How Emergency Economic Powers Work—And What Counts as an Emergency

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By late 2025, small business owners across America were paying more than $16 billion monthly in levies imposed under a law most Americans have never heard of. Tristan Wright makes cider in Virginia. The aluminum cans he needs for his production line now cost significantly more than they did two years ago. Not because aluminum got scarcer or his supplier got greedier, but because the federal government imposed levies under the International Emergency Economic Powers Act. Wright has already paid those levies. So have hundreds of thousands of other small business owners.

The Supreme Court will decide by February 20, 2026, whether any of them get that money back.

The case turns on the International Emergency Economic Powers Act—IEEPA, in the confusing collection of acronyms that is federal law—and on two questions that sound technical but aren’t. First: does a 1977 law designed to let presidents freeze assets during genuine crises also let them rewrite the entire trade code? Second: who decides what counts as a crisis—the president who declares it, or courts reviewing whether the declaration makes any sense?

This isn’t about one set of levies. It’s about whether a president can declare nearly any persistent policy problem a crisis and then exercise authority that would otherwise require Congress to act. Trade deficits. Immigration flows. Climate change. Drug trafficking. The precedent set here will affect how future presidents use power in every area of policy.

The Statute’s Language and Congressional Intent

Congress passed IEEPA in 1977 because it was worried about presidents having too much authority, not too little. During Vietnam and the Cold War, presidents had used an older statute—the Trading with the Enemy Act from World War I—to do whatever they wanted economically. Congress decided that was a problem.

IEEPA was designed as a restriction. The statute says a president can exercise crisis economic authority only after declaring a national crisis in response to an “unusual and extraordinary threat” that comes from outside the United States. Those words—unusual and extraordinary—were chosen deliberately. Not serious. Not merely concerning. Unusual and extraordinary.

Once a crisis is properly declared, the statute authorizes the president to regulate international commerce, including the authority to “investigate, regulate or prohibit” imports and exports. The president can block assets, control foreign exchange, require record-keeping.

Here’s what the statute doesn’t say: tariffs. Levies. Taxes. Import fees.

The government argues that “regulate” is broad enough to include levies—that when you impose a 25 percent charge on Canadian lumber, you’re regulating the importation of lumber, not taxing it. The levy’s purpose, they say, is regulatory: to change behavior, extract concessions, protect industries. Revenue is incidental.

The challengers—a wine importer called V.O.S. Selections and twelve state attorneys general—point out that when Congress wants to authorize levies, it knows how to do so explicitly. Other trade statutes say “impose duties” or “collect revenue.” IEEPA doesn’t. When Congress wrote IEEPA right after a panel had upheld President Nixon’s crisis surcharge under the old Trading with the Enemy Act, Congress knew about that precedent and chose not to clarify whether IEEPA included similar authority. The omission looks deliberate—a way of narrowing executive authority, not expanding it.

The Two Crises Declared in 2025

Trump invoked IEEPA twice in early 2025, declaring two separate crises.

The first, in February, targeted Canada, Mexico, and China. The declared threat was fentanyl trafficking—federal authorities had seized more than 21,000 pounds of fentanyl at borders, enough to kill over 4 billion people, and the drug was killing approximately 75,000 Americans annually. In response: 25 percent charges on Canadian and Mexican goods, 10 percent on Chinese imports.

The second crisis, declared in April, went broader. Officials identified large and persistent trade deficits as an unusual and extraordinary threat to national security and the economy. The United States runs trade deficits with most of its trading partners, characterized as the result of unfair practices and discriminatory foreign rates. The remedy: baseline 10 percent charges on nearly all imports, plus additional “reciprocal” levies ranging from 11 to 50 percent depending on the country.

By August 2025, these charges covered nearly all U.S. imports. The Congressional Budget Office calculated that roughly 41 percent of all revenue collected in 2025—approximately $130 billion—came from these measures invoked under the statute. If collections continued at the late-2025 rate of $16 billion monthly, that would generate approximately $190 billion annually, or roughly $1.9 trillion over a decade.

If something generates nearly $2 trillion in revenue over ten years, is it a “regulation” rather than a tax?

The Lower Courts’ Rulings

A three-judge panel ruled in May 2025 that while fentanyl trafficking posed a genuine urgent threat, the charges didn’t meaningfully address it. They might provide negotiating leverage about border security, but they don’t stop drugs from crossing borders. The connection between the crisis and the response was too attenuated.

As for the trade deficit crisis, the panel was skeptical. A trade deficit isn’t unusual or extraordinary—it’s been the norm for the U.S. economy for decades. Congress has already addressed trade deficits through a different statute, Section 122 of the Trade Act of 1974, which explicitly authorizes temporary import surcharges for balance-of-payments problems. That Congress provided this authority in one statute with specific limitations, while not explicitly granting it in the emergency statute, suggested Congress deliberately withheld such authority from crisis declarations.

