The gavel falls

On Feb. 20, in a largely anticipated and seminal decision, the Supreme Court of the United States (SCOTUS) struck down the use of the International Emergency Economic Powers Act (IEEPA) as the basis for the Trump administration’s sweeping global tariff policy. IEEPA accounted for more than 60 percent of the tariffs implemented since April 2025 and in place at the time of the decision. As such, this represents a meaningful challenge to the government’s trade agenda and policies. In effect, it prevents President Trump from weaponizing IEEPA as a blunt-force object to implement tariffs on a sweeping and immediate basis to effect a targeted restructuring and reorientation of U.S. foreign trade.

To be clear, this ruling does not eliminate U.S. tariffs, but rather forces a broader procedural framework around tariff policy going forward. According to RBC Global Asset Management (RBC GAM), without IEEPA the effective tariff rate on U.S. imports falls from 13.6 percent to 7.6 percent (prior to any replacement tariffs—more on this shortly).

One might liken the introduction of this procedural framework to a more scalpel-like approach to tariff policy—i.e., it will take time for the Trump administration to implement a more durable and legally based tariff policy. That said, the Trump administration—fully expecting that SCOTUS would rule against its use of IEEPA—had been seeking alternatives since the court began reviewing the case. Several other sectors and/or products that were previously covered by IEEPA remain under investigation for reclassification to other forms of tariffs. There are, in fact, several other avenues vis-à-vis trade law that the administration is considering, as summarized here:

Selected authorities to impose tariffs

Statutory tariff authorities	Reason for imposing tariffs	Agency required to make findings	Maximum limit on duration of action	Maximum limit on tariff rate
Section 232	Threats to national security	Secretary of Commerce	None	None
Section 201	Injury to domestic industry	International Trade Commission	Four years; may be extended to eight years in total	50%; contains phasedown requirement
Section 301	Trade agreement violations; certain other practices	U.S. Trade Representative	Four years; may be extended with no upper limit	None
Section 122	International payments problems	None	150 days	15%
Section 338	Discrimination against U.S. commerce	None	None	50%
IEEPA	National emergency	None	None	None

No sooner had the decision by SCOTUS been released than Trump sprang into action and signed an executive order invoking Section 122 of the Trade Act of 1974 to impose a 10 percent global tariff (which he later threatened would increase to 15 percent, though this remains to be confirmed at this time). However, this legislation only allows the tariff to remain in place for up to 150 days, after which congressional approval is required. We surmise that the use of the more restrained Section 122 tariffs may serve as a placeholder while the administration explores how other sections could be appropriated to enforce more sustained tariffs over the medium to long term. Some haste on this front is likely owing to the looming Nov. 2026 midterm congressional elections, and Trump’s desire to demonstrate a “win” to support and justify his preeminent economic policy thus far into his second term.

Following the issuance of the executive order under Section 122, the new effective global tariff rate lands at 10.6 percent (based on RBC GAM’s estimates ), provided the 10 percent baseline is maintained. Should the administration ultimately opt for 15 percent, the effective rate would increase to 12.1 percent. Still, both estimates are better than the aforementioned 13.6 percent tariff rate that was in place under IEEPA.

IEEPA ruling and Section 122 replacement nets out to a lower effective tariff rate

Cheques in the mail! Tariff refunds are not as simple as a 30-day “money back” guarantee, but they are an economic tailwind nonetheless

In SCOTUS’s ruling striking down the IEEPA tariffs, there was no decision regarding importers’ eligibility for refunds. However, in early March, the U.S. Court of International Trade (CIT) ordered refunds for all importers that had been subject to the tariffs. The Department of Justice (DOJ), to no one’s surprise, sought a stay of that decision pending appeal, though this was denied. An appeal of the refund order can still be pursued; however, at the time of writing, no such decision has been made.

According to a recent New York Times report , the administration has said it could take the government as many as “4,431,161 hours” to manually process all the refund requests. It estimates there were more than 53 million entries for goods subject to the IEEPA duties now deemed illegal. Returning this money would take time and we are not holding our breath that Trump intends to make the refund process easier. In contrast, U.S. Customs and Border Protection (CBP) has indicated that issuance of refunds could begin as early as late April, pending certain technological system updates. Still, we believe uncertainty remains regarding whether refunds will be paid in full and how long the process will take given the enormity and complexity of the undertaking. We remain cautious as to whether it will be resolved fully and fairly in favour of the tariff payers.

Setting aside the potential for an extended timeline for settling importers’ refunds, in our view such an injection of capital back into the economy represents a fiscal tailwind for the U.S. economy. According to CBP, more than US$160 billion in tariff revenue was collected from importers under IEEPA, which, based on RBC GAM’s estimates, would amount to roughly 0.5 percent of GDP . This represents a small but meaningful boon to profitability for these importers in the short to medium term. Yet we wouldn’t necessarily expect a similar boost to consumer spending (which usually delivers a more meaningful multiplier effect on the U.S. economy), as many importers have shielded consumers from absorbing the brunt of tariffs thus far.

It is worth noting that consumers who ultimately paid the cost of the tariffs through higher prices will not be compensated in any way, unless an eligible company chooses to do so. This sets up another political headache for the Trump administration: corporations are seen as “winning” from these now-illegal tariffs at the expense of average (and many of them financially struggling) Americans.   

For now, we believe the decision by SCOTUS to strike down IEEPA is a net positive overall. The introduction of a procedural framework deprives the Trump administration from imposing broad-based tariff policy on a whim, or at best on questionable grounds. Arguably, it demonstrates the existence of some checks and balances between the executive and judicial arms of the U.S. government, even against the backdrop of a conservative-leaning Supreme Court.

Lastly, for the immediate term, tariff rates overall have moved lower, potentially providing a release valve on persistent inflationary pressures in the economy. The caveat is some degree of continued uncertainty for U.S. corporations and their trading partners regarding where tariffs will ultimately land in the medium to long term, pending the conclusion of the ongoing reviews by the Trump administration and the requisite potential approvals. Still, the uncertainty would seem lower than it has been since last April.

Global trade policy uncertainty fell after Supreme Court struck down IEEPA tariffs

Summer forecast: Hot, sweat-inducing days ahead, as CUSMA remains the key for Canada with negotiations on the horizon

The recent SCOTUS IEEPA tariffs ruling has little impact on Canada, given that the trade we do with the U.S. is broadly covered and protected under the Canada-U.S.-Mexico Agreement (CUSMA). But this means that the renegotiation of the agreement this summer is far more consequential. In contrast, countries such as China, and Emerging Markets more broadly, stand to benefit more meaningfully from the revocation of IEEPA tariffs.

Canada retains low comparable tariff rate under section 122 tariffs

Still, Canada-specific sectors such as steel, aluminum, copper and softwood lumber are currently very much subject to steep tariffs under Section 232. Reports show that the Trump administration is considering additional sectoral tariffs aimed at industries such as semiconductors, pharmaceuticals, critical minerals and commercial aerospace and jet engines, suggesting some material near-term risk for Canada. However, the U.S. Commerce Department must conduct a formal investigation and produce a report of its findings in favour of such a move before these tariffs can be implemented.

CUSMA renegotiations on this front have already begun between the U.S. and Canada. As we indicated in our January report, we believe Canada will ultimately secure a “better than feared” outcome on CUSMA 2.0. However, in keeping with Trump’s style, we expect the negative rhetoric will intensify leading into the decision and that the U.S. will continue to leverage its economic heft as Canada’s key trading partner to extract concessions.

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