Trump’s Tariffs Are Illegal. What’s Next for Russia, Europe, and Everyone Else?

April 2, 2025. Donald Trump announces Liberation Day, declaring a national emergency in the United States, and issuing executive orders to raise tariffs against nearly all countries, and some penguins as well.

February 20, 2026. The Supreme Court liberates the United States from Liberation Day. The mechanism that Trump used to impose tariffs is unconstitutional.

They must stop immediately, or at least in their current form.

Phew. There is a lot to cover here, because the tariffs had consequences for international security policy, as well as international insecurity policy for U.S. allies.

So, today, I want to quickly explain the rationale of the Supreme Court’s ruling, the immediate consequences both domestically and globally, and what we may see as a response from the Trump Administration in the upcoming weeks.

Let’s start with the case itself. Trump had imposed tariffs under the International Emergency Economic Powers Act, or IEEPA, a Jimmy Carter era law designed to concentrate coercive power into the executive’s hands and away from the deliberative Congressional

bodies. It is not a crazy thing to do given the tradeoffs between democracy and global power.

bodies. It is not a crazy thing to do given the tradeoffs between democracy and global power.

Well, the Trump administration declared a state of emergency based on claims of trade deficits and foreign narcotics reaching U.S. markets

thereby causing significant annual deaths. That ushered in the Liberation Day tariffs, which immediately spilled into issues well past those specific concerns.

Of the many things that the IEEPA allowed for, however, tariffs were not on the list.

Consequently, many were not amused about the Liberation Day tariffs, even if Trump was throwing hats out to the crowd that day.

Various effected businesses sued, leading to the case “Learning Resources v Trump.”

The main issue is that tariffs are taxes paid by importers, with the net economic costs borne by both the importer and exporter.

I do not want to turn this video into an Econ 101 lesson, but just because you literally pay a tax does not mean that you bear the entire burden of it. The seller realizes that it has less bargaining power due to the tax and will therefore cut down the price accordingly.

Who ends up paying more depends on the second derivatives of supply and demand functions. And

if you have not clicked off this video despite me referencing second derivatives, bless you child.

Anyway, taxes cause economic harm, various companies thought that the tariffs were illegal, and so the case slowly made its way to the Supreme Court. Oral arguments

were in November 2025. The Court then took its sweet time making a decision, but it finally came out today. And the tariffs are indeed illegal.

Despite the ideological division of the Court being 6-3 in favor of conservatives, three of those conservatives joined the three liberals, including two who are Trump appointees.

Chief Justice John Roberts wrote the decision: “The Government [meaning the Trump Administration] … concedes that the President enjoys no inherent authority to impose tariffs during peacetime. It instead relies exclusively on IEEPA to defend the challenged tariffs. It reads the words “regulate” and “importation” to effect

a sweeping delegation of Congress’s power to set tariff policy—authorizing the President to impose tariffs of unlimited amount and duration, on any product from any country ….”

“When Congress has delegated its tariff powers, it has done so in explicit terms and subject to strict limits. Against that backdrop of clear and limited delegations, the Government reads IEEPA to

strict limits. Against that backdrop of clear and limited delegations, the Government reads IEEPA to give the President power to unilaterally impose unbounded tariffs and change them at will. That

view would represent a transformative expansion of the President’s authority over tariff policy….”

“[T]he Government [again, meaning the Trump Administration] cannot identify any statute in which the power to regulate includes the power to tax.

The Court is therefore skeptical that in IEEPA—and IEEPA alone—Congress hid a delegation of its birth-right power to tax within the … power to “regulate” ….”

Now, I thought that this next part was especially interesting: “A contrary reading would render IEEPA partly unconstitutional. IEEPA authorizes the President to “regulate . . . importation

or exportation.” But taxing exports is expressly forbidden by the Constitution.”

“Held: IEEPA does not authorize the President to impose tariffs.” End of story.

Just some quick commentary about the nature of the Supreme Court. Over the past decade or so, I think that the public has gotten a better understanding that the Court is an inherently political actor, even if they often couch their political language in legalese.

It therefore may be surprising to some that three conservative justices went against Trump. Well,

part of what you may be looking at here is that liberal trade policy up until the Trump Administration had been a hallmark of Republican policy platforms. (Sorry that “liberal” trade policy in this context is a confusing term.) So this may be a situation where some justices were in fact voting their politics—just more classically conservative than new-age MAGA.

However, aside from that, the Supreme Court also has political interest in surviving as an institution. The framers of the U.S. Constitution at least partially envisioned it as providing a check and balance against the other branches of government. The justices must care about the long game as well, because they have lifetime appointments. They do

not have to directly worry about what is happening on the ballot in a year or two.

What the Court cannot oversee is a situation where the executive branch takes unbridled control over every facet of the government. Ideologically speaking, many on the court may agree with many of Trump’s policies. But the IEEPA was clear on the tariff matter, and the tariffs themselves were politically unpopular in the United States. If there was

going to be a clear opportunity to exert power over Trump, this was it. And they took it.

