DECODING: IEEPA struck down by the Supreme Court — Trump bypasses, innovates, threatens still

DECODING: IEEPA struck down by the Supreme Court — Trump bypasses, innovates, threatens still

Introduction: The Supreme Court as the last commercial safeguard

February 20, 2026: a historic 6-3 ruling

On February 20, 2026, the United States Supreme Court issued a ruling that shook American trade policy to its foundations. By a vote of 6 to 3, the nine justices ruled that the International Emergency Economic Powers Act (IEEPA) did not authorize the president to impose tariffs. This emergency law, used by Trump to impose sweeping tariffs — including a 10% baseline rate on all foreign imports and additional duties on the three largest US trading partners — was found to exceed constitutional presidential authority.

Chief Justice Roberts, writing the majority opinion, noted that the "extended list of powers" under IEEPA could not be read as authorizing the president to impose tariffs "unlimited in their scope, amount, and duration." The Federal Circuit Court of Appeals had already affirmed this point on appeal. The Supreme Court confirmed it. In theory, this is a resounding victory for the rule of law and the separation of powers. In practice, Trump had already found other avenues before the ink on the decision was dry.

Trump versus the Constitution: an immediate bypass reflex

Donald Trump has never accepted an institutional constraint without immediately seeking to circumvent it. Following the Supreme Court's ruling on IEEPA, his administration rapidly mobilized other legal instruments. Section 122 of the Trade Act of 1974 authorizes the president to impose a blanket 15% tariff on all imports to remedy a "severe balance-of-payments deficit." Trump used this provision to maintain a 10% floor tariff on global imports — but with a constraint: these tariffs expire after 150 days unless Congress extends them.

In parallel, the administration launched investigations into the "unfair trade practices" of several countries under other legal statutes, opening the door to sectoral tariffs that could circumvent IEEPA's limitations. And on June 26, 2026, Trump threatened to impose a 100% tariff on any European country that imposed a digital services tax on American technology companies such as Meta, Alphabet, or Amazon — without specifying the legal basis for such a tariff following the IEEPA ruling.

IEEPA: anatomy of a hijacked law

An emergency law designed for geopolitical crises, not tariffs

The International Emergency Economic Powers Act was adopted in 1977 to allow the American president to block economic transactions with foreign countries in situations of national emergency — originally conceived for geopolitical crises such as embargoes, freezing the assets of hostile governments, or responding to acts of economic warfare. It was used to freeze Iranian assets after the 1979 hostage crisis, to sanction Iraq after its invasion of Kuwait in 1990, and to block transactions with regimes such as North Korea or Russia.

Trump, during his first term and especially his second, interpreted IEEPA expansively to include the power to impose general trade tariffs on grounds such as the trade deficit or fentanyl. Lower courts had begun invalidating these tariffs before the Supreme Court rendered its definitive ruling in February 2026. The court concluded that the list of IEEPA powers — "to investigate, regulate, or prohibit transactions" — did not include the power to impose tariffs, which is traditionally a prerogative of Congress under the US Constitution.

What the ruling means for trade policy

The Supreme Court's ruling on IEEPA has implications that go beyond Trump's tariffs. It reaffirms the constitutional principle that commercial powers belong to Congress, which can delegate them to the president — but only within precise limits. It restricts any future president's ability to use emergency laws to bypass the normal legislative process on trade matters. And it signals to the international business community that American tariffs imposed by presidential decree are susceptible to legal challenge, reducing their predictability and therefore their effectiveness as negotiating instruments.

For America's trading partners — the European Union, Canada, Mexico, Japan, South Korea — this ruling cuts both ways. It reduces immediate exposure to unpredictable presidential tariffs. But it does not change the fundamental trade policy of the Trump administration, which is actively seeking other legal bases to maintain tariff pressure. The trade war is still on. It has simply changed its ammunition.

The 100% threat against European digital taxes

A June 26, 2026 threat with no clear legal basis

On June 26, 2026, Trump posted an explicit threat on social media: any European country imposing a digital services tax on American technology companies would face a 100% tariff on its exports to the United States. "This tariff will supersede any past trade agreements with the country, whether implemented, signed or unsigned," he wrote.

