President Donald Trump has lost his tariff case at the Supreme Court. However, with careful and judicious use of the tariff powers he does have, he can turn this into a victory for his policies and for America.
The Supreme Court just ruled in Learning Services v. Trump that the International Emergency Economic Powers Act (IEEPA) does not authorize the president to impose tariffs. While the law undoubtedly gives him the power to regulate imports in the event of unusual and extraordinary emergencies, the issue at issue was whether tariffs – a type of tax – are legally and constitutionally ‘regulation’.
Although there were reasonable arguments on both sides, six of the nine justices ruled that this is not the case, and that the IEEPA does not give the president the authority to impose tariffs. What are the likely economic consequences of this ruling, and what should it mean for Trump’s future trade policy?
First, note that tariffs as economic policy are a bad idea. International trade increases incomes and promotes economic growth in every trading country. Trade is mutually beneficial and win-win for all trading parties. It is a popular myth that trade destroyed American manufacturing. U.S. manufacturing has increased steadily since 1970, more than doubling, according to data collected by the Federal Reserve Bank of St. Louis.
President Donald Trump during a press conference in the Brady Press Briefing Room of the White House in Washington, DC, on February 20, 2026. (Mandel Ngan/Getty Images)
On the other hand, roughly 90% of the cost of the “Liberation Day” tariffs has been borne by U.S. businesses and consumers, according to an analysis by economists at the New York Federal Reserve. The US economy has seen solid growth and low unemployment under Trump, but this is thanks to his excellent energy and deregulation policies, which have reduced regulatory burden. Tariff costs are another burden on the economy. Removing this barrier should further stimulate economic growth and employment.
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It is also a popular myth that a trade deficit means a loss for a country. The trade deficit, or current account, balances the capital and financial accounts, that is, foreigners invest in America. There are two reasons why foreign investment is flowing into America. One is that American security and dynamism make the country an attractive place to invest, and that’s a good thing. The other is the federal government’s growing appetite for borrowing to cover its growing deficits, which is a bad thing. Tariffs and trade restrictions make the US economy less dynamic and do nothing to curb government fiscal irresponsibility. There is no good economic argument for tariffs.
However, tariffs can play an important role for foreign policy and national security. Numerous other laws authorize the president to impose such tariffs. For example, the Trade Act of 1974, Section 122 (under which Trump has now imposed 10% tariffs) allows tariffs in the event of severe balance of payments deficits. The Trade Expansion Act of 1962, Section 232, allows tariffs on goods for national security purposes.
Numerous other laws authorize the president to impose tariffs. However, these all include different reasonable conditions and limits. For example, if the president imposes a national security tariff, Section 232 gives the government 270 days to develop a study that justifies the tariff. Trump still has broad power to impose tariffs, but now it is more limited and requires transparent reasons for each specific exercise of this power.
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While this limits Trump somewhat, he can turn this into a victory for his presidency. Tariff power can be useful as a foreign policy tool, and by taking a more nuanced and targeted approach to tariff policy, it can do a lot of good for the American economy.
For example, the European Union is trying to impose its ESG (Environmental, Social, and Governance) standards on US companies doing business in Europe, through the EU’s Corporate Due Diligence and Sustainability Mandates. EU mandates would apply to all activities of a company anywhere, not just those in Europe.
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Similarly, the EU has tried to impose its Digital Services Act on US media platforms such as X (formerly Twitter) and Meta. This would require companies to monitor and censor free speech, despite the protections of the U.S. First Amendment. Targeted tariffs could be a very useful tool to counter this, protect free trade and defend American companies from such attacks. This would have the effect of strengthening the American economy and position in the world.
President Trump has lost a round in the Supreme Court and his ability to impose tariffs is limited. But by wisely using what powers he has left, he can turn this into an opportunity to make America stronger and make his presidency a greater success.
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