The markets were pleased with the decision. The S&P 500 jumped about 0.8% as soon as the ruling came out. Now, on one hand, given all of the consternation about how bad the tariffs are for

came out. Now, on one hand, given all of the consternation about how bad the tariffs are for the economy, you may be surprised that it was not more. Well, a couple of notes there. One,

if you had a million dollars in market, and I told you that a guy named John said some words, and now magically you had an extra $8,000 just because he said those words, you would probably be happy.

Two, though, it was only 0.8% because the ruling was already built into the market.

Stock prices reflect expectations, not the news directly. This is another place where prediction markets are helpful for understanding what people are thinking. A

stock price has a thousand expectations built into it. A prediction market has just one.

And right before the ruling came out, the prediction market’s guess was that the Court was going to reject the tariffs with between 75% and 80% likelihood.

Thus, another way to think about the market’s gain is that had the Court ruled in favor of the Trump Administration instead, stocks would have immediately shed about 3% of their value.

Moving along, on the international relations front, the ruling has three immediate effects.

First, over the last couple of months, countries have been purchasing fewer barrels of Russian oil out of fear of secondary sanctions—that is, Trump would impose tariffs on those importers as a means of punishment, so as to deter them from importing the oil in the first place. That would then give better leverage to Trump to force Putin to agree to a ceasefire.

place. That would then give better leverage to Trump to force Putin to agree to a ceasefire.

It turns out that if you cannot pay for an invasion of Ukraine, you cannot continue to invade Ukraine.

Well, the threat of the tariff was purely from the IEEPA. That is off the books now. You may

start seeing some additional imports over the short term, giving Russia more rubles to work with at a time when the budget constraint inside the Kremlin is getting tighter.

I say “for now” because there is bipartisan support for a bill that explicitly authorizes the president to impose secondary sanctions. It has sat in Congress since April. Presumably,

that will go through the House and Senate quickly, and the threat to sanction importers of Russian oil will return.

So, from Ukraine’s perspective, this is likely a short run problem, not long run problem.

The second implication for international relations involves Cuba, which the Trump Administration has tried to squeeze since the removal of Maduro from Venezuela in early January. Cuba relied

on Venezuela for imported oil. With that gone, Cuba is in the midst of an energy and economic crisis. The Trump Administration was threatening to tariff any country that broke the definitely

crisis. The Trump Administration was threatening to tariff any country that broke the definitely not a blockade but rather a quarantine. Again, that is off the books. There is

bipartisan support for something to be done here as well, but it is not as popular as the aforementioned secondary sanctions bill involving Russia. Thus, a new legislative solution is not likely to arrive as rapidly, and it is possible that nothing ever reaches the president’s desk.

Of course, the U.S. Navy could have a strong influence in enforcing a quarantine aside from the tariff threats. In turn, that is something to watch out for, especially as Russia prepares a tanker delivery to the island.

The final implication for international relations involves all of the U.S. trading partners who grew frustrated of the never-ending tariff threats. Now, a bunch of them began to internalize how these tended to be a bunch of TACOs, and a threat that would never be followed through on is a threat that is not worth paying attention to. But it did form part of the backbone of, say,

the Greenland saga from a month ago. And it was a constant point of discussion whenever more standard trade negotiations took place. I have no doubt that Europeans are celebrating right now, knowing that it is one step more complicated for Trump to make those threats in the future.

Ah, but there is the rub. The future. What will Trump do in response? There is no way that Congress will give Trump the blank check that he claimed the IEEPA gave him. So, at most, his legal team would be left with searching for alternative documents that purportedly give the president the ability to impose tariffs at his sole discretion. One may therefore imagine that

we will see some type of repeat of this case in the future. But one thing to keep in mind is that the Trump Administration chose the IEEPA as its justification because it thought that law was the most plausible mechanism. Anything else that the administration might try later is going to be on even shakier legal ground than what we have already seen.

So when you see claims like Trump’s response on Truth Social “that there are methods, practices, Statutes, and other Authorities, as recognized by the entire Court and Congress, that are even stronger than the IEEPA TARIFFS,” be skeptical.

And there is also the lingering question of a legal remedy to the tariffs already imposed.

Remember, people have been paying taxes here for the better part of a year. That money made its way into government coffers—illegally, as the Supreme Court has declared. How will importers get any of that money back? And even if an importer does get their money back, also remember that they were passing along the cost of the tariffs to end purchasers—effectively, people like you and me.

Will we ever get our money back? That is something that the lower courts will be grappling with soon.

In the meantime, it is a like a whole new ballgame for the Trump Administration.

Tariffs have been front and center for basically this entire presidential term. Once upon a time, I would teach a lecture hall full of freshmen, and few would have ever heard of the “t” term before it came up on the syllabus. That era is no more. But to some degree, Trump will have to move past it. And in a year where so much other stuff has been happening, I guess we will all

just have to follow the news for yet another reason to see what Trump’s next strategy is.

If you want to learn more about how tariffs distort economic systems in ways that are far from obvious, check out this video that I produced when the Liberation Tariffs first arrived.

And if you enjoyed today’s video, then please like, share, and subscribe, and I will see you next time. Take care.