The immediate problem is that the Supreme Court just invalidated IEEPA as a basis for this type of tariff. The Washington Times notes explicitly that "the legal basis on which the president would use this threat if European countries impose the tax is uncertain." Trump can lean on Section 122 of the Trade Act of 1974 for general tariffs, or launch unfair practice investigations under other statutes. But a 100% tariff targeted at a specific country in response to a national fiscal measure would likely be challenged in court — and in the post-IEEPA context, these challenges now have a stronger chance of success.

The digital tax: the dispute that never ends

The digital services tax — which hits the gross revenues of American technology companies operating in a given country — has been a longstanding dispute between the United States and its allies. France had proposed such a tax in 2019. It suspended implementation under American pressure in 2021, pending an international agreement through the OECD on a global minimum tax. This OECD agreement was adopted in principle but its implementation is fragmented — some countries have enacted it, others are waiting.

Trump had convinced Canada to drop its digital tax during trade negotiations the previous year. Several European countries face similar pressure. The 100% threat aims to deter European governments from moving forward with national taxes while awaiting an international agreement that is not materializing. It is a classic economic coercion strategy — but its legal effectiveness in the post-IEEPA context is now more uncertain than before.

The constitutional arm-wrestling around commerce

Congress: legitimate but absent

The Supreme Court's ruling on IEEPA reaffirms that tariffs are constitutionally a prerogative of Congress. But Congress is not eager to reclaim this prerogative. For decades, both parties have accepted a growing delegation of trade authority to the executive branch, because trade negotiations are technically complex and representatives and senators prefer to avoid difficult votes on tariffs that create winners and losers in their districts.

Following the February 2026 ruling, several members of Congress discussed legislating to explicitly grant the president broader tariff authority — a law that would circumvent the constitutional limitations the Supreme Court just identified. This is a legally available option: if Congress explicitly delegates tariff power to the president with defined limits, the Supreme Court would be obliged to respect that delegation. But politically, legislating to give Trump the tariff powers the Court just stripped from him is a difficult position to assume publicly. This option is therefore discussed but not actively advanced.

Section 232 and Section 301 tariffs: the instruments that survive

The invalidation of IEEPA for tariffs does not leave Trump without tools. Section 232 of the Trade Expansion Act of 1962 allows tariffs on imports that threaten national security — the basis on which Trump imposed tariffs on steel and aluminum during his first term. Section 301 of the Trade Act of 1974 allows tariffs in response to "unfair" trade practices by a foreign country — the basis on which tariffs on Chinese imports were imposed. These instruments are slower and more limited than IEEPA, but they are constitutionally solid. Trump will use them actively in the months ahead.

The great question is Section 122 — the 10% balance-of-payments tariffs that expire in 150 days. If Congress does not extend them, they disappear automatically. If Trump wants to maintain them, he will have to either convince Congress to legislate or find a new emergency basis — which would recreate exactly the scenario the Supreme Court just invalidated. This cycle is at the heart of the American constitutional arm-wrestling around trade.

Implications for America's trading partners

The European Union: a window of respite, not a victory

For the European Union, the IEEPA ruling offers a partial window of respite. The tariffs Trump had imposed via IEEPA were invalidated, creating a period of legal uncertainty regarding potential refunds for importers. But the EU must not interpret this ruling as a lasting victory in the trade war with Washington. Trump immediately signaled his willingness to find other avenues — Section 122, unfair practice investigations, and now the direct threat against digital taxes.

The optimal European strategy in this context is threefold: first, keep its own retaliatory measures ready to deploy; second, work with American allies in Congress who oppose Trump's trade policy to strengthen legislative constraints on presidential tariff powers; third, accelerate the conclusion of alternative trade agreements with non-American partners to reduce dependence on the American market in the most vulnerable sectors. This is a multi-front strategy that demands European coordination — something Brussels sometimes struggles to organize.

