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In a 6-3 decision on Friday, America’s highest court ruled that the Trump administration lacked the constitutional authority to impose sweeping tariffs under the International Emergency Economic Powers Act, a statute the White House had deployed as its primary trade weapon since early 2025. The Supreme Court ruling reaffirmed what trade lawyers had long argued: the power to impose tariffs is, in the words of the majority, a branch of the taxing power explicitly reserved for Congress under Article I of the Constitution.
But fashion’s trade troubles aren’t over.
The administration’s response came within hours. In a Truth Social post on Saturday, US President Donald Trump announced he would enact a new global tariff surcharge — first at 10%, then raised to 15% — under Section 122 of the Trade Act of 1974, a rarely invoked provision designed to address balance-of-payments crises. As of the time of publication, no official federal notice had been published confirming the rate increase, though the 10% surcharge — effective February 24, with a 150-day statutory window — was formalised in a signed proclamation. New Section 301 investigations into unfair trade practices were announced in the same breath, laying the groundwork for a separate and potentially permanent tariff architecture.
For fashion and apparel — an industry that has navigated 12 months of whipsaw trade policy — the ruling landed as neither resolution nor relief. “It’s a constraint,” says Maria Pagán, attorney and former Deputy General Counsel at the Office of the United States Trade Representative. “But it’s not really, because Trump never really had the power to do what he was doing with IEEPA. The power to tax, the power to impose tariffs, is clearly given in the Constitution to the Congress.”
Industry associations were swift to welcome the ruling — and equally quick to flag what it does not resolve.
“Today’s Supreme Court decision reaffirms that only Congress — through its Article I, Section 8 powers — has the authority to impose tariffs,” Steve Lamar, president and CEO of the American Apparel and Footwear Association, notes in a statement issued Friday. “This is a bedrock principle that was present at the founding of our country and is no less important as we celebrate its 250th birthday.”
The ruling is “a tremendous victory for American consumers and American businesses”, says Julia Hughes, president of the US Fashion Industry Association, noting that fashion brands and retailers already carry some of the highest tariff burdens of any sector. Her organisation is calling on the administration to develop an efficient, automatic refund process to return what she estimates to be more than $133 billion in IEEPA tariffs collected from industry.
Angela Santos, partner and customs practice leader at ArentFox Schiff, notes that the ruling’s immediate effect is precedential rather than operational. “As of February 20, 2026, IEEPA tariffs are unlawful,” she says. “But CBP cannot cease collecting tariffs based solely on the court’s opinion.” A presidential executive order issued Friday evening directed agencies to begin winding down IEEPA duty collection, but implementation will take time, and the transition period introduces its own compliance risks.
What the court has struck down is one tool. The tariff toolbox remains decidedly open for business — meaning businesses have no choice but to brace for further impact.
The refund question
According to projections from the Penn Wharton Budget Model, based on data from the US International Trade Commission, US Customs and Border Protection (CBP) and the US Department of the Treasury, reversing the IEEPA tariffs could generate up to $175 billion in refunds to importers. Can brands get that money back?
Pagán is unsparing on the underlying principle: the administration was never entitled to the money in the first place. But there is a yawning chasm between having a legal right to a refund and actually obtaining one.
For fashion companies, the imperative is to move now, before the procedures are formalised. Santos is advising clients to file protests immediately to preserve their refund rights, preserve all documentation related to IEEPA tariff payments — import data, entry summaries, payment records, invoices and any CBP correspondence — and track inventory liquidation dates carefully. “We are helping many companies evaluate their import data and position themselves to quickly apply for refunds once the process has been developed,” she says.
The operational pressure is significant. Chris Desmond, a partner in PwC’s customs and international trade practice, warns that the refund process will arrive on top of an already stretched customs infrastructure. “Customs brokers will be under significant strain, with limited capacity to manage a surge of post-summary corrections and protests across thousands of importers,” he says. “Those that move quickly, with clear data and a defined strategy, will be far better positioned to get in front of the line as refund mechanisms take shape.”
Desmond advises companies to focus on three critical priorities: robust modelling of true opportunity and eligibility at the entry level; CFO-level attention to refund timing relative to seasonal cash needs; and honest accounting of execution risk.
There is also a downstream contractual question. Companies that restructured supplier relationships, renegotiated contracts, or adjusted pricing explicitly in response to IEEPA tariffs may now face disputes over those arrangements, notes Santos. A review of material change provisions and any clawback mechanisms tied to tariff changes should happen immediately, she says.
Ali Furman, PwC’s consumer markets industry leader, frames the refund question in terms that will resonate with finance teams: any refunds received would likely be treated as one-time gains until cash is in hand, not as structural margin normalisation. “The strategic decision then becomes capital allocation,” she says — whether to reinvest in brand and retail experience, strengthen inventory positions ahead of key seasons, or improve price positioning in competitive categories. For luxury houses in particular, she cautions, any adjustment to pricing structure must be weighed against long-term brand equity signals.
If brands raised prices citing IEEPA tariffs, the question of whether they reverse those increases now is less straightforward than it might appear — and the answer, from some analysts, is: not yet, and possibly not at all.
Neil Saunders, managing director of GlobalData’s retail division, is blunt about consumer expectations: most shoppers have already absorbed elevated prices as the new normal. “The consumer is inflation-weary, so any reduction in prices would be welcomed,” he says. “However, most have already accepted that prices will remain elevated.” In theory, markets could penalise brands that maintain inflated pricing post-ruling — but in practice, he notes, disentangling tariff-driven increases from broader inflationary adjustments is a task few consumers will undertake.
