US Supreme Court Quashes Trump’s Liberation Day Tariffs and Trafficking Tariffs and Re-Affirms the Congress’ Exclusive Taxing Power

18 March 2026

On 20 February 2026, the Supreme Court of the United States (“SCOTUS”) delivered its highly anticipated ruling in Learning Resources, Inc, et al. v. Trump,  President of the United States, et al. [No. 24–1287]¹ (“Learning Resources”) on the constitutionality of the tariffs imposed by the Trump Administration since taking office on 20 January 2025.
 
The SCOTUS, by a 6:3 majority, held that the President is not authorised by the International Emergency Economic Powers Act (“IEEPA”) to impose tariffs. In doing so, the SCOTUS construed the text of the IEEPA and concluded that the provision relied upon by the Trump Administration – Section 1702(a)(1)(B) – does not empower the President to impose tariffs absent Congressional authorisation.
 
This article will consider this landmark judgment and its implications within the United States, for Malaysia and the wider world.
 
Background Facts & Litigation in the Lower Courts
 
One of the hallmarks of the second Trump Administration has been the liberal use of tariffs as an instrument to secure American interests ranging from national security to economic policy.
 
Citing “a public health crisis” created by the increased illicit drug trade and the unsatisfactory response of other States, President Donald Trump imposed tariffs against Canada, China and Mexico on the basis of each State’s failure to address the trafficking of illegal drugs into the United States (“Trafficking Tariffs”).²
 
Subsequently, on 2 April 2025, President Donald Trump announced a set of across-the-board tariffs to be imposed on the United States’ trading partners, including Malaysia (“Liberation Day Tariffs”). The official justification was the “unusual and extraordinary threat to the national security and economy of the United States” arising from the allegedly unfair trade practices of the United States’ trading partners.³
 
The primary legal basis cited by the Trump Administration to impose the Trafficking Tariffs and Liberation Day Tariffs was Section 1702(a)(1)(B) of the IEEPA, which reads as follows:
 
Unsurprisingly, litigation was promptly commenced across the United States by dissatisfied parties ranging from private businesses to entire State Governments (such as the State of Oregon). Less than two months later on 28 May 2025, the United States Court of International Trade set aside these tariffs on the basis that Section 1702(a)(1)(B) of the IEEPA did not confer such an unlimited tariff authority to the President. The court held as follows: 

1. Historically, the particular tariffs imposed by the Nixon Administration were capped by the rates set in the United States Harmonized Tariff Schedule. Hence, they were legally justifiable unlike the tariffs imposed by the Trump Administration that have no limits. 
2. The words “regulate … importation” (as emphasised above) could not be read as conferring an unlimited tariff-imposing authority to the President. The court relied upon the separation of powers doctrine and the need to preserve the distinct powers held by the Legislative and Executive branches of government. 
3. The legislative background to the IEEPA demonstrates that it was enacted to curtail the previously expansive presidential power on tariffs, as provided under the IEEPA’s predecessor, the Trading with the Enemy Act (“TWEA”). Hence, whilst the IEEPA does re-use the words “regulate … importation” from the TWEA, it does not mean the scope of such power is similar bearing in mind the IEEPA’s broader object of regulating and limiting presidential power vis-à-vis tariff policy. 

On appeal, the United States Court of Appeals for the Federal Circuit upheld the lower court’s judgment by a 7:4 ruling. The intermediate appellate court’s decision was premised on the following considerations: 

1. The IEEPA provides no mention of the term “tariff” or its synonyms such as “duty” or “tax” in Section 1702(a)(1)(B). This is a notable departure from numerous statutes where Congress expressly delegates the power to impose tariffs. For example: Section 338 of the Tariff Act 1930 empowers the President to “specify and declare new or additional duties”. 
2. The power to “regulate” does not imply the power to impose tariffs. Regulatory power is distinct from taxing power. This is evident from the language of the Constitution itself which enumerates the power to levy taxes separately from the power to regulate commerce. Hence, the power to ‘regulate … importation’ does not equate to a power to tax. 
3. Since its promulgation, the IEEPA has never been invoked by Presidents as legal authority to impose tariffs on imports. The present use of the IEEPA to assert a presidential claim to a power never previously claimed (i.e., the power to impose tariffs) compels the Government to “point to clear congressional authorisation”, which they could not.

Appeal to the Supreme Court & the Oral Arguments
 
Facing a 2-0 score, the Trump Administration appealed to the SCOTUS.
 
