State of Play: The Global Impact of the SCOTUS Decision on IEEPA Tariffs

Commentary by Victor Cha, Nicholas Szechenyi, Oge Onubogu, Christopher Hernandez-Roy, Charles Edel, Scott Kennedy, Ilaria Mazzocco, Henrietta Levin, Bonny Lin, Federico Steinberg, Richard M. Rossow, Kristi Govella, Mona Yacoubian, and Gregory B. Poling

Published February 20, 2026

On February 20, 2026, the Supreme Court of the United States (SCOTUS) declared President Donald Trump's use of the International Emergency Economic Powers Act (IEEPA) to impose global tariffs against U.S. trading partners illegal. The Supreme Court did not address whether the administration will have to refund tariff revenues collected from over 300,000 companies.

Although the legal picture is somewhat clearer, the economic and diplomatic consequences will unfold over time and depend on how the administration and U.S. trading partners respond. CSIS experts assess how governments and key sectors around the world are likely to interpret and react to the decision.

This analysis was edited by Victor Cha and Nicholas Szechenyi.

Photo: iLab/CSIS

Africa

Oge Onubogu, Director and Senior Fellow, Africa Program

The SCOTUS ruling invalidating the reciprocal tariffs imposed under IEEPA will be treated with cautious optimism by African governments.

The intersection of IEEPA and the African Growth and Opportunity Act (AGOA) has become a central point of tension in U.S.-Africa trade policy, since the Trump administration's announcement of the reciprocal tariffs in April 2025.

AGOA, a trade preference program, lapsed late last year, after 25 years of providing duty-free access to the U.S. market for eligible goods from designated Sub-Saharan African countries. AGOA served as the cornerstone of U.S.-Africa trade policy, supporting U.S. jobs, fostering economic growth across Africa, and helping to diversify global supply chains.

The lapse of AGOA and the imposition of the reciprocal tariffs significantly increased costs and disrupted trade for African exporters. The apparel and textile industries in countries like Madagascar, Kenya, and Lesotho have seen notable tariff increases, threatening thousands of jobs. South Africa, the largest beneficiary of AGOA, was also severely impacted, with major sectors now facing high effective U.S. tariff rates, especially in the automotive parts industry, which relies heavily on duty-free exports to the United States.

On February 3, President Trump authorized a short-term extension of AGOA lasting only until December 31, 2026, with benefits applied retroactively to September 30, 2025, to cover the period it had lapsed. While this short extension provides an immediate lifeline for AGOA-eligible countries, tensions remain as the IEEPA-based tariffs could functionally diminish the benefits of the preferential trade treatment under AGOA. Notwithstanding, the short-term extension of AGOA provides a pivotal window for Congress to develop a modernized U.S.-Africa trade framework that could position the United States and African states to compete more effectively in an increasingly contested global economy.

Even though SCOTUS invalidated the reciprocal tariffs under the IEEPA, President Trump still has a range of tools available to impose higher tariffs. For example, some expectations suggest the administration may replace IEEPA-based tariffs with duties imposed under Section 122 of the Trade Act of 1974, which authorizes the president to impose flat duties of up to 15 percent on countries with which the United States runs large trade deficits. This includes approximately 20 African countries. This action could serve as an interim measure while the administration explores other options.

The reciprocal tariffs have shaken African economies and raised significant doubts about the intent of the Trump administration's commercial diplomacy strategy to prioritize trade over aid. There is a general awareness among African governments that an overturning of the IEEPA will not signal a return to a low-tariff world. While none of the other tools available to the president to impose higher tariffs will permit the same level of sweeping tariffs attempted under the IEEPA, the Trump administration's intent to maintain and expand high tariffs is clear, and African governments and businesses are actively navigating the resulting economic challenges and policy shifts through a mix of diplomatic negotiations and a pivot toward regional integration and alternative trade partners.

The Americas

Christopher Hernandez-Roy, Deputy Director and Senior Fellow, Americas Program

Striking down tariffs imposed under IEEPA would provide relief for Canada and Mexico by reducing uncertainty and restoring some predictability across deeply integrated North American supply chains, though the benefits would likely be limited and potentially short-lived. The impacts would be limited because most exports from Canada (90 percent) and Mexico (85 percent) to the United States have remained tariff-free under carve-outs for United States-Mexico-Canada Agreement (USMCA) compliant goods; thus, the benefits would accrue to non-USMCA-compliant goods. In addition, the upside from striking down IEEPA tariffs would be significantly mitigated by the continued application of Section 232 tariffs, especially on lumber and wood products, autos, heavy trucks, steel, aluminum and copper, which impact those industries directly (approximately two-thirds of primary aluminum comes from Canada) and raise costs across autos, appliances, construction, energy infrastructure, and industrial manufacturing in all three countries.