Furman raises a point that cuts closer to brand reputation than to margin: companies that raised prices indiscriminately during the tariff period may face pressure to demonstrate that refunded duties benefit customers who bore those costs. “Retailers could use refunds to offset prior price increases through targeted promotions and/or provide one-time employee bonuses,” she says. How brands handled that calculus — whether they absorbed costs to protect customers or passed them through indiscriminately — may prove as consequential for long-term loyalty as the tariff exposure itself.
Diversification without reversal
One of the more consequential shifts of the IEEPA tariff era was in sourcing. According to Dr. Sheng Lu, director of the department of fashion and apparel studies at the University of Delaware, China’s share of US apparel imports dropped from 20.9% in 2024 to 13.7% in 2025 — a structural change driven directly by tariff pressure. US fashion companies moved aggressively toward emerging suppliers in Cambodia, Pakistan, Jordan and Sri Lanka, while overall US apparel import growth lagged peer markets significantly: just 1.7% in the first 10 months of 2025, against 6 to 11% growth in the EU, UK and Japan.
The ruling does not unwind that geography. Lu expects companies to wait and see before significantly adjusting import volumes or sourcing patterns — particularly given unresolved questions around the refund process and the rapidly shifting tariff architecture. Section 122 tariffs already apply; Section 301 investigations may follow. The incentives to diversify have simply changed legal address instead of disappearing altogether.
Rita McGrath, professor of management at Columbia Business School, is direct on the question of reversal: companies that diversified their supply chains in response to IEEPA tariffs were not making a mistake, but reverting now would be. “You don’t dismantle resilience because one threat receded,” she says. “Threats iterate; your capabilities should persist.”
McGrath connects this moment to a longer arc that predates the current administration. The logic of optimising production around a single low-cost geography was already under pressure from Covid-era disruptions; tariff volatility accelerated a rethink that was structurally overdue. “The mental model of treating trade policy as a stable constraint to optimise around is simply no longer viable,” she says. “The new imperative is strategic flexibility under uncertainty.”
One detail in the Section 122 proclamation is worth particular attention for nearshoring advocates: it formally exempts goods qualifying under USMCA and — notably — textiles and apparel entering duty-free under CAFTA-DR. Hughes is unambiguous about its significance. “It is positive that the administration says the new 15% tariff will not apply to products that qualify for USMCA duty-free access,” she says, “and they specifically exempt textiles and apparel articles that enter duty-free as goods of Costa Rica, the Dominican Republic, El Salvador, Guatemala, Honduras, or Nicaragua under CAFTA-DR. This should mean that brands and retailers can be confident to increase their sourcing in the Western Hemisphere.”
Pagán noted that under the IEEPA regime, equivalent preferences for Central American countries had existed only through piecemeal bilateral deals; the Section 122 proclamation is the first time CAFTA-DR has been treated as a formal, treaty-based structural exception. Whether that protection persists beyond the 150-day window remains to be seen, but for brands already building out Western Hemisphere supply chains, it is the clearest near-term signal yet that the logic of nearshoring remains intact.
A narrower toolset — not a truce
The Supreme Court’s 6-3 decision is, in constitutional terms, significant. It reaffirms that emergency powers have limits, that the taxing authority belongs to Congress, and that the major questions doctrine requires clear legislative authorization for delegations of vast economic consequence.
“While the Supreme Court s decision removes IEEPA as the administration s most flexible pathway for imposing sweeping tariffs, the trade environment for apparel and footwear remains chaotic and uncertain,” says Nate Herman, executive vice president of the AAFA. “Overturning IEEPA reduces the president s ability to quickly and directly tariff our key import countries, but it does not eliminate other authorities or the longstanding most-favored nation (MFN) rates that have disproportionately burdened this industry for nearly a century.”
But fashion executives should resist the urge to read it as strategic relief. “The ruling provides legal clarity but not strategic clarity,” McGrath says. “What companies experienced over the past year wasn’t just tariff exposure — it was the discovery that the rules of the game could change overnight without warning or due legislative process. That kind of policy volatility leaves a scar on planning confidence that a court ruling can’t fully heal.”
Santos echoes the caution in operational terms: Section 232 tariffs remain in place; Section 301 investigations are newly announced; and Section 122 surcharges are already in effect. The administration has demonstrated both the will and the legal creativity to pursue its trade agenda through multiple channels simultaneously. “The landscape remains highly dynamic,” Santos says, “and brands should expect continued volatility and potential litigation over the coming months.”
Saunders puts it plainly: “The tariff situation hasn’t really changed, even though the mechanism by which tariffs are being imposed has. The main thing that will worry retailers is that the disruption continues — and that President Trump becomes more dogged around tariff policy as he fights back against the ruling.”
For fashion brands navigating the weeks ahead, McGrath offers a three-part framework: don t snap back to pre-tariff sourcing or pricing assumptions; use this window to make supply chain investments that were deferred; and think carefully about the customer value proposition built — or damaged — during the tariff period. “Fashion brands that treated the tariff era as a strategic forcing function — rather than just a cost shock to manage — will emerge from it with better businesses,” she says.
While the Supreme Court may have constrained one tool, the era of trade volatility as a permanent operating condition remains fully intact. “It’s the uncertainty that kills everybody — domestically and internationally,” Pagán says. “When you have people who are just willing to not really follow the rules, it’s a problem for everybody.”
For an industry that has spent the past year learning to plan for that uncertainty, the lesson is already baked in — and the ruling does not change it. “Rigid organisations that slow-walked adaptation and then breathe a sigh of relief at this ruling are the ones at risk,” McGrath says. “They’ve learned the wrong lesson.”
With a new Section 122 global tariff now in place for 150 days, Herman is equally unsparing: “This is not the end of the tariff story — it is the beginning of the sequel.”
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