Introduction
On Friday 20th, 2026, the Supreme Court of the United States (SCOTUS), struck down the sweeping tariffs that President Trump had originally imposed in a series of executive orders. The SCOTUS ruled that the tariffs exceed the powers given to the President by Congress under the 1977 International Emergency Economic Powers Act, known as IEEPA. The IEEPA authorizes the President to use the laws “to deal with any unusual and extraordinary threat, which has its source in whole or substantial part outside the United States, to the national security, foreign policy, or economy of the United States, if the President declares a national emergency with respect to such threat.” In essence, the ruling creates a more complex legal landscape, potentially slowing large-scale, long-term FDI due to persistent, albeit reshaped, trade policy uncertainty rather than eliminating tariff-driven investment decisions.
In Depth
The Legal Framework
In a 6-3 decision, the Court ruled that the International Emergency Economic Powers Act (IEEPA) does not grant the president authority to impose certain tariffs, limiting executive power and bolstering congressional oversight on trade. In imposing most of the ‘reciprocal tariffs’ President Trump cited large trade deficits as an “unusual and extraordinary threat to the national security and economy of the United States.” Nonetheless, for the past fifty years, the United States have constantly run on a trade deficit, spending more than what it has produced. In his opinion, Justice Roberts wrote that the IEEPA “contains no reference to tariffs and duties.” In addition, “until now no President has read the IEEPA to confer such a power.” Moreover, citing the ‘major question doctrine’ (MQD), three of the judges wrote that it is very unlikely that Congress would have delegated the President of “highly consequential power” through ambiguous language. In previous recent cases the SCOTUS has rejected a similar argument about the executive branch holding emergency powers in the student-loan forgiveness case. Learning Resources, Inc. v. Trump, (Learning) may also have implications for other aspects of the Trump’s agenda. For instance, a few additional questions may arise to determine whether President Trump has the constitutional legitimacy and statutory authority to require NVIDIA to give 25% of its sales to the United States government to secure export license. Or, whether President Trump has the authority to force Ukraine to share proceeds from its mineral resources in exchange for the United States security and military assistance.
What does the SCOTUS Holding Mean in Reality?
The SCOTUS decision on the constitutionality over the President’s use of IEEPA does not eliminate the ability of the executive branch to impose tariffs without Congress’s approval. Section 122 of the Trade Act of 1974 has already been invoked by President Trump to maintain even higher tariffs. In addition, Section 232 of the Trade Expansion Act of 1962 and Section 310 of the Trade Act of 1974 give the executive established pathways for imposing tariffs. The SCOTUS decision of IEEPA does not prevent President Trump from imposing tariffs through other means, rather it gives Congress the opportunity to finally create a legal framework that would embrace clarity in the United States trade policies. Foreign investors need strategic clarity and certainty of the United States trade policies.
So, what is Next for Foreign Direct Investment in the United States?
Immediately after the SCOTUS holding, President Trump reacted by pursuing the same objective through a different statute, where his authority is arguably clearer. Under Section 122 of the Trade Act of 1974, U.S.C § 2123, he lifted a 10% global tariff and a 15% tariff over the weekend on imports from all countries. The instability of the trade policies imposed by the current administration force businesses to live with continued uncertainty. The importance of the ruling in Learning, lays in the chance the SCOTUS is giving to Congress to restore stability and clarity in the United States trade policy framework.
Conclusion
In summary the SCOTUS’s February 20th, 2026, ruling in Learning, has the following implications:
Impact on FDI Strategy: The ruling forces a pivot from relying on unpredictable, broad IEEPA-based tariffs. While some investments may decrease due to overall trade uncertainty and fears of retaliation, the continued, albeit modified, tariff environment (e.g., 15% new, narrower duties) may drive “tariff-jumping” FDI, where foreign firms set up production within the U.S. to avoid import taxes.
Continued Uncertainty: Despite the ruling, the administration immediately implemented new tariffs under different statutes (Section 122 and 232). This suggests that while the “fastest” tool is gone, the overall, long-term trade protectionism and policy fluidity remain, which can suppress long-term investment planning.
Shift in Legal Landscape: The ruling specifically invalidates the use of IEEPA for broad, economic-related tariffs, requiring the administration to use more specific, and likely more legally challenging, authorities (e.g., Sections 122, 232, 301).
Potential for Refunds: The ruling raises the possibility that importers could seek repayment of up to $200 billion in duties collected since April 2025, which might temporarily boost corporate liquidity but does not change the long-term, high-tariff environment.
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