The certainty of the American trade war

The IEEPA ruling must not create the illusion that a normalization of American–European trade relations is imminent. Trump deeply believes trade deficits are a form of loss, that allies are freeloading off America, and that tariff pressure is the best way to renegotiate relationships he considers unbalanced. These convictions are not alterable by a court ruling. As long as Trump remains in power, the trade war with Europe will continue — the instrument will change, not the intent.

The real change the IEEPA ruling produces is structural: it forces the administration to go through slower and more visible processes to impose tariffs, giving businesses and trading partners more time to adapt and challenge them. This is a slowdown in the rhythm of tariff shocks, not their elimination. For companies planning investments and supply chains, this increased predictability — even partial — has real economic value.

IEEPA and the US Constitution: legal analysis of a contested power

The legal foundation of IEEPA: scope and limits

The International Emergency Economic Powers Act (IEEPA), enacted in 1977, grants the American president extraordinary economic powers during "an unusual and extraordinary national emergency." It has been used by virtually every president since Carter to impose economic sanctions, block transactions, and control foreign assets. Trump's use of it to impose general trade tariffs represents, however, an unprecedented extension of the law's scope.

The courts had to determine whether IEEPA authorized trade tariffs or whether this use exceeded the presidential powers Congress had intended to confer. The Federal Circuit Court of Appeals had initially validated the use of IEEPA for tariffs, before the 9th Circuit Court of Appeals challenged this interpretation. The Supreme Court ultimately had to resolve this circuit conflict — a classic situation justifying the intervention of the highest American jurisdiction.

The Youngstown precedent: when the Court limits presidential powers

The constitutional analysis of presidential economic powers inevitably returns to Youngstown Sheet and Tube Co. v. Sawyer (1952), in which the Supreme Court invalidated President Truman's seizure of American steel mills during the Korean War. Justice Jackson, in his concurring opinion that has become doctrinal reference, established a tripartite framework for evaluating presidential powers: they are at their maximum when Congress explicitly authorizes them, in a "twilight zone" when Congress is silent, and at their minimum when Congress opposes them.

In the case of IEEPA applied to tariffs, the question is precisely which category applies. Supporters of the Trump administration argued that IEEPA constitutes explicit legislative authorization — first category, presidential powers at their maximum. Opponents argued that Congress, in adopting IEEPA, did not intend to give the president the power to set general trade tariffs — that this would be a usurpation of legislative power over commerce that the Constitution explicitly assigns to Congress.

Trump's trade tariffs: economics, politics, and consequences

The economics of tariffs: who really pays?

A persistent misconception in the public debate about Trump's tariffs deserves correction: it is not the foreign countries that pay the tariffs — it is American importers, and ultimately American consumers. A 25% tariff on Mexican products does not mean Mexico pays 25% of the value of goods to the American Treasury — it means the American importer pays 25% more, a cost that is then partially passed on to consumer prices.

Economic studies on the impact of Trump's 2018–2019 tariffs are consistent on this point: the final incidence of tariffs falls primarily on American consumers in the form of higher prices, on American businesses using taxed imported inputs, and secondarily on foreign exporters through margin compression. The benefit for protected sectors exists but is generally concentrated and significantly outweighed by the diffuse costs borne by the economy as a whole.

The politics of tariffs: signals, negotiations, and leverage

If the economics of tariffs are largely unfavorable to those imposing them, why does Trump keep using them? The answer is political rather than economic. Tariffs serve primarily as a signal of strength — "we can hurt you" — and as a negotiating lever. They also allow for targeting visible and concentrated benefits toward politically key sectors — Pennsylvania steel, Midwest aluminum — even if the dispersed costs across all consumers are greater in aggregate terms.

This political logic is consistent with Trump's negotiating style, as described in his book The Art of the Deal: create an intolerable situation for the adversary in order to bring them to the table on your terms. The 100% threat on European digital taxes fits this pattern. The problem with this approach in the current context is that Europe — unlike the less well-equipped trading partners Trump faced in his early years — has substantial retaliatory tools and a growing political will to use them.

