What the Supreme Court’s ruling on Trump tariffs means for your money

The Supreme Court on Friday struck down the centerpiece of President Donald Trump’s tariff policy. Economists say this could be good news for consumers’ wallets.

But economists say much of the fiscal impact will depend on future actions by the Trump administration.

Tariffs are taxes placed on imported goods. According to the Yale Institute for Budget Studies, President Trump’s tariffs have caused prices to soar on a wide range of goods, including furniture, clothing, food, electronics, and cars.

“Ultimately, this manifested itself in higher prices for consumers,” said Rasna Sharad, CEO of cross-border shipping and logistics company FlavorCloud.

In a research report released on February 6, the Tax Foundation estimates that President Trump’s tariffs will cost U.S. households $1,000 in 2025 and $1,300 in 2026.

Economists now say the cost burden for consumers could fall.

The Yale Budget Institute estimated on Friday that the Supreme Court’s ruling would cut household tariffs by about half, from about $600 to $800, in 2026, said John Rico, the group’s associate director of policy analysis. The other half comes from other duties on the books that were not affected by the Supreme Court’s decision.

According to the organization’s analysis, these costs will be more borne by low-income households than high-income households.

The Tax Policy Center estimated in December that if the Supreme Court ruled against Mr. Trump, the cost of tariffs to households would decrease by $1.4 trillion over 10 years, saving the average household $1,200 in 2026.

However, an analysis by the Yale Institute for Budget Research and the Tax Policy Center assumes that the tariffs imposed by the court will not be replaced by other tariffs. Trump administration officials have previously said they would introduce new taxes using different legal tools to achieve roughly the same result.

President Trump used the International Emergency Economic Powers Act of 1977 (IEEPA) to impose widespread tariffs on America’s trading partners, raising the country’s tariffs to the highest levels since before World War II. It was the first time a president had used the law to impose tariffs.

In a 6-3 decision, the high court ruled that IEEPA does not give the president the authority to impose tariffs.

According to the court’s opinion in Learning Resources, Inc. v. Trump, “The government has read IEEPA to give the President the power to unilaterally impose and change unlimited tariffs at will.”

“The opinion represents a transformative expansion of the president’s authority over tariff policy,” the opinion said. “It also speaks to the fact that in the half-century since IEEPA was established, no president has invoked this law to impose tariffs, let alone tariffs of this size and scope.”

When announcing the tariffs last year, President Trump said the influx of illegal drugs from Canada, Mexico and China was creating a public health crisis, and that large and persistent trade deficits were undermining U.S. manufacturing.

He declared a national emergency and used IEEPA to impose tariffs on imports to manage the perceived crisis, including a 10% basic tariff on all U.S. trading partners and even higher tariffs on some countries.

Prior to the ruling, the Trump administration had said that if the Supreme Court struck down the IEEPA tariffs, it would use other means to impose new tariffs to get “to the same place.”

Just hours after the Supreme Court’s ruling, President Trump announced he would sign an executive order imposing a new 10% “universal tariff.” President Trump will use Section 122 of the Trade Act of 1974 to do so.

Paul Ashworth, chief North American economist at Capital Economics, said in a research note on Friday that Section 122 caps tariffs at 15% and for a period of 150 days, but can be applied without Congressional approval.

Ashworth wrote that Trump could later invoke Section 338 of the Smoot-Hawley Tariff Act of 1930, which allows the president to impose tariffs of up to 50% on countries that “discriminate” against the United States. But such a move would also likely invite legal challenges, he said.

Alternatively, the president could rely on “old tariff workhorses” such as Section 232 of the Trade Expansion Act of 1962, which is based on national security, or Sections 201 and 301 of the Trade Act of 1974, which are based on anticompetition, Ashworth wrote.

In fact, the Trump administration has used Section 232 to impose item-specific tariffs on steel, aluminum, copper, automobiles, trucks, and wood products.

Before the Supreme Court’s decision, the average effective tariff rate in the United States was 16.9%, the highest since 1932, said Rico of the Yale Budget Institute.

Without the IEEPA tariffs, the effective tariff rate is currently 12%, accounting for the new 10% tariffs globally, but still significantly higher than the roughly 2% it was at before President Trump began his second term, according to Capital Economics.

It would have been 9.1% if President Trump had not announced new tariffs on Friday, according to Budget Lab.

Economists say the cost to consumers will not be zero because the Trump administration has already imposed other tariffs on books that rely on various legal authorities, many of which are based on stronger legal grounds.

Economists say the tariffs, which are still being counted, will affect household budgets differently depending on income.

For example, households in the bottom decile of income earners will lose $430 in tariffs in 2026, or about 1.1% of their after-tax income, according to the Yale Budget Institute. The analysis found that the top 10th of households would lose about $1,800, a small percentage of their income at about 0.8%.

Consumers will feel these price increases most when purchasing metal products, electronics and cars.

It’s unclear what the ruling means for tariff refunds the Trump administration may have to pay to businesses and consumers.

“The Supreme Court did not rule on whether the administration must return more than $130 billion in tariffs already paid under these (IEEPA) declarations, which will likely start a lengthy legal battle,” Michael Pearce, chief U.S. economist at Oxford Economics, said in a note Friday.

FlavorCloud’s Sharad said many questions remain unanswered so far regarding the possibility of a tariff refund, including who is eligible and how they can apply.

“Refunds will be very difficult because there is no precedent for this,” Sharad said.

But consumers could be left out of the picture, she says.

“Consumers probably won’t have any refund relief,” she said. “They will have peace of mind on price.”

Additionally, it’s unclear how the Supreme Court’s decision will affect so-called tariff “dividend checks” that President Trump has proposed using tariff revenue to send to households.

Mark Zandi, chief economist at Moody’s, said it was unlikely that consumers would receive such checks. That would have happened even if the Supreme Court had ruled in favor of the Trump administration, he said.

“This would require legislation, but I do not believe Congress will pass it,” Zandi wrote in an email.