In late 2025, the SCOTUS heard the oral submissions in a 3-hour session which provided early indications on the views of the Justices to the arguments.
 
US Solicitor General D. John Sauer (“Sauer”), for the Trump Administration, pressed hard on the Administration’s determination that “our exploding trade deficits had brought us to the brink of an economic and national security catastrophe”. Thus, the IEEPA, Sauer asserted, grants the President “major powers to address major problems” and that the phrase ‘regulate … importation’ would embrace tariffs which is one of the “most traditional and direct methods of regulating importation”.
 
Neal Katyal (“Katyal”), representing the small businesses, hinged the case on common sense. He argued that it is “simply implausible” for Congress to have enacted the IEEPA with the view of conferring upon the President “the power to overhaul the entire tariff system and the American economy”. He relied upon past presidential practice that had never invoked the IEEPA as empowering presidential imposition of tariffs.
 
The SCOTUS’ liberal Justices (Justice Kagan, Justice Sotomayor and Justice Jackson) pressed upon the Administration for its claim to exercising tariff-imposing authority. For instance, Justice Jackson observed that it would be inconsistent to interpret the IEEPA which was, in her words, “designed to constrain presidential authority” with the Administration’s assertion that Congress intended the President to have unlimited tariff-imposing authority.
 
Even several conservative Justices (Chief Justice Roberts, Justice Gorsuch and Justice Barrett) expressed scepticism to Sauer’s submissions. Justice Barrett asked Sauer to refer to other federal legislation “or any other time in history” where the phrase ‘regulate … importation’ was used by Congress to authorise Presidents to impose tariffs.
 
Other conservative justices appeared favourable to the Trump Administration’s assertions. Justice Kavanaugh (joined by Justice Barrett) pressed the Solicitor General of Oregon, Benjamin Gutman, on the coherence of the IEEPA allowing the President to shutdown all trade with another country but does not permit the less intrusive measure of presidentially-imposed tariffs.
 
The Supreme Court’s Majority Judgment
 
The SCOTUS by a 6:3 majority upheld the judgment of the United States Court of Appeals for the Federal Circuit.
 
The Justices were divided as follows: 

1. Majority Opinion: Chief Justice Roberts, Justice Gorsuch, Justice Barrett, Justice Kagan, Justice Sotomayor and Justice Jackson. 
2. Dissenting Opinion: Justice Kavanaugh, Justice Alito and Justice Thomas. 

The leading opinion was delivered by Chief Justice Roberts and consisted of two key points.
 
The Taxing Power Resides Exclusively with Congress
 
Article 1, Section 8 of the United States Constitution enshrines Congress as the exclusive repository of the taxing power. The power to impose tariffs clearly flows from the taxing power as it is after all a tax imposed on imported goods and services. Further, tariffs raise revenue, a defining feature of taxation. To this, the Chief Justice observed the constitutional scheme vis-à-vis taxation as follows:
 
“Recognizing the taxing power’s unique importance, and having just fought a revolution motivated in large part by “taxation without representation,” the Framers gave Congress “alone . . . access to the pockets of the people.” The Federalist No. 48, at 310 (J. Madison); see also Declaration of Independence ¶19. They required “All Bills for raising Revenue [to] originate in the House of Representatives.” U. S. Const., Art. I, §7, cl. 1. And in doing so, they ensured that only the House could “propose the supplies requisite for the support of government,” thereby reducing “all the overgrown prerogatives of the other branches.” The Federalist No. 58, at 359 (J. Madison). They did not vest any part of the taxing power in the Executive Branch. See Nicol, 173 U. S., at 515 (“[T]he whole power of taxation rests with Congress”). “ (Emphasis added.)
 
The IEEPA Does Not Authorize the President to Impose Tariffs
 
The IEEPA authorises the President to, among others, “investigate, block during the pendency of an investigation, regulate, direct and compel, nullify, void, prevent, or prohibit … importation or exportation”. Absent from this list is the mention of tariffs or duties.
 
Hence, Chief Justice Roberts opined:
 
“That omission is notable in light of the significant but specific powers Congress did go to the trouble of naming. It stands to reason that had Congress intended to convey the distinct and extraordinary power to impose tariffs, it would have done so expressly—as it consistently has in other tariff statutes.” (Emphasis added.)
 