The U.S. Court of Appeals for the Federal Circuit affirmed in a 7-4 decision on August 29, 2025. The majority emphasized that while the statute grants broad crisis authority, it doesn’t extend to charges of “unlimited duration on imports of nearly all goods from nearly every country.” When Congress wants to authorize such measures, it does so explicitly with specific procedures and limitations. The absence of such language in the statute matters.

The appellate panel also identified a constitutional problem: major policy decisions need explicit congressional approval. Charges of this scope and significance represent a major policy question—the kind that requires explicit congressional authorization, not merely a broad reference to regulatory authority buried in a crisis statute.

Constitutional Constraints on Presidential Authority

The Constitution explicitly gives Congress—not the president—the authority “To lay and collect Taxes, Duties, Imposts and Excises” and “To regulate Commerce with foreign Nations.” The Framers put these authorities in Article I for a reason. Taxation was the core grievance that sparked the Revolution. The authority to tax was supposed to rest with the people’s elected representatives, not with one person.

When the government tries to characterize these charges as “regulations” rather than taxes, several justices weren’t persuaded. During oral arguments in November 2025, Chief Justice Roberts and Justice Sotomayor pressed the solicitor general on this exact point. A charge that generates $130 billion in annual revenue operates functionally as a tax on American importers and consumers. Calling it something else doesn’t change what it is.

There’s also the constitutional problem of giving the president too much authority without limits. This doctrine, rooted in the principle that Article I vests “all” legislative authority in Congress, prevents Congress from giving the president a blank check. When Congress delegates authority, it must provide clear rules that limit what the president can do.

If “regulate importation” means the president can impose any charge, at any rate, on any products, for any duration, with any countries, then what’s the limiting principle? Multiple constitutional law scholars have argued in briefs that interpreting the statute this broadly would violate this doctrine. The president’s discretion would be unlimited.

Officials counter that in foreign affairs, courts give presidents greater latitude, and that the statute includes enough limits on presidential authority—like the requirement that actions respond to a declared crisis. But that only works if “unusual and extraordinary threat” limits presidential discretion rather than being merely a box to check.

Historical Use of IEEPA

President Carter first invoked the statute during the Iran hostage crisis in 1979, when American embassy personnel were held captive. Carter blocked Iranian assets in U.S. banks and restricted transactions involving Iran. The Supreme Court upheld this use in 1981 in Dames & Moore v. Regan.

Since then, the statute has been invoked repeatedly and with increasing frequency. Reagan used it against Nicaragua. Clinton against various adversaries. After September 11, 2001, Bush dramatically expanded its use to designate terrorist organizations and block their assets. Obama extended the authority to impose sanctions on Russia for invading Ukraine and on Iran for its nuclear program.

By the time Trump took office in 2017, nearly 40 national crises were active, most invoking the statute.

All those previous uses targeted specific foreign governments, entities, or nationals. Sanctions against Iran, Russia, Venezuela, or terrorist organizations restrict activity involving particular adversaries. The restrictions were targeted, not blanket.

No previous president invoked the statute to impose general charges on nearly all imports from nearly all countries based on a claimed crisis related to trade practices. This represents a qualitatively different use—transforming it from a targeted sanctions tool into a mechanism for restructuring trade policy.

When President Nixon imposed a temporary 10 percent surcharge in 1971 to address a balance-of-payments crisis, he apparently didn’t cite crisis authority as his primary basis. Legal historians have established that Nixon invoked his general proclamation authority under earlier trade statutes. The government later rationalized the action by citing the Trading with the Enemy Act, but Nixon himself apparently didn’t think crisis authority was the proper basis for such charges. This undermines the government’s argument that the statute has long been understood to authorize such measures.

Refund Mechanisms and Administrative Complexity

By the time arguments were heard, importers had paid more than $16 billion monthly in these disputed charges. If invalidated, the lower panel has ruled it can order recalculating how much importers owe and issuing refunds if the charges were unlawfully imposed. Officials have signaled they wouldn’t object to refunds if the charges are found unlawful.

For shipments not yet finalized (which usually takes about 10 months), importers can file a formal correction process. For entries already finalized, importers must file protests within 180 days and potentially file protective lawsuits to preserve refund rights. A blanket stay was issued on December 23, 2025, pausing approximately 1,000 similar cases pending the decision.

Even if refunds are ordered, complications abound. The administrative process will take time. Businesses that raised prices to absorb costs may struggle to reverse those increases—many customers have no memory of which portion of their purchase price reflected the charges. Businesses seeking refunds from customers who paid elevated prices face contested legal ground.