International trade law versus American protectionism

The WTO: a reference institution under pressure

The World Trade Organization (WTO) is the central institution of the multilateral trading system that the United States itself helped build after 1945. Its dispute settlement mechanism — through which member countries can challenge trade practices deemed illegal before an arbitration panel — is the keystone of the system. Trump's tariffs, insofar as they violate WTO most-favored-nation rules and negotiated tariff concessions, have been challenged by many members.

But the WTO has suffered for years from a blockage of its appellate body — the mechanism that allows appeals of first-instance rulings. The United States has blocked appointments of new appellate body members since the Obama administration, a blockage intensified under Trump. The result is a non-functional appellate body that strips the dispute settlement system of its final avenue of appeal. This is an institutional paralysis that weakens international trade law precisely when it is most needed.

Bilateral and regional alternatives to multilateralism

Faced with the WTO's paralysis and American unilateral behavior, trading partners have developed alternative strategies. The European Union has accelerated negotiation of bilateral trade agreements — with Mercosur, with Japan, with New Zealand, with India. These agreements do not replace the multilateral system, but they create networks of preferential trade that reduce dependence on the American market.

The Trans-Pacific Partnership — renamed CPTPP after the American withdrawal in 2017 — represents the most significant example of this strategy. By pursuing and enlarging this agreement without the United States, the eleven founding members created a high-quality trade framework covering economies collectively representing 13% of global GDP. The United Kingdom's application for membership and discussions around Chinese accession illustrate the growing attractiveness of this model in the face of American protectionism.

Conclusion: The Constitution holds, but with cracks

What the IEEPA ruling says about the state of American democracy

The Supreme Court's ruling on IEEPA is a reaffirmation of the principle of separation of powers in American trade policy. It proves that American institutions can resist the temptations of excessive executive power concentration — even when that power is exercised by a president who does not readily acknowledge his constitutional limits. For those concerned about the state of American democracy in 2026, it is an encouraging signal.

But the ruling also reveals the cracks: the fact that Trump was able to use IEEPA in this manner for several months before being corrected by the courts shows that there is a transition period during which constitutionally dubious measures can have real and lasting economic effects. And the fact that the administration immediately sought other bypass instruments shows that the Court's ruling is not a policy correction — it is a procedural correction. The trade war continues under new forms.

What the West can learn from this arm-wrestling

For Europe and other US trading partners, the lesson from the American constitutional arm-wrestling around trade is this: the best protection against unpredictable trade policy shocks is economic diversification and the reduction of asymmetric dependencies. A Europe heavily dependent on the American market for its manufactured or technological exports is vulnerable to tariff threats regardless of their legal basis. Reducing these vulnerabilities — by developing alternative markets, building sovereign industries in key sectors, strengthening the European internal market — is the most resilient strategy in the face of an America whose trade policy will remain unpredictable for years to come.

By Maxime Marquette, columnist

Columnist's transparency note

Limits of the legal analysis

I am not a specialist in American trade law. My analysis of the IEEPA ruling and its implications rests on secondary sources — Washington Times, New York Post, and publicly available Supreme Court documents. The legal nuances of the ruling and its precise implications for the various tariff instruments available exceed my competence for direct analysis.

What this analysis does not cover

This analysis does not cover the details of ongoing bilateral trade negotiations between the United States and the EU, nor the specific positions of different American and European industrial sectors on tariff issues. It focuses on the constitutional and geopolitical dimension of the file.

Sources

Primary sources

Washington Times — Trump threatens 100% tariff on European nations that impose digital service tax — June 26, 2026

United States Supreme Court — Learning Resources, Inc. v. Trump — IEEPA Opinion — February 20, 2026

New York Post — Supreme Court strikes down emergency Trump tariffs — February 20, 2026

Secondary sources

New York Times — Trump news live coverage — June 24, 2026

Hoodline — Trump Cancels Housing Signing — June 24, 2026

Fox News — Trump scores major win as Congress passes housing crackdown — June 23, 2026

ABC News — Johnson says Congress will send housing bill to Trump — June 26, 2026