The Administration’s reliance on the words ‘regulate … importation’ is insufficient to fill the legislative omission. Chief Justice Roberts, citing Black’s Law Dictionary (5th ed. 1979) said the term ‘regulate’ ordinarily means to “fix, establish, or control; to adjust by rule, method, or established mode; to direct by rule or restriction; to subject to governing principles or laws” and is not usually thought to include taxation. No reference can be shown to the Court on any legislation which delegated taxing power through regulation. It is unlikely that Congress would have hidden away the delegation of such a core congressional power within the word ‘regulate’.
 
Thus, Chief Justice Roberts concluded:
 
“The question is not, as the Government would have it, whether tariffs can ever be a means of regulating commerce. It is instead whether Congress, when conferring the power to “regulate … importation,” gave the President the power to impose tariffs at his sole discretion. And Congress’s pattern of usage is most relevant to answering that question. That pattern is plain: When Congress grants the power to impose tariffs, it does so clearly and with careful constraints. It did neither here.” (Emphasis added.)
 
The Supreme Court’s Dissenting Judgments
 
Principal Dissent from Justice Kavanaugh
 
Citing the legislative text, Justice Kavanaugh (joined by Justice Thomas and Justice Alito) concluded that the IEEPA does in fact authorise a President to impose tariffs. He relies on the following wordings in Section 1702(a)(1)(B):
 
“…the President may, under such regulations as he may prescribe, by means of instructions, licenses, or otherwise—
…
 
(B) investigate, block during the pendency of an investigation, regulate, direct and compel, nullify, void, prevent or prohibit, any acquisition, holding, withholding, use, transfer, withdrawal, transportation, importation…” (Emphasis added.)
 
His Honour also made reference to the tariffs imposed by the Nixon Administration under the IEEPA’s predecessor, the TWEA. Under a similarly worded provision, the Nixon Administration imposed tariffs which were upheld in 1975 by the Court of Customs and Patent Appeals (see: United States v. Yoshida Int’l, Inc., 526 F.2d 560). The IEEPA’s ‘regulate… importation’ were directly borrowed from the TWEA and logically would not exclude imposing tariffs as a means to regulate imports.
 
Justice Kavanaugh also cited tariffs imposed by the Ford Administration in 1975 on foreign imports of oil. The litigation arising therefrom centred on whether the words “adjust the imports” under Section 232 of the Trade Expansion Act 1962 authorised the President to impose tariffs. This culminated in the SCOTUS’ unanimously upholding the Ford-era tariffs as valid in Federal Energy Administration v. Algonquin SNG, Inc., 426 US 548 (1976). The words ‘adjust the imports’ was held to encompass both quantitative methods (e.g., import quotas) and monetary methods (e.g., license fees).
 
Thus, Justice Kavanaugh concluded:
 
“If Congress in 1977 wanted to exclude tariffs from the President’s IEEPA toolkit, either it would have not retained the phrase “regulate . . . importation,” or it would otherwise have made clear in IEEPA that the power to impose tariffs was excluded. Congress did neither.”
 
Secondary Dissent from Justice Thomas
 
In addition to concurring with Justice Kavanaugh, Justice Thomas authored a separate dissenting opinion to address the question of whether Congress can delegate the tariff power, which he answered in the affirmative.
 
Justice Thomas first described ‘core legislative power’ as the power to make law that affects life, liberty or property (which are collectively described as ‘core private rights’). Hence, any deprivation of life, liberty or property is only permissible on the basis of a rule enacted by the legislature and is non-delegable. Conversely, the tariff power is not a core legislative power because it does not “involve setting the rules” to restrict core private rights. Justice Thomas found that no one “had a core private right to import goods” at the Founding of the United States as the Founders understood importation of goods to be a privilege rather than a core private right. Thus, Congress may delegate the tariff power to the President.
 
By framing the constitutional issue from the perspective of regulating foreign commerce rather than raising revenue via taxation, Justice Thomas concluded that the IEEPA empowers the President to impose tariffs as a means of regulating foreign commerce.
 
The Aftermath
 
The response from the Trump Administration was immediate. On the very same day of the SCOTUS’ ruling, President Trump invoked Section 122 of the Trade Act 1974 and imposed, for 150 days, a 10% ad valorem import duty on all imports (“Section 122 Tariffs”) with effect from 24 February 2026 12:01 a.m. (Eastern Standard Time). On the following day, President Donald Trump posted on Truth Social his intention to hike the tariff to 15%, the maximum rate under Section 122 of the Trade Act 1974. However, no Executive Order has been promulgated to date to implement this tariff hike.
 
