On November 5, the U.S. Supreme Court heard oral arguments on whether President Trump used the International Emergency Economic Powers Act (IEEPA) properly in imposing reciprocal and fentanyl-related tariffs on trading nations around the world. One of the case’s lead petitioners is Learning Resources, an educational toy company impacted by the tariffs, joining a spirits company and other small businesses.
As previously reported, the case centers on whether the Administration went too far in using emergency powers meant for national-security situations to impose broad trade tariffs on countries around the world. The Court is expected to decide before the New Year (2026), although legally it has until spring 2026.
During the hearing, the U.S. Supreme Court Justices pressed both sides on a few big-picture questions:
- Do tariffs qualify as “taxes” under IEEPA?
- How much power should a president have to set tariffs without approval from Congress?
- If the tariffs are struck down, how would refunds work?
While some conservative justices signaled support for broad presidential authority and allowing flexibility for national security emergencies under IEEPA, others joined liberal justices in questioning whether allowing these “emergency” tariffs would give the president too much unchecked power over taxation and trade.
High-profile attendees included Treasury Secretary Scott Bessent, Commerce Secretary Howard Lutnick, House Ways & Means leadership, key Senators, and other stakeholders.
U.S. Trade Representative Jamie Greer confirmed during oral arguments that the government is prepared to issue refunds if The Court invalidates the tariffs. Senior officials also reiterated confidence in the Administration’s legal position, while signaling that alternative remedies remain available if necessary.
If The Court upholds the tariffs:
- IEEPA authority would be reaffirmed.
- Both the fentanyl and reciprocal tariffs would remain in place.
If The Court strikes down the tariffs (either in whole or in part):
- The Administration may be required to issue refunds to affected importers, creating logistical and administrative complexity; this would be worked out following the ruling and it is currently unknown how this would work.
- The White House could reinstate tariffs using alternative legal authorities, including the Trade Act of 1974, the Trade Expansion Act of 1962, and other laws. The White House could recharacterize the IEEPA tariffs as “licensing fees” or “embargoes,” which are expressly permitted under that law.
It is unclear how the U.S. Supreme Court will rule in this historic case, and how the ruling will precisely impact industry. However, The Toy Association continues to believe that tariffs will be an ongoing tool in the Trump Administration’s pursuit of its trade policy, no matter the outcome of this case. The Association will continue to closely monitor the case, including any official policy developments, and will continue to update members as new information becomes available.