Relations at the National Retail Federation (NRF)
“The Supreme Court’s announcement today regarding tariffs provides much-needed certainty for U.S. businesses and manufacturers, enabling global supply chains to operate without ambiguity. Clear and consistent trade policy is essential for economic growth, creating jobs and opportunities for American families. We urge the lower court to ensure a seamless process to refund the tariffs to U.S. importers. The refunds will serve as an economic boost and allow companies to reinvest in their operations, their employees and their customers.”

Matt Priest, President and CEO, Footwear Distributors and Retailers of America (FDRA)
Today’s Supreme Court decision marks an important step toward creating a more predictable and competitive environment for American businesses and consumers. By removing these widespread tariffs, the footwear industry can redirect billions of dollars toward innovation, job creation, and affordability for families across the country.

“FDRA has consistently advocated for policies that strengthen the U.S. economy and support working families. This ruling provides relief at a time when cost pressures have been significant, and it opens the door for continued collaboration between industry leaders and policymakers to ensure trade policy reflects today’s global marketplace.

“We look forward to working with the Trump Administration and Congress to build on this progress and create a framework that benefits consumers, retailers, and manufacturers alike.”

 Steve Lamar, President and CEO, American Apparel & Footwear Association (AAFA)
“Today’s Supreme Court decision reaffirms that only Congress – through its Article I, Section 8 powers enumerated in the U.S. Constitution – has the authority to impose tariffs. This is a bedrock principle that was present at the founding of our country and is no less important as we celebrate its 250th birthday. We thank the Justices for their careful and timely consideration of this highly complex case.

“We are confident in Customs and Border Protection’s (CBP’s) ability to move quickly and provide clear guidance to American businesses on how to obtain refunds for tariffs that were unlawfully collected. CBP’s recently modernized, fully electronic refund process should help to expedite this effort.

“We further urge the Administration to work in partnership with Congress and the full range of stakeholders representing American businesses when considering any future tariff actions. Now is the time to restore a predictable and dependable trade policy, compliant with the rule of law, that the apparel and footwear industry can rely on to temper the already heavy tariff burden facing our industry, U.S. manufacturers, and every hardworking American family that relies on our products.”

Brian Dodge, president and CEO, at  Retail Industry Leaders Association (RILA)
“The Supreme Court’s decision on the use of the International Emergency Economic Powers Act (IEEPA) to impose broad tariffs opens the door for the Administration to engage industry more closely on trade policy to create the stability and predictability American retailers and consumers need.”

“The nation’s leading retailers support the administration’s goal to grow the economy, create jobs and protect our national security. The court’s decision provides an opportunity to direct the nation’s trade policy toward U.S. economic growth and affordability for American families.”

Wall Street’s Take
In a note on Friday, February 20, Tom Nikic, Apparel and Footwear analyst at Needham & Co., wrote that the ruling “is extremely important, in our view, because tariffs levied under IEEPA represented most of the incremental tariffs that were levied on apparel and footwear imports in 2025. While the administration may seek out other avenues to levy tariffs on imports, at the very least, this is a near-term positive for the group.”

At Citi Research, Paul Lejuez noted that the ruling was “much anticipated.” He also said recent trade deals announced between the U.S. and key sourcing countries (i.e., India, Bangladesh, Indonesia) may make this ruling less impactful than it would have otherwise been.

However, Lejuez also noted that the SCOTUS decision could lead to more uncertainty, as it’s unknown how the Trump administration will respond. He wrote in a note, “Most mgmt teams have stressed that they want more certainty and stability in tariff rates, and though a decision has now been made, it still brings many complications for the sector.”

In a note issued February 13, Lejuez categorized which companies under his coverage were “most affected” by tariffs and would benefit most from the ruling, as well as “less affected” and “no commentary.” Citi’s analysis found 18 out of the 55 companies under their average in the “most affected” category, including Columbia Sportswear, Under Armour, Deckers Outdoor, Lululemon, VF Corp., and Nike.

Lejuez said those in the “less affected” category, including those with sizeable international sales such as Birkenstock and On Holdings, as well as retailers such as Macy’s and Kohl’s, would “still benefit from any lower tariff rates, but they have been better able to mitigate tariff pressure thus far.

Lejuez further said the ruling may risk causing a more promotional climate. He wrote, “As many companies have used pricing (or are planning to use pricing) to help mitigate tariffs, this decision raises the question of whether consumers may start to expect bigger discounts (lower prices). It would be a negative if we start to see retailers use promotions as a way to give back value to the consumer, as it could cause many to follow down that path, resulting in an overall promotional environment (and consumers expecting discounts).”

At Stifel, Peter McGoldrick, who covers lifestyle brands in the apparel and footwear space, believes companies with “high tariff burden and low margins” will likely benefit the most from the ruling, citing Black Diamond’s parent Clarus, Under Armour, Columbia Sportswear, Nike and Wolverine Worldwide.

He cautioned in a note, “The Supreme Court ruling on IEEPA is set in stone, though the administration could pursue other avenues to enact tariffs such as Section 301 (in response to unfair foreign trade practices) or Section 232 (threats to national security). President Trump has suggested enactment of a global 10 percent tariff through other alternatives, and we hold off on updating estimates as the situation remains in flux.”

Uncertainty Will Weigh on Business
The Tariffs Cost Us group also cautioned that while the Court’s decision removes one legal pathway for imposing broad emergency tariffs, it does not eliminate the possibility that the Administration or Congress could pursue alternative tariffs that would result in similar disruptions and costs for farmers, small businesses and consumers. That’s the next big issue.

Uncertainty and confusion will reign “supreme” as many expect that President Trump will not take the Supreme Court ruling sitting down. He is already working on other pathways to achieve his economic goals for the U.S., one that calls for tariffs to replace income taxes over the long term.