SCOTUS Strikes Down Trump Tariffs: S&P 500 Rallies as President Defies Ruling with "Section 122" Backup

The global trade landscape was turned upside down on Friday, February 20, 2026, as the U.S. Supreme Court delivered a staggering blow to the administration’s economic centerpiece. In a landmark 6-3 decision, the high court ruled that President Donald Trump exceeded his constitutional authority by using the International Emergency Economic Powers Act (IEEPA) to impose sweeping, across-the-board tariffs.

While the ruling sent shockwaves through Washington, the Dow Jones and S&P 500 reacted with a relief rally, as investors cheered the removal of "emergency" taxes that have squeezed global supply chains for over a year.

The Ruling: SCOTUS Reclaims the Power to Tax

Chief Justice John Roberts, writing for the majority, was joined by the court's three liberal justices and Trump appointees Neil Gorsuch and Amy Coney Barrett. The court made it clear: the power to levy tariffs belongs to Congress, not the Oval Office.

The "Two Words" Test: Roberts noted that the administration’s attempt to stretch the words "regulate" and "importation" in the IEEPA to justify taxes was unconstitutional. "Those words," Roberts wrote, "cannot bear such weight."
A "Total Victory": Lead attorney Neal Katyal, who argued the case for American small businesses, hailed the verdict on X (formerly Twitter) as a "complete and total victory for the rule of law."
The Dissent: Justice Clarence Thomas and Samuel Alito joined Justice Kavanaugh in dissent, arguing that the IEEPA grants the President broad latitude during national emergencies.

Trump's Fury: "A Disgrace to Our Nation"

Hours after the ruling, President Trump held a fiery press conference at the White House, flanking himself with Treasury Secretary Scott Bessent and Commerce Secretary Howard Lutnick.

"I am absolutely ashamed of certain members of this court," Trump told reporters, specifically calling out Gorsuch and Barrett as "disloyal" and "lap dogs for the radical left."

The Defiant Countermove: Trump immediately signed a new executive order to bypass the court. Using Section 122 of the Trade Act of 1974, the President announced a temporary 10% import surcharge effective February 24.

The Catch: Unlike the IEEPA tariffs, Section 122 only allows for a 150-day window to address "balance-of-payments" deficits unless Congress votes to extend it.
The Goal: Trump stated this 5-month period would be used to launch new "Section 301" investigations to permanentize the duties.

Market Watch: Dow and S&P 500 Surge

Wall Street, which had been "tentative" leading up to the decision, found its footing as the news broke. Analysts suggest the ruling provides much-needed clarity for businesses currently facing over $133 billion in potential state refunds and federal clawbacks.

Index	Closing Price (Feb 20)	Change
Dow Jones (DJIA)	49,625.97	+230.81 (0.5%)
S&P 500	6,909.51	+47.62 (0.7%)
Nasdaq	22,886.07	+203.34 (0.9%)

Scott Bessent noted that while the IEEPA path is closed, the administration’s "growth plan" remains intact. However, the NYT and WSJ report that the ruling could trigger thousands of lawsuits from companies seeking to reclaim billions in duties already paid.

Summary of the "Tariff War" 2.0

Struck Down: Broad reciprocal tariffs and fentanyl-linked duties under IEEPA.
Still Standing: Product-specific tariffs on steel, aluminum, and autos (protected under Section 232).
New Threat: A 10% global surcharge under Section 122 starting next week.

The legal battle now moves from the "emergency" phase to a grueling statutory fight. As the Dow Jones today proves, the market prefers the courtroom to the chaos of unilateral decrees.

$133 Billion Refund Rush: SCOTUS Ends Trump’s IEEPA Tariffs, But "Section 122" Surcharge Takes Flight Tuesday

The U.S. Supreme Court just detonated a "legal bomb" under the administration's trade policy. On Friday, February 20, 2026, a 6-3 majority ruled in Learning Resources, Inc. v. Trump that the President cannot use the International Emergency Economic Powers Act (IEEPA) to levy taxes on Americans.

The ruling effectively kills the 10% Baseline Tariff, the Reciprocal Tariffs, and the Fentanyl Trafficking Tariffs. However, the "relief" for importers may be short-lived. By Friday afternoon, President Trump signed a defiant executive order to replace the lost duties with a new 10% global surcharge under a rarely used 1974 law.

The "Section 122" Pivot: What’s Taxed on Tuesday?

To bypass the Court, Trump invoked Section 122 of the Trade Act of 1974, which allows a temporary 10% surcharge to address "balance-of-payments" deficits.

Effective Date: Tuesday, February 24, 2026, at 12:01 AM EST.
The 150-Day Clock: Unlike the previous "permanent" emergency tariffs, Section 122 expires in 150 days unless Congress votes to extend it—a high hurdle in a divided legislature.
The Bridge Strategy: Treasury Secretary Scott Bessent confirmed this 5-month window will serve as a "bridge" while the administration launches new Section 301 investigations to make the tariffs permanent under different legal authorities.

The "Exemption List" (What stays duty-free):

Category	Status
USMCA Goods	Canada and Mexico are exempt (for now).
Energy & Minerals	Critical minerals, fertilizers, and energy products are exempt.
Pharmaceuticals	Life-saving drugs and ingredients are exempt.
Food Staples	Beef, tomatoes, and oranges are exempt.
De Minimis	Shipments under $800 remain taxed (Duty-free status stays suspended).

The $133 Billion Question: How to Get Your Refund

With the IEEPA tariffs declared "unlawful," the U.S. government is sitting on an estimated $133 billion in illegally collected duties. However, the Supreme Court provided no automatic roadmap for repayment.

The "Messy" Process: Legal experts from SCOTUSblog and Neal Katyal’s team warn that refunds will not be automatic. U.S. Customs and Border Protection (CBP) currently has no mechanism to mass-refund these billions.
Post-Summary Corrections (PSCs): Importers have roughly 300 days from the date of entry to file PSCs for unliquidated entries to reclaim their cash.
Protests: For entries already "liquidated" (finalized), companies have 180 days to file a formal protest.
Interest is Owed: Under federal law, successful refund claims should include interest, potentially adding billions more to the government's bill.

Market Reaction: Relief or Uncertainty?

The Dow Jones and S&P 500 ended Friday in the green, largely because the ruling removes the threat of "infinite" executive taxing power. However, Neil Gorsuch and Amy Coney Barrett joining the liberal bloc to strike down the tariffs has created a rift in the conservative legal movement.

"This is a one-way ratchet on executive power," attorney Neal Katyal argued. "The Court just reminded the President that the power of the purse belongs to the people, through Congress."

Scott Bessent has fired back, stating, "No one should expect tariff revenues to go down. We will get back to the same levels; we’re just switching the legal engine."