The benefits would be short-lived because the administration has other tariff powers it can exercise, including expanding Section 232 tariffs (national security), using Section 301 (unfair trade practices), or Section 122 (persistent balance of payment deficits). Current 232 investigations into commercial aircraft and jet engines, semiconductors, processed critical minerals, wind turbines, medical equipment, along with robotics and industrial machinery, could have an outsized impact on Canada and Mexico. Though these tariffs are more procedurally constrained and time-consuming to enact, they will almost certainly be used to apply more pressure during what will now be a more extended USMCA review. The loss of IEEPA authorities may also lead the Office of the U.S. Trade Representative (USTR) to focus more on embedding stricter rules, particularly in areas like autos and enforcement, directly into the USMCA review process. Mexico has been able to weather the changing nature of North American trade, overtaking Canada in August 2025, as the United States' largest export market. Meanwhile, Canadian exports to the United States declined in October to the lowest non-pandemic level since 1997, while exports to non-U.S. nations jumped by 15.6 percent to reach a record high. Expect these trends to continue.

Australia

Charles Edel, Senior Adviser and Australia Chair

The SCOTUS ruling invalidating IEEPA will be welcomed by the Australian government and most Australian businesses, albeit cautiously. Since the imposition of the Trump administration's "Liberation Day" tariffs, and with a few exemptions, Australian businesses have had a 10 percent tariff imposed on them, with higher tariffs levied against certain sectors, including steel and aluminum, which have seen rates as high as 50 percent.

As the United States and Australia are treaty allies and have a reciprocal free trade agreement, there has been widespread displeasure in Australia with the tariffs, expressed by Australian business and political leaders. Even as Prime Minister Anthony Albanese's government has worked to minimize differences with the White House, he publicly characterized the tariffs as "undermining [of] our free and fair-trading relationship," and called their imposition "not the act of a friend." Interestingly, however, bilateral trade between Australia and the United States has actually increased over the last several months of 2025, indicating that Australia's effective lower tariff rate relative to most other nations might have comparatively advantaged Australian products over those originating from third countries.

While Australia has downplayed the negative effects of the tariffs on its economy, there have been costs to the political relationship. This has been seen most clearly in public opinion polling in Australia, which has shown a steep decline in trust of the United States. Ultimately, while a removal of tariffs will be greeted with expressions of relief in Australia, most observers expect that the Trump administration will utilize other mechanisms to create a similar effect. It remains unclear what short- and long-term effects their removal will have on the Australian economy, balance of trade with the United States, and the overall relationship with the United States.

China

Scott Kennedy, Senior Adviser and Trustee Chair in Chinese Business and Economics
Ilaria Mazzocco, Deputy Director and Senior Fellow, Trustee Chair in Chinese Business and Economics
Henrietta Levin, Senior Fellow, Senior Chair in China Studies
Bonny Lin, Director, China Power Project and Senior Adviser

Beijing will be delighted to see the Supreme Court invalidate the IEEPA tariffs, which it has condemned as illegitimate and inconsistent with U.S. commitments to the World Trade Organization. IEEPA tariffs against China currently stand at 20 percent for most products, but the United States maintains several other sectoral tariffs that, in combination with the IEEPA tariffs, are estimated to stand at 47.5 percent. Though this rate is far lower than its 145 percent peak in spring 2025, the remaining tariffs are still disruptive to the Chinese economy at a time when growth and domestic demand have stagnated, pushing the Chinese government and businesses to find alternative export markets.

That said, the Chinese leadership will not be counting on the Supreme Court to save its commercial relationship with the United States. The Trump administration has multiple options to reimpose the current duties, and Beijing believes the United States will go to great lengths to hamper China's economic growth. The administration could attempt to reclassify the tariffs as "licensing fees," or use another existing legal basis (Section 232 or Section 301) for similarly high tariffs or press Congress to revise the IEEPA statute in a way that explicitly expands the president's authority to impose tariffs.

