Update: On February 20, 2026, the Supreme Court ruled that the legal basis for most of the Trump administration’s tariff increases throughout 2025 is invalid. The International Economic Emergency Powers Act (IEEPA) had never before been used to justify unilateral executive action on tariffs.
This ruling does not end the most damaging near-term economic consequences of the Trump tariff agenda – the radical uncertainty about what are the rules governing trade between the U.S. and trading partners. In fact, it might increase this uncertainty in the short-run, as a number of ad hoc trade deals rested on the premise that the Trump administration’s ability to impose and change these tariffs as they wished.
There are other possible legal foundations for widespread unilateral tariffs. But these have their own legal uncertainties. For example, the president can impose 15% across-the-board tariffs in the face of a “large and serious” balance-of-payments deterioration, and the Trump administration could argue that the chronic U.S. trade deficit satisfies this criterion. But these tariffs would need to be re-authorized by Congress after just 150 days.
In short, today’s ruling likely has some long-run legal importance, but it is unlikely to resolve much of the uncertainty about what the rules governing trade will be in 2026 and beyond, and this uncertainty is clearly not good for U.S. economic growth and stability.
It is worth noting that in some ways the chaos in trade policy over the past year is a long-run consequence of Congress abdicating its proper role in setting tariffs and trade agreements and granting excessive power to the executive branch in these realms. In previous administrations, this ceding of power to the executive branch was done explicitly to grease the wheels for negotiating trade agreements with terms that would have had a hard time finding a Congressional majority. The fact that excess executive power in the past year has instead been used to tear up existing agreements rather than negotiate new ones is ironic, but is largely just another symptom of this larger trend.
This decades-long process of steadily ceding more ground to the executive branch has led to trade policy that has not been responsive to the needs of typical working families. In the decades before the Trump administration trade policy reliably prioritized the desires of corporate owners and managers. The Trump administration has mostly aimed to punish foreign countries and give themselves opportunities to grant exemptions to companies and industries that curry their favor. Neither of those approaches have helped working families in the U.S., so if today’s decision leads to trade policymaking power moving away from the executive branch and back towards Congress, that could be a useful long-run development.
Timeline
August 29, 2025: The earlier de minimis exemption from the tariffs expired, meaning import taxes will now be applied to goods being shipped to the U.S. with a value of less than $800. This affects roughly 1 billion packages annually received through the postal service, as well as goods that fliers import during air travel.
August 1, 2025: Despite the justification for the tariffs being ruled unlawful by federal courts, Trump’s 35% tariff on imports from Canada went into effect.
July 31, 2025: Trump announced a further 90-day delay on implementing the increased tariffs on imports from Mexico.
May 28, 2025: the U.S. Court of International Trade ruled that the Trump administration’s April 2 executive order on tariffs are illegal, stating that the tariffs exceeded his power under the International Economic Emergency Powers Act (IEEPA). The court ruling also struck down separate tariffs Trump imposed on China, Canada, and Mexico, where the administration argued fentanyl trafficking as a justification to invoke the IEEPA. The ruling does not impact tariffs Trump has issued on steel, aluminum, and cars.
In arguments for this case, an attorney for the Trump administration said that this decision would “would kneecap the president on the world stage, cripple his ability to negotiate trade deals, imperil the government’s ability to respond to these and future national emergencies.” However, senior White House officials indicated that they attend to appeal the ruling, and would proceed with ongoing trade negotiations with the assumption that they will be successful on appeal and be able to continue imposing the tariffs.
March 6, 2025: the Trump administration delayed tariffs on goods from Mexico and Canada until early April.
March 5, 2025: the Trump administration delayed tariffs on the auto industry until April.
March 4, 2025: The Trump administration implemented tariffs of 25% on goods imported from Mexico and Canada, with the exception of energy imports from Canada being subject to 10% tariffs. The administration also raised the previously announced tariff on goods imported from China to 20% from 10%.
February 7, 2025: President Trump paused his earlier suspension of the de minimis exemption on imports from China. His February 5 decision to end the de minimis exemption would have applied import taxes to goods with a value of less than $800 entering the US from China.
February 3, 2025: President Trump announced an agreement to pause the effective date of the new tariffs on both Mexico and Canada for one month pending further negotiations.
On February 1, 2025, the Trump administration announced tariffs of 25% on goods from Mexico and Canada – with a carveout for energy imports from Canada. They also announced a 10% tariff on goods from China. These amounts are over and on top of any existing tariffs.
Tariffs can be a useful policy tool when used strategically – we at EPI have provided a defense of tariffs (including some passed in the first Trump administration) as part of strategic plans to protect economically important sectors in the past. But without a strategic plan, and applied broadly across all sectors, these tariffs will not provide a meaningful boost to U.S. manufacturing.
And these announced tariffs are extremely broad-based – in what follows all statistics on trade and tariffs are based on 2023 full-year data from the United States International Trade Commission (USITC). According to this USITC data, imports from China, Canada, and Mexico combined account for over 40% of all imports into the United States – this means that the tariffs will have a substantial negative effect on the U.S. economy. If, for example, import flows from these countries did not change in response to these tariffs, these tariffs would raise taxes faced by U.S. importers by roughly $230 billion. The consensus of empirical research into tariffs indicates that the vast majority of these costs would be passed onto U.S. households. In reality, imports from these countries will likely fall sharply in response to these tariffs, but this decrease in supply for the goods they are providing would significantly push up prices even for domestically-produced goods that compete with imports. In short, U.S. households will feel noticeably higher costs as a result of these actions even if imports fall.
The strategy behind these tariffs is far from obvious. For example, the volume of imports is far less important to the wellbeing of a country’s manufacturing sector than the size of the trade deficit (the amount by which imports exceed exports). In 2023, for example, the U.S. trade deficit with China was one third larger than the trade deficit with Canada and Mexico combined. Given this, it seems odd that an aggressive raising of tariffs sees China as the country facing the smallest increase. For another, the reasons given for the tariffs and the implicit conditions demanded to remove them have essentially nothing to do with the health of U.S. manufacturing or U.S. jobs. Instead, it is a mishmash of demands relating to immigration and flows of fentanyl. This intermingling of issues is a new and unwelcome distraction for debates over trade policy.
Extremely broad-based and indiscriminate tariffs have occasionally been defended on the grounds that they are undoing some of the damage done by trade policy in recent decades to U.S. workers. It is commonly thought that the passage of the North American Free Trade Agreement (NAFTA) began an era where the interests of U.S. workers were shunted aside in issues of international trade. This is undoubtedly true in many ways.
But this week’s action pushes tariffs far above pre-NAFTA levels. For example, immediately before NAFTA the average effective tariff on goods imported from Mexico was between 2-3% – it will now stand at 25%. In short, the damage done by NAFTA to U.S. workers had far less to do with tariff levels than all of its other provisions, and raising tariff levels on nearly 40% of all U.S. imports will do little to undo this damage (in part due to the sharp retaliation this action will incur – retaliation that has already begun).
Further, it is worth remembering that NAFTA was re-negotiated under the first Trump administration, becoming the US-Mexico-Canada (USMCA) agreement. The actions of this week highlight that even the Trump administration sees its USMCA renegotiation as a failed and insufficient action. This week’s actions, implicitly constituting a second attempt by the Trump administration to re-orient American trade policy, are no more likely than the USMCA to provide any benefit to U.S. manufacturing and its workers.