Tax Insights: US Supreme Court invalidates IEEPA‑based tariffs ─ Implications for Canadian and multinational businesses

Visit our Tariffs and Trade Policy Resource Centre

Issue 2026-08

In brief

What happened? 

On February 20, 2026, the US Supreme Court (Court) released its decision in Learning Resources, Inc. v. Trump (No. 24-1287), ruling that the US International Emergency Economic Powers Act (IEEPA) (50 U.S.C. § 1702) does not authorize the President to impose tariffs. In a 6-3 decision, the Court held that the IEEPA’s authorization to “regulate” importation does not extend to imposing duties, which the US Constitution assigns to the US Congress.

In response to the ruling:

• US President Trump will impose a temporary global tariff¹ that will take effect February 24, 2026 (12:01 am ET) under section 122 of the US Trade Act of 1974
• the US Customs and Border Protection (CBP) agency will cease to collect IEEPA‑based tariffs² on goods entering the United States on or after 12:00 am ET on February 24, 2026

Why is it relevant?

The US President can no longer rely on the IEEPA to serve as a standalone basis for imposing US tariff measures. The decision effectively invalidates tariff actions taken under the IEEPA, including certain tariff measures that directly affected Canadian exporters and Canadian‑based multinational businesses importing into the United States, including:

• the border security tariffs imposed on Canada, Mexico and China (which do not apply to goods that qualify as originating goods under the Canada‑United States‑Mexico Agreement [CUSMA])
• the “reciprocal tariffs” applied globally at a base rate of 10% (which do not apply to Canada and Mexico if the border security tariffs also apply, or if the goods had qualified under CUMSA)

However, the decision does not affect the sector-specific tariffs (i.e. aluminum, steel, automobiles, copper, lumber, etc.) imposed under section 232 of the US Trade Expansion Act of 1962, or tariffs under other US legislation.

The decision may create refund opportunities for Canadian and multinational businesses and could alter future US trade actions that rely on emergency powers. It also leaves unresolved the retroactive treatment of tariffs previously collected under the IEEPA, with the lower courts expected to determine whether importers may recover the duties paid.

Actions to consider

Canadian and multinational businesses should assess their tariff exposure, prepare for potential refund processes, reassess supply chains and monitor US policy developments to determine what tools the US Administration intends to use to replace the IEEPA‑based tariffs. Canadian businesses that rely on US customs brokers should also consider near‑term capacity constraints and elevated demand that could affect the timing and administration of any refund claims.

In detail

Background

The IEEPA has historically been used by the US Administration to impose rapid tariff actions during declared national emergencies. The Court found no clear statutory authority permitting tariffs, emphasizing that broad-based tariff programs represent matters of significant economic and political consequence requiring explicit congressional authorization.

The ruling removes a key executive tool for levying emergency trade actions and introduces operational uncertainty as US agencies, customs brokers and importers consider potential refund processes. For Canadian and multinational businesses, this shift may reduce sudden tariff risk, but also introduces transitional complexity as procedural mechanisms are defined.

For more information on this decision, see our PwC US Tax Insights “US Supreme Court invalidates IEEPA tariffs.”³

Implications for Canadian and multinational businesses

The Court’s decision will affect:

• Canadian exporters and affiliates (including US importing entities) whose goods were subject to IEEPA‑based US duties
• multinational businesses with North American supply chains that import into the United States
• industry sectors previously targeted by emergency tariff actions, including consumer goods, industrial equipment and commodities

Key considerations and actions for these businesses include:

• assessing their tariff exposure by reviewing their import entries into the United States to identify IEEPA‑based tariffs and quantify potential duty‑recovery amounts, particularly where Canadian entities are indirectly affected through US affiliates or third‑party importers
• evaluating and selecting the refund‑filing operating model (customs broker, self‑filer or third‑party software) to optimize speed and visibility and align with relevant US CBP processes, taking into account expected broker delays due to high demand  
• reassessing supply chains by reevaluating sourcing and pricing models that were adjusted in response to emergency tariffs
• monitoring US policy developments by tracking congressional deliberations and administrative guidance that may replace IEEPA‑based tools or create new tariff authorities

The takeaway

Tariff relief for Canadian businesses that import into the United States may be limited, because the Court’s decision only invalidates tariffs imposed under the IEEPA. It does not affect sector‑specific tariffs, which have a greater impact on Canadian businesses. The decision narrows the legal basis that is available to the US Administration but does not signal a broader shift away from the use of tariffs as a trade policy tool. It is expected that President Trump will impose new tariffs under other legislative authorities to replace the IEEPA tariffs, such as the temporary global tariff under section 122 of the US Trade Act of 1974 (however, Canadian businesses will continue to benefit from the CUSMA with respect to this particular new global tariff, subject to continued compliance with applicable CUSMA‑origin and documentation requirements).¹ The Court’s decision is based on US constitutional and statutory law and does not, in itself, require any changes to Canadian trade policy or legislation.