23 February 2026
Supreme Court IEEPA tariffs ruling: Modest implications for automakers
Article Summary
In the latest IEEPA tariffs news, the US Supreme Court issues major announcement invalidating President Trump’s IEEPA tariffs that were implemented last year.
Highlights
- US Supreme Court rules IEEPA tariffs invalid
- White House issues executive order for Section 122 tariffs to be effective Feb. 24, 2026
- Section 232 tariffs remain in place
- Little impact on vehicle forecasts at this time
On February 20, 2026, the US Supreme Court issued its ruling that many of the tariffs imposed in the first months of the current US administration exceeded presidential authority. With the authority invalidated, US President Donald Trump issued executive orders to cease collection of certain tariffs immediately, or as soon as practicable.
In 2025, President Trump used the International Emergency Economic Powers Act (IEEPA) to impose a series of tariffs on all countries, opening a period of tariff uncertainty. This included ‘reciprocal’ tariffs of varying rates on all countries, as well as tariffs on Canada and Mexico under the national emergency concern related to fentanyl trade and border security and a tariff on mainland China over fentanyl trade.
Later in the year, the President used the same authority to increase tariffs on several countries over other trade issues. Depending on the country, these IEEPA tariffs were ultimately between 10% and 50%.
The IEEPA tariffs have largely impacted the macro-economic environment with an indirect impact on the auto industry outlook. Section 232 tariffs on passenger vehicles and parts, medium- and heavy-duty vehicles and parts, steel, aluminum and copper — which are not applied cumulatively with the IEEPA tariffs — have all had larger impact on the automotive industry.
There are several other laws under which the US president may impose tariffs, but most have checks and limits. The Section 232 tariffs are authorized under the Trade Expansion Act of 1962 but also require investigation by the US Department of Commerce to prove they are necessary and to provide recommendations, which the president can accept and impose or not.
Immediate and most likely tariff options following IEEPA tariffs ruling
The US President has been clear that he believes a high-tariff environment is the best route for the US economy. As the first court cases came down against the US use of the IEEPA in this way, the current administration indicated there were other avenues open to create the environment it is looking for.
In the hours after the US Supreme Court ruling on tariffs was handed down, responsive actions were announced. Under the Trade Act of 1974, Section 122 gives the US president discretion to impose tariffs to address international payments problems. The president can impose up a tariff of up to 15% tariff or, alternatively, quotas for a period of 150 days; this can be extended by Congress. The Section 122 tariff must be applied uniformly and cannot be used to target individual countries, however.
On Feb. 20, Trump issued an executive order imposing 10% under this authority starting Feb. 24, 2026. On Feb. 21, the President announced on his social media forum that the amount would increase to 15%, though at time of writing that assertion has not been formalized. During the period of the newly announced Section 122 tariffs, the administration will explore other actions under Section 301.
Refund for businesses?
An outstanding question is when, how, and if any refunds for tariffs that businesses paid since IEEPA was imposed will be distributed; this issue was not addressed in the Supreme Court tariff case. Legal and administrative complexities make this unlikely to be resolved quickly. According to S&P Global Market Intelligence, the US could have an aggregate refund rate between US$150 and US$160 billion. Market Intelligence data shows US import duties reached US$254 billion between February and December 2025.
Trade framework agreements: What’s next following IEEPA tariffs news?
The US reached more than 15 trade framework agreements after the imposition of IEEPA and Section 232 tariffs from February 2025 through early 2026. Several of these agreements were with key automotive trading partners and significant for the auto industry, including both the light-vehicle and medium- and heavy-duty sectors.
The agreements adjusted the Section 232 automotive tariffs and, in the case of the UK, tariffs on steel. For the UK, the agreement reduced the Section 232 autos tariff to 10% for the first 100,000 units exported to the US. For the European Union, South Korea and Japan, autos and auto parts tariffs dropped to 15%.
The US Supreme Court ruling affects only IEEPA tariffs, which means the Section 232 tariffs and non-tariff elements of the framework agreements can continue as negotiated. The Section 122 tariffs which the US announced on Feb. 20 must be applied to all countries, equally, and are limited to 15%. Functionally, the Section 122 tariff replaces IEEPA tariffs, up to 150 days. For some countries, this might mean lower tariffs on certain goods and for others it may increase the real and effective tariff rates.
S&P Global Market Intelligence expects that countries and territories who signed trade frameworks are unlikely to reopen trade negotiations and will abide by the agreements. These countries incurred sunk costs in working out the agreements, they want to maintain positive US bilateral relations outside of trade and they recognize the US still has alternative methods for imposing tariffs.
However, Market Intelligence also sees risk that some governments could delay implementing some investment and other non-tariff commitments “depending on how they assess the speed, scope and legal durability of the alternative tariffs.” Relative to the auto industry, most of the investment has been committed on general outside of the auto industry. Outside of financial commitments, some may slow non-tariff elements, including agreeing to accept US vehicle safety and emissions standards in lieu of their own and without re-certifications.
The negotiated agreements structured the new rates as an adjustment to the IEEPA tariffs. With those invalidated, the agreements could see differentiated rates if the US is successful with imposing Section 301 tariffs.
Forecast assumptions hold steady
There remain other avenues for the current US President to move forward a high-tariff trade policy, including the Section 122 announced already. The Section 232 tariffs remain the most impactful to the US auto industry and remain in place. The situation creates further uncertainty in the system, but there is no immediate change to our automotive industry forecast assumptions for a relatively high-tariff environment, and for the United States-Canada-Mexico Agreement to see revision later this year.
S&P Global Mobility is not yet modifying vehicle production or sales forecast assumptions, whether for light vehicle forecasts or for medium- and heavy-duty vehicle forecasts.
S&P Global Market Intelligence says macro-economic impact will depend in part on the extent to which the administration can replace the IEEPA tariffs with tariffs authorized under alternative mechanisms.
Navigate the impact of US trade deals and tariffs uncertainty with confidence
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This article was published by S&P Global Mobility and not by S&P Global Ratings, which is a separately managed division of S&P Global.