US to halt collection of tariffs ruled illegal by supreme court

The U.S. will cease collecting import tariffs after the U.S. Supreme Court ruled the use of emergency powers for the levies was illegal, prompting an immediate pivot to a new trade enforcement mechanism.

The U.S. Customs and Border Protection (CBP) agency announced it would deactivate all tariff codes associated with the International Emergency Economic Powers Act (IEEPA) as of Tuesday at midnight.

The move follows a Friday ruling by the Supreme Court, which determined President Donald Trump exceeded his authority by invoking federal emergency laws to impose sweeping global and reciprocal tariffs.

The U.S. dollar slumped 0.4% against a basket of currencies as investors reacted to the sudden rollback and the resulting uncertainty for global trade.

Despite the judicial setback, the administration has signaled its trade policy remains aggressive. Following the court’s decision, President Trump signed an order to impose a new 10% global duty under Section 122 of the Trade Act, which he subsequently announced would be increased to 15%. This new tariff is scheduled to take effect simultaneously with the cessation of the illegal IEEPA collections.

U.S. Trade Representative Jamieson Greer stated on Sunday that while the legal tools may change, the administration’s core policy has not. He argued that the continued use of tariffs provides U.S. businesses with “a lot of leverage” in international trade negotiations.

Economists estimate that more than $175 billion in past tariff revenue is now at risk of being refunded to businesses. Prior to the ruling, the IEEPA−based tariffs were generating approximately $500 million a day for the U.S. government.

The Supreme Court did not provide specific guidance on how these refunds should be processed, leaving the matter to lower courts and administrative agencies. This lack of clarity has created significant volatility for global manufacturing and technology supply chains, particularly for major Asian exporters like mainland China, South Korea, Japan, and Taiwan.

In response to the legal shift, China has urged Washington to scrap the tariff measures entirely. The European Union has frozen its approval process for pending trade agreements. Meanwhile, India has moved to delay planned trade talks.

Domestically, a group of 22 Democratic U.S. senators has introduced legislation to force the administration to issue refunds for the illegal tariffs within 180 days, though the bill faces an uncertain future in Congress.

The halt in collections is strictly limited to those imposed under the 1977 IEEPA. Other duties, including Section 232 national security tariffs and Section 301 measures targeting unfair trade practices, remain in full force. Furthermore, USTR Greer indicated that the administration expects to open new Section 301 investigations into several countries, a move that could lead to additional new tariffs in the near future.

For global markets, the transition marks a period of prolonged legal disputes and continued volatility as the administration tests the limits of executive power in its pursuit of protectionist trade strategies.