Trade Update: The Supreme Court Stepped In, but Many Tariffs Stand
Starting in early 2025, President Trump issued executive orders to impose tariffs on goods from nearly all trading partners under the International Emergency Economic Powers Act (IEEPA), as well as targeting industries seen as critical to national security with Section 232 of the Trade Expansion Act.
Tariffs are taxes on imported goods, which the administration has focused on to raise revenue, help protect domestic industries, incentivize multinational businesses to invest in the United States, and as a bargaining chip in trade negotiations.
In February 2026, the U.S. Supreme Court struck down the IEEPA tariffs, ruling 6 to 3 that the president had exceeded his authority to impose tariffs using this law.1 Article I of the Constitution gives Congress the “power of the purse” — exclusive authority to tax and spend. However, some tariff-setting power has been delegated to the president through laws such as the 1962 Trade Expansion Act, the 1974 Trade Act, and the 1977 IEEPA.
IEEPA tariffs that are now invalid include the “fentanyl tariffs” on China, Mexico, and Canada, intended to address drug trafficking, and the sweeping “reciprocal tariffs” aimed at reducing the trade deficit. Other tariffs levied by President Trump, including some dating to 2018, remain in place, and the president acted immediately to replace the invalidated tariffs.2
U.S. Customs and Border Protection recently launched a portal to allow more than 300,000 eligible importers to file refund claims for $166 billion in illegal IEEPA tariffs that were collected. Some retailers might share recovered funds with customers by lowering prices, but many businesses may hold off on price adjustments until the tariff picture becomes clear.3
Tracking tariffs
In response to the Court’s decision, the Trump administration imposed a global 10% tariff on nearly all trading partners under Section 122 of the Trade Act of 1974. These tariffs apply to about $1.2 trillion (34%) of annual imports but will expire after 150 days (July 24, 2026), unless extended by Congress.4 Tariffs under two other legal provisions remain in place or are scheduled to take effect in the coming months, and U.S. Trade Representative (USTR) investigations under these provisions could lead to future tariffs, essentially reinstating many of the invalidated tariffs under a different legal structure.
Section 232 of the Trade Expansion Act of 1962. In 2025, tariffs were imposed on the following products for which imports were found to pose a threat to national security: cars and parts (25%); medium-heavy trucks (25%); buses (10%); steel, aluminum, and copper products (now 15% to 50%, depending on metal content); and lumber and wood products (10% to 25%).5
Effective January 2026, a 25% tariff applies to a narrow set of advanced semiconductors (computer chips). A 100% tariff has been initiated on patented pharmaceuticals and active ingredients, designed as a “structural reset” to force onshoring. These duties take effect on July 31, 2026, for large companies and September 29, 2026, for others, with key exceptions for orphan drugs, generics, biosimilars, and voluntary pricing deals.6
Nine ongoing USTR Section 232 investigations could lead to more tariffs in 2026 on imports of semiconductors, pharmaceuticals, medical supplies and equipment, critical minerals, aircraft, drones, polysilicon, wind turbines, and robotics.7
Section 301 of the Trade Act of 1974. Tariffs may be imposed on specific countries following a USTR investigation and a finding of unfair or discriminatory trade practices or policies. Since 2018, China has been subject to tariffs on thousands of products due to unfair technology transfers and intellectual property practices. In March 2026, the USTR initiated investigations into forced labor practices and excess capacity involving dozens of U.S. trading partners, laying the groundwork to replace the IEEPA tariffs.8
Paying the price
According to Bloomberg Economics, the effective tariff rate (import-weighted average across all products and countries) was 10.7% in April 2026, up from just 2.3% in January 2025.9
If U.S. companies pay a 10% tariff on imported goods, their actual costs may not increase by the full 10% because foreign exporters might lower their prices to remain competitive. Still, it could cost substantially more for U.S. businesses to import foreign products or the raw materials (such as metal and lumber) needed for domestic production. Research published by the Federal Reserve Bank of New York found that 90% of the economic burden of tariffs was borne by U.S. companies and consumers.10
Even so, largely resilient U.S. corporate earnings in 2025 suggest that companies were able to adjust their operations and/or pass tariff costs on to consumers.11 According to the Tax Foundation, tariff price increases amounted to a tax of about $1,000 per U.S. household in 2025.12
An analysis of personal consumption expenditures (PCE) by the Federal Reserve estimated that tariff changes in 2025 raised core goods prices cumulatively by 3.1% through February 2026, pushing up core prices overall by 0.8%.13 (Core measures exclude volatile food and energy categories.) The March 2026 inflation report showed that the core PCE price index climbed 3.2% over the previous year, well above the Fed’s 2.0% target.14
By one estimate, tariff costs reduced U.S. gross domestic product (GDP) growth by 0.5% in 2025.15 Uncertainty around future tariff targets and rates makes it impossible to predict the impact tariffs could have on inflation and GDP growth in 2026 and beyond.
Another major question for the U.S. economy is whether tariffs will cause prices to rise more than consumers can bear, forcing them to pull back on spending. In April 2026, the University of Michigan’s gauge of consumer sentiment dropped to the lowest level on record. Higher prices, due to the energy crisis caused by the war in Iran as well as tariffs, appear to be a primary concern.16
Estimates are based on current conditions, subject to change, and may not come to pass.