The United States Supreme Court delivered a stunning blow to the administration’s trade agenda on Friday, February 20, 2026, striking down the use of the International Emergency Economic Powers Act (IEEPA) to bypass Congress in the imposition of broad-based national tariffs. In a 6-3 decision, the Court ruled that the executive branch had engaged in a "transformative expansion" of its authority, asserting that the power to levy duties—a form of taxation—resides fundamentally with the legislative branch under Article I of the Constitution.

The ruling has sent shockwaves through global supply chains and triggered a volatile "V-shaped" reaction in the financial markets over the last 72 hours. While the decision initially sparked a relief rally for major importers and multinational corporations, the administration’s rapid pivot to an alternative "Section 122" import surcharge over the weekend has dampened investor enthusiasm, leading to a significant market retreat as of Monday, February 23, 2026.

A Constitutional Check on Trade Policy

The consolidated cases, Learning Resources, Inc. v. Trump and Trump v. V.O.S. Selections, Inc., centered on two aggressive tariff regimes implemented in early 2025. These included the "Fentanyl Tariffs" on North American and Chinese imports and the "Liberation Day" global baseline tariffs, both of which relied on IEEPA’s emergency provisions rather than traditional trade statutes. Chief Justice John Roberts, writing for the majority, argued that interpreting IEEPA’s grant to "regulate... importation" as a blank check to tax would fundamentally alter the separation of powers.

The Court’s majority heavily invoked the "major questions doctrine," a legal principle requiring clear congressional authorization for executive actions of "vast economic and political significance." The majority noted that in the 50-year history of IEEPA, the act had been used for sanctions and asset freezes, but never as a primary mechanism for revenue-generating duties. By contrast, the dissenting opinion, authored by Justice Kavanaugh and joined by Justices Thomas and Alito, argued that the President requires broad flexibility to address modern international emergencies and that the Court's intervention creates a "dangerous vacuum" in national security tools.

Winners, Losers, and the Billion-Dollar Refund Queue

The immediate fallout for public companies has been a mix of legal optimism and operational chaos. For the retail and technology sectors, the ruling opened the door to a potential $160 billion in tariff refunds collected since 2025.

• Apple Inc. (NASDAQ: AAPL): Shares of the tech giant initially rose nearly 2% on Friday as analysts estimated the company could be eligible for over $3.3 billion in refunds for duties paid on China-sourced components. However, by Monday, February 23, the stock pared those gains as the market weighed the impact of the administration's new 15% surcharge.
• Walmart Inc. (NYSE: WMT) and Target Corp. (NYSE: TGT): Both retail heavyweights saw a "stock spike" following the ruling. These companies had proactively filed thousands of protective cases with the U.S. Court of International Trade (CIT) to preserve their rights to duty recovery. The prospect of these multi-billion dollar windfalls provided a temporary floor for their valuations.
• Nucor Corporation (NYSE: NUE) and United States Steel Corporation (NYSE: X): Domestic steel producers saw less volatility from the IEEPA ruling. Because their primary protection stems from Section 232 of the Trade Expansion Act—which was not at issue in this case—investors viewed them as relatively insulated. In fact, these stocks remained stable while the broader market dipped on Monday, as they are excluded from the new Section 122 surcharges that are currently roiling the retail sector.

The Major Questions Doctrine and the Death of "Emergency" Trade Wars

This ruling represents the most significant application of the major questions doctrine to date, signaling that the era of unilateral presidential trade wars may be coming to a close. Historically, the executive branch has enjoyed nearly unfettered discretion in trade under the guise of national security. However, the Court’s insistence on "clear congressional authorization" suggests that future tariffs must adhere to specific, narrow statutes like Section 232 (national security) or Section 301 (unfair trade practices), both of which carry more rigorous procedural requirements than the IEEPA.

The decision fits into a broader trend of judicial skepticism toward the "administrative state." By stripping the President of the IEEPA "shortcut," the Court has forced trade policy back into the halls of Congress. This shift is likely to encourage trading partners and competitors to challenge other U.S. trade measures in federal court, potentially leading to a period of heightened litigation and regulatory uncertainty for global logistics firms like FedEx Corp. (NYSE: FDX) and United Parcel Service, Inc. (NYSE: UPS).

What Comes Next: The Section 122 Pivot

The relief for importers was short-lived. Within hours of the Supreme Court's Friday ruling, the administration invoked Section 122 of the Trade Act of 1974 to address what it termed a "balance-of-payments crisis." Over the weekend, the President announced a new 15% across-the-board import surcharge. Unlike the invalidated IEEPA tariffs, Section 122 provides a specific—if limited—statutory basis for such a move, though it is legally capped at 150 days unless extended by Congress.

In the short term, the market faces a "tariff cliff" in July 2026, when this temporary surcharge is set to expire. For companies, the strategic pivot must now focus on the U.S. Court of International Trade, where the battle for the $160 billion in refunds will play out over the coming months. Investors should expect a period of "risk-off" sentiment as the market adjusts from the targeted (but now illegal) IEEPA tariffs to the broader, universal 15% tax currently being implemented.

Looking Ahead

The Supreme Court’s decision is a watershed moment for constitutional law and global commerce. While it re-establishes congressional oversight of the nation's "purse strings," it also creates an immediate period of policy instability. The market move on Monday, February 23, 2026, reflects a realization that the administration is willing to test every available statutory lever to maintain its protectionist stance.

For investors, the key watch-items in the coming months will be the CIT's timeline for processing refunds and the legislative appetite in Congress to either codify the President's tariff authority or let the Section 122 surcharge expire this summer. Until then, the volatility in the retail and tech sectors is likely to persist as companies navigate this new, court-ordered trade landscape.

This content is intended for informational purposes only and is not financial advice.