The European Union

Federico Steinberg, Visiting Fellow, Europe, Russia, and Eurasia Program

Last July, President Trump and Ursula von der Leyen, president of the European Commission, reached a trade agreement under which all European imports would be subject to a 15 percent tariff, while U.S. products would enter the European market tariff-free. Under this agreement, the European Union avoided a more damaging outcome, but the deal was clearly worse than the previous status quo. Prior to the agreement, the average tariff on industrial products entering the United States was below 3 percent. The agreement was the result of a difficult negotiation process that began in April, when the Trump administration imposed a broad set of high tariffs on virtually all countries worldwide on what it termed "Liberation Day." These measures were justified under IEEPA and have now been declared unconstitutional. The agreement, therefore, is now likely to collapse. Other tariffs on European products-such as those on steel and aluminum-would remain in force, however, at a level of 50 percent.

The European products most affected by the agreement are automobiles and auto parts, as well as pharmaceuticals, which are important EU exports to the United States. And the most affected country is Germany, the European economic engine, which is currently experiencing chronically low economic growth. In addition, the collapse of the agreement will probably nullify the investment commitments ($600 billion by 2029) and purchases of U.S. natural gas ($750 billion over three years) that the Trump administration has presented as major successes. Economic uncertainty will now increase significantly, and current transatlantic tensions-including Greenland, EU regulation and recent fines imposed on U.S. technology companies, support for Ukraine, and the overt hostility toward the European Union expressed by the Trump administration in its latest National Security Strategy-could intensify further.

In such a scenario, the Trump administration and the USTR would most likely seek alternative mechanisms to reimpose tariffs through measures deemed legally defensible under U.S. law. At this moment, it has announced a 10 percent tariff on all imports based on Section 122 of the 1974 Trade Act, which will automatically expire in 150 days, and some investigations under Section 301 for unfair trade practices against the United States. This means that companies would once again face the highly destabilizing uncertainty that prevailed prior to the agreement.

India

Rick Rossow, Senior Adviser and Chair on India and Emerging Asia Economics

India is likely to view the Supreme Court's ruling on IEEPA tariffs as a form of temporary relief, but not as signifying a wider change in the U.S. approach to tariffs. New Delhi will quietly welcome the added legal clarity, seeing it as a partial check on unpredictable, unilateral trade actions by India's most significant commercial partner. But, as noted elsewhere in this analysis, the president has additional authorities to impose tariffs, and this may trigger a new wave of "tariff turmoil." Despite the tariffs on India, goods trade between the United States and India has proven resilient so far, due to carve-outs and front-loading of Indian exports to the United States.

For U.S.-India relations, the impact would therefore be indirect but meaningful: A more rules-bound U.S. trade environment could reinforce India's preference for institutionalized economic engagement, even as underlying disagreements on market access persist. However, India will likely continue to diversify trade partnerships through deals and domestic reforms. For instance, India has recently signed a historic trade deal with the European Union, just one example of India's broader effort to reduce reliance on any single market while simultaneously advancing domestic reforms aimed at attracting foreign investment.

Japan

Kristi Govella, Senior Adviser and Japan Chair

The SCOTUS ruling striking down IEEPA tariffs certainly comes as welcome news to many in Japan, but the concrete impact of the decision will likely be limited. For example, tariffs on the Japanese automobile sector-which constitutes about 21.5 percent of Japan's total exports and employs roughly 8.3 percent of its workforce-were implemented through non-IEEPA means and remain in place. Moreover, the widespread expectation that the Trump administration would quickly expand its use of mechanisms under Sections 122, 201, 232, 301, and/or 308 to replace the IEEPA tariffs already seems to be coming to pass with President Trump's initial reaction to the decision. Therefore, the removal of the IEEPA tariffs will heighten policy unpredictability as the United States recalibrates its tariff strategy with alternative tools.

As a major economic partner and military ally of Japan, the United States retains a great deal of leverage bilaterally, even without IEEPA tariffs. Although Japan would not have agreed to the existing U.S.-Japan trade deal and its pledge of $550 billion in Japanese investment without the threat of 25 percent IEEPA tariffs, the agreement still provides some benefits to Japan, such as reduced 15 percent automobile tariff rates (decreased from the 25 percent level imposed in early 2025).

Despite many criticisms and questions regarding the deal, around 47-58 percent of the Japanese public evaluated it positively in avoiding a worse outcome. Any attempt to touch the agreement would risk provoking additional U.S. tariff hikes or causing trade tensions to spill over into the security relationship. Overall, the SCOTUS ruling has changed the tools available to the Trump administration, but it seems unlikely to change the overall trajectory of U.S. tariff policy, suggesting that the specter of tariffs will continue to loom over the U.S.-Japan relationship in alternative forms.

