Majority ruled six to three to dismantle core Trump policy but tariffs on steel, aluminum, automobiles and lumber unaffected
The U.S. Supreme Court has struck down President Donald Trump’s sweeping “Liberation Day” global tariffs, abruptly dismantling a core pillar of his second-term economic strategy.
The decision centered on whether the administration could use the International Emergency Economic Powers Act (IEEPA) to impose across-the-board tariffs of at least 10%—and up to 50% for some countries—on imports from nearly all major trading partners. Lower courts had previously ruled that IEEPA did not authorize such broad, revenue-oriented duties and that the approach raised serious concerns.
The law that underpins those import duties “does not authorize the President to impose tariffs,” the majority ruled, according to CNBC.
In the majority opinion for Learning Resources, Inc. v. Trump, Chief Justice John Roberts said Trump "asserts the extraordinary power to unilaterally impose tariffs of unlimited amount, duration and scope," but that "in light of the breadth, history, and constitutional context of that asserted authority, he must identify clear congressional authorization to exercise it."
This ruling forces an abrupt reset of U.S. trade policy and removes—at least temporarily—hundreds of billions of dollars in expected tariff revenue that had been partially earmarked to offset tax cuts and fund Trump’s proposed “tariff dividend” for households.
The decision also marks a dramatic twist in a US-Canada trade war that began shortly after Trump took office last January and that has plunged the Canadian economy into crisis.
Canadian economy
Randall Bartlett, deputy chief economist at Desjardins, however, noted that the decision does not affect tariffs imposed under other authorities, such as on steel, aluminum, automobiles and lumber, which hit Canada hardest and will remain. Bartlett described the impact as unambiguously positive for the Canadian economy, but added it was not really clear that it's going to have any substantive magnitude of an impact given the tools the U.S. administration still has at its disposal.
The ruling specifically targets the use of IEEPA—a law traditionally used for freezing assets or imposing sanctions—as a tool for broad trade taxes. However, U.S. officials have already signaled they may attempt to maintain the tariff framework using other statutes, such as Section 232 or Section 301.
"If the Supreme Court strikes it down, it really does send a big message... that these tariffs, really were not permissible," Pellerin said. "And hopefully, it will give the U.S. administration pause... though I think we are going to see a continued use of tariffs, and that's unfortunate."
Trump's initial move to impose levies on Canadian imports sparked fears of mass layoffs and a sharp economic downturn north of the border. The minister tasked with Canada-U.S. trade was quick to react and said the Supreme Court ruling reinforces Canada's position that the IEEPA tariffs "are unjustified."
"While Canada has the best trade deal with the United States of any trading partner, we recognize that critical work lies ahead to support Canadian businesses and workers who remain affected by Section 232 tariffs on steel, aluminum and automotive sectors," wrote Dominic LeBlanc in a social media post.
Market reaction
The immediate market reaction was clearest in New York. U.S. equities moved higher after the decision, with retailers and manufacturers that had been hit by rising import and production costs leading gains. As of 11:04 a.m. ET, the Dow Jones Industrial Average was up 93.81 points, or 0.2%, recovering from an earlier 200‑point loss on weak economic data. The S&P 500 was ahead 0.3%, and the Nasdaq Composite rose 0.5%. Shares of “Magnificent Seven” member Amazon climbed about 2% following the ruling, while industrial bellwether Caterpillar reversed losses to trade nearly 1% higher.
Although Canadian markets were less directly exposed to the now‑invalidated tariff framework, the logic extends north of the border. TSX‑listed industrials, railways, manufacturers and logistics firms tied to global and U.S. trade volumes stand to benefit from reduced policy uncertainty. Consumer‑facing companies that import finished goods or components could see some relief at the margin compared with a scenario in which broad U.S. tariffs remained in place and were expanded or prolonged.
The Globe and Mail reported that as of mid-December, U.S. Customs and Border Protection had collected around US$2.4-billion in IEEPA tariff revenue on imports from Canada – less than 2 per cent of the total.
“For Canada, this ruling doesn’t eliminate the most significant tariffs currently in place, which are on autos, steel, aluminum, lumber and some copper products,” Avery Shenfeld, chief economist at Canadian Imperial Bank of Commerce wrote in a note to clients, according to the Globe report..
“But it does remove the threat of that 35 per cent tariff being applied if the US opts to withdraw from the USMCA … So while this isn’t a cure for tariffs facing Canada in targeted sectors (and actually provides more immediate relief to Canada’s competitors in the US that face reciprocal tariffs on all of their exports) it is nevertheless an improvement in Canada’s negotiating position in the upcoming USMCA talks.”
No celebration just yet
Candace Laing, CEO and president of the Canadian Chamber of Commerce, emphasized that this was a legal decision rather than a fundamental shift in US trade policy, as reported by Reuters.
"Canada should prepare for new, blunter mechanisms to be used to reassert trade pressure, potentially with broader and more disruptive effects," she said in a statement.
Laing observed that businesses were rapidly taking steps to protect themselves against future disruptions, pointing out that Canadian firms were strengthening independent relationships with Mexico to avoid over-reliance on a single trading partner.
Separately, a group of more than 800 small businesses operating under the name "We Pay the Tariffs" praised the Supreme Court decision as a major win for small companies that have shouldered billions of dollars in tariff costs, according to Reuters. The coalition urged the Trump administration to create a swift, streamlined, and automatic refund system.
"Small businesses cannot afford to wait months or years while bureaucratic delays play out, nor can they afford expensive litigation just to recover money that was unlawfully collected from them in the first place. These businesses need their money back now," the group's executive director Dan Anthony said.