Impact on Small Businesses

The U.S. Chamber of Commerce estimated that Trump’s policies cost America’s roughly 236,000 small business importers approximately $200 billion annually. That’s nearly one-third of the federal government’s projected revenue for the entire fiscal year.

Small businesses lack the pricing leverage of large corporations. A survey by the Main Street Alliance of approximately 3,000 small business members found that 81.5 percent of those affected indicated they may raise prices, 41.7 percent would delay business expansion, and 31.5 percent said employee layoffs were likely if the charges remained unchanged.

Wright, the Virginia cider maker, faces higher aluminum can costs. A wine and spirits importer in New York—the lead plaintiff in the lawsuit—confronts elevated import costs threatening business viability. Food importers, manufacturers relying on imported components, retailers dependent on foreign suppliers: across the economy, small businesses report the measures as an existential threat.

The Tax Foundation calculated that Trump’s policies would cost the average American household approximately $1,000 in 2025 and $1,300 in 2026. Federal Reserve research found that nearly 90 percent of the burden fell on U.S. firms and consumers rather than foreign producers.

The charges function primarily as a tax on Americans, not as leverage against foreign competitors.

Justices’ Questions During Oral Arguments

When oral arguments were heard on November 5, 2025, several justices expressed skepticism about the government’s position. Justice Kagan questioned how a trade deficit—a persistent condition the U.S. has experienced for decades—could possibly constitute an “unusual and extraordinary threat” under any reasonable reading of the statute’s language.

Justices aligned with more expansive executive authority appeared more receptive. Justices Thomas, Kavanaugh, and Alito focused their questioning on the challengers’ counsel, seeming open to the idea that the statute’s language could encompass such authority and that courts should defer to presidential determinations of what constitutes a crisis.

Multiple outcomes are possible. The ruling could be broad—striking down these levies and limiting how much crisis power future presidents can use. Alternatively, it could be narrow, finding that while the statute might authorize some measures, these particular ones exceed permissible scope. A narrow ruling that says these particular crises don’t qualify as emergencies would leave the statute’s basic authority question unresolved. Or the ruling could say the statute authorizes only targeted measures against specific threats, not blanket charges on all trading partners. Or it could uphold the measures as within the statute’s scope.

Implications of Possible Outcomes

A broad invalidation would constrain executive crisis authority significantly but might create problems if genuine crises require rapid executive action. A narrow ruling focused on the inadequacy of these particular crises would leave the statute’s basic authority question unresolved. An upholding would establish precedent that presidents can declare crises fairly broadly and restructure trade policy unilaterally.

If the measures are invalidated, the lower panel will need to issue orders explaining how to refund the money. If upheld, officials have indicated they would likely continue them unchanged.

A ruling upholding the authority could enable future presidents to invoke it not merely for sanctions against adversaries but for restructuring trade policy broadly. A ruling invalidating the measures won’t necessarily resolve broader questions about executive crisis authority—questions that may soon arise regarding environmental regulations, pandemic response, immigration enforcement, or other policy domains where presidents might seek crisis authority.

The Trump administration has indicated that if these measures are struck down, it would move quickly to reimpose them using alternative legal authorities. These alternatives include Section 301 of the Trade Act of 1974 (which authorizes measures against countries engaged in unfair trade practices) and Section 232 of the Trade Expansion Act of 1962 (which authorizes measures based on national security concerns). Both have more explicit procedural requirements and more circumscribed authority than what was sought under the emergency statute.

The Fundamental Constitutional Question

This case forces a confrontation with a fundamental question about the presidency and the Constitution: how much authority can one person exercise unilaterally, and on what basis?

The statute was designed in 1977 to create a middle path—granting presidents flexibility to respond to genuine crises without congressional approval, while simultaneously creating guardrails through the requirement of declaring an “unusual and extraordinary threat” and subjecting crises to congressional review every six months.

The question now is whether those guardrails constrain presidential discretion or are merely formal boxes to check before the president does whatever he wants.

The decision won’t definitively answer that question. But it will clarify, for this moment, what it means to exercise crisis authority under a statute called the International Emergency Economic Powers Act—authority that affects not distant foreign adversaries but the daily commercial lives of American small businesses and consumers.

Wright, the Virginia cider maker, awaits a decision that could mean the difference between viability and closure for his enterprise. His fate is intertwined with fundamental principles of constitutional law. How the nine justices resolve the technical questions about the statute’s language and their constitutional implications will shape how future presidents understand the scope of their own authority for years to come.

The decision is expected by February 20, 2026. Small business owners have already paid billions in charges that may have been unconstitutional from the start. Whether they get that money back depends on nine justices’ interpretation of a 1977 statute that was supposed to limit presidential authority, not expand it.

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