South Korea

Victor Cha, President, Geopolitics and Foreign Policy Department and Korea Chair

A SCOTUS ruling will take tariffs, now at 15 percent pursuant to the U.S.-Korea Trade and Investment Framework Agreement, down to zero percent. South Korean companies most affected will be in the automotive sector (e.g., Hyundai and Kia, as well as auto parts manufacturers), electronics (e.g., Samsung and SK), pharmaceuticals (e.g., Celltrion), and chemicals and industrials (e.g., LG, Lotte, Kumho Petroleum, and Hanwha Solutions). The decision to strike down IEEPA would raise questions about the remaining terms of the agreement as enumerated in the joint fact sheet.

For example, if President Trump seeks to maintain tariffs through other means, this will introduce even greater uncertainty on the heels of a hard-fought agreement that provided a degree of stability in the alliance for the Lee Jae Myung government. Lee could face domestic pressure to nix the deal, including calls from the opposition to renegotiate the deal, but also calls from the hardcore base of his party to lower the total investment amount. For Lee, pulling back from the agreement could jeopardize other valued aspects of the agreement, including shipbuilding and nuclear submarines. For the United States, the tariffs were arguably an efficacious element in securing $350 billion in South Korean investment.

Other equities of a threatened deal would include important nontariff barrier concessions by South Korea, including in autos (unit cap elimination), digital trade (data localization, duties on e-transactions, and network usage fees), agriculture (U.S. meats, cheeses, and regulatory approvals), and pharma (pricing and patents). The two allies will have to find a way to preserve valued elements of the agreement amid domestic and partisan reactions, with both administrations facing elections in 2026 (U.S. midterms and South Korean local elections) that will be seen as a popular mandate of the governments' policies.

The Middle East

Mona Yacoubian, Director and Senior Adviser, Middle East Program

A decision by SCOTUS to strike down the IEEPA tariffs will have minimal impact on the Middle East. The tariffs did not target the Middle East in a meaningful way. Gulf Cooperation Council countries were assessed under a baseline of 10 percent tariffs on non-oil exports. Indeed, the Trump administration has focused on deepening economic ties with Arab Gulf countries, promoting major bilateral investment deals in the tech, energy, and defense sectors. Meanwhile, countries in the region that were assessed relatively high tariffs, such as Syria (41 percent), Iraq (35 percent on non-oil), Libya (30 percent, oil exempt), and Algeria (30 percent, oil exempt), have relatively low levels of non-oil trade with the United States, while their oil exports were exempted.

A decision to strike down the tariffs would bring two countries-Jordan (25 percent tariff) and Syria-more into alignment with the current U.S. policy. The Trump administration has prioritized supporting Syria's fragile transition, including measures such as lifting sanctions to promote Syria's economic recovery. Removing the 41 percent tariff would signal further U.S. encouragement of economic growth in Syria. Jordan, a longstanding U.S. ally and aid recipient, has endured shocks to domestic stability following Hamas's October 7 terror attack, and tariffs only deepen its economic woes.

Southeast Asia

Gregory B. Poling, Director and Senior Fellow, Southeast Asia Program and Asia Maritime Transparency Initiative

The immediate effects of striking down IEEPA tariffs on Southeast Asia will be mixed. Only three regional countries-Cambodia, Malaysia, and, just yesterday, Indonesia--have finalized trade agreements with the Trump administration. None have taken effect yet, but all three pacts would lock in 19 percent baseline tariff rates on goods exported to the United States. In exchange, Cambodia, Indonesia, and Malaysia made numerous politically sensitive concessions, such as foregoing digital services taxes and agreeing to impose duties on goods from third countries if requested by the United States. Prime Minister Anwar Ibrahim of Malaysia has faced especially strong domestic criticism for accepting these conditions, and opponents will now seize on the court's decision, potentially complicating ratification by Kuala Lumpur. President Prabowo Subianto of Indonesia is in for some of the same criticism and may wish he had held off on signing a bit longer.

The Indonesian agreement is set to take effect in 90 days, during which either side can seek adjustments; that presents Jakarta with some tough choices now that it appears to be giving a lot for very little. The region's other large economies, the Philippines, Thailand, and Vietnam, also faced 19-20 percent tariffs but have been slower to finalize their deals with the White House. In the wake of this ruling, none of them is likely to walk away from talks with the United States, but they will drive a harder bargain and focus more on exemptions from future Section 232 tariffs, including on semiconductors, electronics, critical minerals, and pharmaceuticals.

State of Play, a podcast and commentary series produced by the CSIS Geopolitics and Foreign Policy Department, features timely analysis from CSIS's leading regional experts on geopolitical developments and the future of the international order.

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