On 5 March 2026, 24 American States filed a challenge to the legality of the Section 122 Tariffs, among others, on grounds that the statutory conditions required for the use of Section 122 had not been fulfilled and that the Section 122 Tariffs are in excess of what the Trade Act 1974 provides for.⁴ It appears that the stage is set for a new round of tariff litigation to be appealed all the way back to SCOTUS for another ruling either in late 2026 or early 2027. Whether the Justices will rule in the same direction remains to be seen. However, it is clear that the question of Presidential power over tariffs has divided the conservative justices of the SCOTUS – as the Trump-nominated Justice Gorsuch and Justice Barrett provided the necessary votes to Chief Justice Roberts and the liberal justices in Learning Resources.
 
It is estimated that the tariffs collected under the IEEPA amount to $166 billion. The SCOTUS’ majority judgment does not address the point of refunds. This attracted the criticism from President Donald Trump who remarked that the issue of refunds would take between two to five years of litigation to be resolved.⁵
 
As it stands, the US Government has not created a framework on managing tariff refunds. Notwithstanding, business groups affected by the IEEPA tariffs have demanded the Government expeditiously process the refunds. Illinois Governor, JB Pritzker sent a letter to President Trump, demanding that every household in Illinois be provided a $1,700 payment.⁶ The State of New York has also joined the call for refunds, demanding tariff refunds worth approximately $13.5 billion.⁷
 
On 4 March 2026, Judge Eaton of the Court of International Trade issued an order directing US Customs and Border Patrol to initiate the refund process of IEEPA tariffs struck down by the SCOTUS. Citing the court’s jurisdiction to make nation-wide orders and subject-matter jurisdiction over claims regarding tariff refunds, Judge Eaton held that all importers who were subject to IEEPA tariffs “are entitled to the benefit” of the SCOTUS’ ruling.⁸ It is likely the US Department of Justice will appeal this ruling, which will trigger litigation to determine the fallout from the SCOTUS striking down the Trafficking Tariffs and Liberation Day Tariffs, casting further uncertainty on an already very ambiguous trading environment.
 
Significance to Malaysia and the Wider World
 
In October 2025, Malaysia and the United States signed the bilateral Agreement on Reciprocal Trade (“ART”). The object was to lower the average tariff Malaysian goods face upon entry into the United States and lower trade barriers for American goods imported into Malaysia. With the collapse of the Liberation Day Tariffs, the circumstances leading to ART have essentially vanished.
 
After initially announcing that the ART had become “null and void” by reason of the majority opinion in Learning Resources,⁹ the Minister of Investment, Trade and Industry of Malaysia, Datuk Seri Johari Abdul Ghani subsequently said that Malaysia has not received any feedback from the United States on the ART following the decision in Learning Resources. The Minister added that the United States is conducting a review to determine the new tariff rate and within five months¹⁰ discussions would take place after the United States presents its proposal to Malaysia.¹¹  
 
Notwithstanding, Malaysia and other States who have been released from the yoke of the Trafficking Tariffs and/or Liberation Day Tariffs cannot rest easy yet. On 11 March 2026, the Trump Administration opened investigations under Section 301 of the Trade Act 1974 that may be a prelude to a new wave of tariffs to fill the void of the IEEPA-based tariffs struck down in Learning Resources. In a call with reporters, US Trade Representative Jamieson Greer affirmed that the Trump Administration’s trade policy remains the same and it is the tools which may change “depending on, you know, the vagaries of courts and other things”.
 
Overall, the situation on international trade remains uncertain in view of ongoing and pending litigation flaring up in the United States. The litigation surrounding Learning Resources demonstrates the willingness of the American Judiciary to step in and restrain the Executive branch’s margin of appreciation vis-à-vis trade policy. Whilst the courts disclaim any superior knowledge/expertise over foreign commerce, unfavourable statutory interpretation and precedent hinder President Donald Trump’s signature ‘America First’ trade policy. Unless the Trump Administration alters its course or a new Administration is inaugurated in 2028, importers in, and exporters to, the United States will continue to sail in turbulent waters. With the Section 122 Tariffs and more to come, every State with an interest in maintaining access to the large and wealthy American market must commit to keeping open and engaging diplomatic channels with Washington DC. The American market is too attractive to ignore.
 
 
Case Note by Muhammad Akhmal Amaluddin Bin Mat Aris (Associate) of the Dispute Resolution Practice of Skrine.
 
 
This article/alert contains general information only. It does not constitute legal advice nor an expression of legal opinion and should not be relied upon as such. For further information, kindly contact skrine@skrine.com.