While this represents the current landscape at the time of writing, we are actively monitoring developments as this story develops.

The US Supreme Court ruled on February 20 that President Donald Trump lacks the emergency authority to impose many of his administration’s tariffs under the International Emergency Economic Powers Act (IEEPA), including the so-called “Liberation Day” duties and levies on Canada, Mexico, and China.

Where did tariffs stand prior to the decision?

The Trump administration’s trade policies upended the retail and advertising landscapes. As of November, nearly half of all US imports were subject to duties, according to a New York Times analysis of Census Bureau trade data. Roughly 25% of all US imports were specifically subject to IEEPA-based tariffs—the law at the center of the Court’s decision.

How have tariffs impacted consumers?

Since “Liberation Day,” consumers have faced effective tariff rates not seen in decades.

Immediately following the IEEPA ruling, the effective rate fell to 9.1%—still the highest level since 1946 (excluding 2025), according to the Yale Budget Lab. Had the IEEPA tariffs remained in effect, it would have climbed to 16.9%, the highest since 1932.

After the Trump administration imposed the Section 122 tariffs on February 24, the rate rose to 13.7%. If those duties expire after 150 days, it would return to 9.1%.

Under the Yale Budget Lab’s assumptions—including that the Federal Reserve “looks through” the tariffs and allows the burden to pass through prices rather than offsetting it with tighter monetary policy—the remaining tariffs would raise the overall price level by 0.5% to 0.6% if the Section 122 duties expire as scheduled. That translates into a loss of roughly $600 to $800 per average household.

If the Section 122 tariffs are made permanent, the price impact would increase to 0.8% to 1.0%, or about $1,000 to $1,300 per household. Had the IEEPA tariffs remained in place, the short-run price impact would have reached 1.2%, costing the average household an estimated $1,751 annually, or $1,292 after accounting for consumer substitution.

Federal Reserve research reinforces this pattern. A February 2026 New York Fed analysis found that nearly 90% of the tariffs’ economic burden falls on US firms and consumers rather than foreign producers. In effect, tariffs function primarily as a domestic tax on businesses and households.

The effective rate could rise more if the administration turns to other statutory authorities to impose additional duties.

What is the new temporary tariff under Section 122?

In the aftermath of the Court’s decision, President Trump signed a proclamation implementing a temporary 10% global import duty under Section 122 of the Trade Act of 1974, which allows the president to levy surcharges of up to 15% for as long as 150 days to address “fundamental international payment problems,” including balance-of-payments deficits. The duty took effect on February 24 and are set to remain in place for 150 days.

In a subsequent social media post on February 21, the president said he would raise the global tariff to 15%—the maximum permitted under Section 122—and that the higher rate would take effect immediately, replacing many of the duties invalidated by the Supreme Court. However, although US Trade Representative Jamieson Greer told several media outlets that Trump would sign the directive in the coming days, no formal action had been taken as of February 26.

The current proclamation carves out numerous exemptions, including:

• Certain agricultural goods
• Pharmaceuticals and ingredients
• Certain electronics
• Passenger vehicles and many auto parts
• Informational materials, such as books
• USMCA-compliant goods from Canada and Mexico

Low-value shipments affected by the de minimis suspension are also subject to the new duties.

Will consumers and/or businesses receive refunds from the IEEPA tariffs?

It remains unclear what happens next.

Although the Supreme Court ruled that the IEEPA tariffs were unlawful, it did not address whether previously collected duties must be refunded to importers of record. Those tariffs generated more than $160 billion in revenue from companies importing foreign goods, according to the Tax Foundation, which estimates they would have raised roughly $1.4 trillion from 2026 through 2035 had they remained in effect.

Behind the scenes, the administration is reportedly weighing several options to limit or reshape potential refunds. According to Politico, one proposal under discussion would attempt to deem previously collected tariff payments lawful under a revamped set of duties imposed under different statutory authorities. Another option would allow companies to move to the front of what is expected to be a lengthy refund queue if they agree to forfeit a portion of the money owed to them. Either approach would likely invite further legal scrutiny.

Litigation is already underway. FedEx, L’Oréal, Dyson, and Bausch + Lomb are among the companies suing the US government for full refunds of tariffs paid under IEEPA authority. Costco and Kohl’s have also filed suits that remain pending before the US Court of International Trade in New York.

Even if refunds are ultimately issued, the economic impact may be muted. While most of the tariff burden was passed through to consumers, reimbursements would technically flow to businesses as importers of record. However, some companies are pledging to pass any repayments along. FedEx has said it would refund shippers and consumers who bore the charges if it receives compensation, per Axios. Cards Against Humanity has similarly vowed to return any tariff-related overpayments to customers, while Dame Products has already begun issuing automatic refunds to customers rather than waiting for a potential government rebate.

President Trump has suggested that any refund process would likely be tied up in litigation for years. Given that legal and procedural uncertainty, refunds—if they occur—are unlikely to provide a meaningful near-term macroeconomic boost.

What happens now?

The administration appears committed to using alternative statutory tools—particularly Section 122—to maintain elevated tariff levels. That step alone pushed the effective tariff rate back toward pre-ruling levels. Even if the Section 122 duties expire after 150 days, ongoing uncertainty will likely keep retailers cautious in their inventory planning, pricing strategies, capital allocation, and advertising budgets.

Had the administration not imposed Section 122 tariffs, we would have expected the Supreme Court’s decision to create a modest but measurable tailwind for retail sales. Lower import costs would have reduced pricing pressure in import-heavy categories, lifting nominal retail sales relative to our Q1 2026 baseline, with the biggest gains accruing to import-heavy discretionary categories.

Specifically, we expected:

• Immediate cost relief for retailers: ​​Lower landed costs would have driven disinflation in import-heavy categories such as apparel, furniture, toys, and consumer electronics. While retailers absorbed a meaningful share of the tariff burden, many passed through some of their costs. A June New York Fed survey found that roughly three-quarters of affected firms passed along at least some tariff-related increases, and up to half fully passed them through. A Harvard Business School analysis similarly found that import prices rose 5.4% in the first six months after tariffs were imposed, compared with 3.0% for domestic goods.
• Refunds channeled into discounts and ad spend: If refunds are eventually issued, some portion could flow back to consumers via targeted promotions, temporarily boosting traffic and sales, while some could support margins or incremental ad spend. However, given ongoing legal uncertainty, companies would likely prioritize balance sheet flexibility over aggressive discounting. Promotion-driven categories like apparel would be most likely to pass savings through.

To demonstrate the impact of the Court’s decision, we modeled two retail spending scenarios for 2026 and beyond:

• Base case: Had the Court kept tariffs in place, we would have expected US retail sales to grow 3.4% this year to $7.767 trillion.