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U.S. Supreme Court invalidates IEEPA tariffs: Potential relief of global reciprocity tariffs on the horizon

Updated: February 20, 2026

At a glance

  • The U.S. Supreme Court ruled 6–3 that IEEPA does not authorize the President to impose tariffs, invalidating 2025 emergency tariffs.
  • Canada-specific tariffs of up to 35% imposed under IEEPA are affected, particularly on non-USMCA/CUSMA qualifying goods.
  • Refunds are not automatic; recovery will depend on entry status, documentation, and CBP guidance.
  • Other tariff authorities (Section 122, 232, 301, AD/CVD, safeguards) remain fully in force.
  • Businesses should review duty exposure, preserve protest rights, and strengthen origin compliance processes.

On February 20, 2026, in a 170-page decision, the United States (U.S.) Supreme Court (SCC) ruled 6–3 that the International Emergency Economic Powers Act (IEEPA) does not authorize the U.S. President to impose tariffs. The ruling invalidates the 2025 emergency tariffs issued under IEEPA, including the Canada-specific measures that increased from 25% to 35% on affected goods.

The Court held that while IEEPA allows the U.S. President to regulate certain economic transactions during a declared national emergency, it does not extend to the imposition of import duties, and tariff action must instead rely on specific trade statutes enacted by Congress.

The decision closes off IEEPA as a tariff mechanism; however, broader tariff exposure for Canadian and global exporters persists under other statutory authorities.

We are already seeing how other tariff mechanisms can be used, as within minutes of the SCC ruling, the U.S. President announced plans to issue a new executive order imposing a 10% tariff on most imports under Section 122 of the Trade Act of 1974. Section 122 permits tariffs of up to 15% for a limited duration and is not affected by the Court’s decision. While the scope and duration differ from the invalidated IEEPA regime, the announcement signals that broad-based tariff measures will continue under alternative statutory authorities.

Note: Although this alert focuses on Canadian exporters, the ruling applies to any tariffs imposed under IEEPA authority in 2025, including portions of the country-based reciprocal tariff framework that relied on the same statutory basis.

What this means for Canadian exports

The commercial impact is targeted. IEEPA tariffs primarily affected Canada origin goods where United States-Mexico-Canada Agreement/Canada-United States-Mexico Agreement (USMCA/CUSMA) preferential treatment was not available or not claimed. They also affected non-Canadian companies that routed third-country goods through Canada, where those goods did not qualify as originating and were subject to U.S. emergency or reciprocity-based duties.

The decision is most relevant for Canadian exports:

  • that did not meet USMCA/CUSMA origin requirements or where certification and documentation were incomplete; and
  • of goods transshipped through Canada that did not undergo sufficient production to obtain Canadian origin.

For Canadian exporters with consistent USMCA/CUSMA qualification and disciplined origin controls, the direct duty impact is limited but not zero.

What this means for Non-USMCA/CUSMA exports

Outside North America, the implications may be more significant.

Several country-based emergency or “reciprocity” tariffs announced in 2025 relied, in whole or in part, on IEEPA authority. To the extent those duties were grounded in IEEPA, they are invalidated by the Court’s decision.

The determining factor is statutory authority:

  • IEEPA-based tariffs do not apply
  • Tariffs imposed under Section 232, Section 301, antidumping/countervailing duty law, or other trade statutes remain in force

Multinational enterprises should conduct a country and tariff-line review to identify IEEPA-based exposure and assess potential recovery. A separate alert will follow with further analysis of global considerations.

Refunds and duty recovery

The ruling does not trigger automatic refunds. Although the statutory basis for the tariffs has been invalidated, the Court did not order blanket repayment of duties already collected.

Any recovery will be procedural and entry-specific. Importers should expect a documentation-driven process and potential implementation lag as U.S. Customs and Border Protection (CBP) issues guidance.

Importers should:

  • confirm whether affected entries remain unliquidated and assess Post-Summary Correction eligibility
  • review liquidation dates and preserve protest rights within the 180-day statutory window

Recovery is not assured. Timing, entry status, and CBP implementation will determine outcomes.

Alternative tariff authorities remain unchanged

The ruling limits IEEPA, it does not restrict the U.S. administration’s ability to rely on other trade statutes, as we are already seeing with the new section 122 10% tariff.

Tariffs imposed under the following authorities remain unaffected by the SCC ruling:

  • Section 232 (national security), including steel, aluminum, and potential future sector-specific measures
  • Section 301 (unfair trade practices), following USTR investigation and statutory process
  • Antidumping and countervailing duties
  • Safeguard (Section 201) measures

Tariff policy volatility continues to remain elevated, and alternative authorities are available and could support future sector-specific or broader measures.

Recommended actions

Canadian exporters and their U.S. importer partners should:

  • extract U.S. entry data to quantify IEEPA duty exposure and confirm liquidation status;
  • evaluate refund pathways and preserve protest rights where deadlines are approaching;
  • reinforce USMCA/CUSMA origin qualification processes and certification controls;
  • conduct forward-looking exposure reviews under Section 232 and Section 301; and
  • incorporate tariff scenario planning into 2026 sourcing and pricing decisions.

Multinational enterprises in particular should confirm the origin of their exports to the U.S. and assess whether previously paid IEEPA duties may be eligible for recovery.

How BDO can help

With potential refund opportunities emerging and alternative tariffs remaining in force, businesses should take a structured approach to recovery and risk mitigation. 

BDO can assist with:

  • entry data analytics, such as our Tariff Origin Valuation Analytics (TOVA) tool to isolate IEEPA-paid duties and assess recovery options
  • protest and refund strategy support
  • tariff exposure screening across Section 232, Section 301, and related measures
  • supply chain mitigation and restructuring planning

We will continue to monitor implementation guidance and potential follow-on trade actions.  In the meantime, please consult our tariff readiness page for additional tariff information.

Charmaine Goddeeris
Director, Indirect Tax
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Brian Morcombe
Partner, Indirect Tax Leader
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The information in this publication is current as of Feb. 20, 2026.

This publication has been carefully prepared, but it has been written in general terms and should be seen as broad guidance only. The publication cannot be relied upon to cover specific situations and you should not act, or refrain from acting, upon the information contained therein without obtaining specific professional advice. Please contact BDO Canada LLP to discuss these matters in the context of your particular circumstances. BDO Canada LLP, its partners, employees and agents do not accept or assume any liability or duty of care for any loss arising from any action taken or not taken by anyone in reliance on the information in this publication or for any decision based on it.