How the Recent U.S. Supreme Court Decision on Tariffs Might Affect HRAI Members
By Impact Public Affairs
On February 20, 2026, the Supreme Court of the United States struck down the tariffs that President Donald Trump had imposed on American trading partners, labelling them as “unconstitutional”. Nominally, control over tariffs is the domain of Congress, but Trump had been using the powers outlined in the International Emergency Economic Powers Act (IEEPA) to unilaterally impose duties on foreign trade, ostensibly because of a national emergency. IEEPA authorizes the president “to deal with any unusual and extraordinary threat… to the national security, foreign policy, or economy of the United States, if the president declares a national emergency with respect to such a threat” and that the president may “regulate… importation or exportation” of “property in which any foreign country or a national thereof has any interest.”
The Supreme Court ruled 6-3 that IEEPA does not grant the President complete and unilateral control over import duties and tariffs, as this violates the “major questions doctrine” – a legal precedent that issues of major economic and political importance may not be decided by those institutions other than Congress, without sufficiently clear and explicit authorization for them to do so by legislation. In this case, the majority of Supreme Court justices did not believe that the parts of IEEPA quoted above gave the President clear authority to set tariffs, as if it had, that would have been explicitly laid out in the text of the legislation rather than implied.
That the tariffs would be struck down – sooner or later – had been widely anticipated. When the Federal Court of Appeals first rejected the legality of the tariffs in August 2025, there were calls for the courts to implement a judicial stay on tariffs until the Supreme Court reviewed the case, in large part to avoid the administrative difficulty of having to refund those tariffs that had been illegally collected in the meantime. Conversely, the Trump administration had always made it clear that if this method of imposing tariffs was rejected by the Supreme Court, then another way would be found instead.
The Trump administration has since announced it will invoke Section 122 of the Trade Act of 1974 to impose a global tariff to replace country-specific rates. Originally, Trump announced the rate would be 10%, but he later announced that the rate would be changed to 15%: the maximum level of a “temporary import surcharge” that §122 allows “whenever fundamental international payments problems require special import measures to restrict imports”. However, as the tariffs have gone into place on February 24, the current rate is 10%. This is subject to change, as ever; given Trump’s negative reactions to the judicial rebuke and his wheel-and-deal approach, it would be prudent to expect this rate to change.
It is anticipated that this new approach to tariffs will not fare any better in the courts than the previous scheme did when it runs into the major questions doctrine, especially as Trump’s erratic behaviour in setting rates again undermines the supposed rationale for invoking them. Also, given that §122 only allows these “temporary import surcharges” to be set for 150 days and requires an Act of Congress to extend them, the administration likely sees this purely as a tactic of legal delay.
It took roughly a year for the first wave of Trump’s tariff saga to play out – they were imposed, challenged in court, struck down by the Federal Circuit, appealed by the federal government, and finally rejected by the Supreme Court. If it takes another year for this new round of appeals and court decisions to play out, the Trump administration will essentially be able to impose tariffs at will, indefinitely, especially because the Supreme Court has already substantially weakened the ability of federal courts to issue universal injunctions. Nor has any conclusion been reached on whether the United States government will be obligated to repay the roughly $130 billion collected from the illegal tariffs. This item may also see its own prolonged episode in the courts. Treasury Secretary Scott Bessent has given mixed signals: on the one hand he has commented that this is a matter for lower courts to decide and the administration will follow their guidance, but on the other he mused that this process might take years, and remarked, “I got a feeling the American people won’t see it [the collected IEEPA revenues].” The Trump administration is still yet to concede that their previous tariff approach was illegal, and it would be premature to assume that they will easily comply with an order to repay those affected, which may still be years away.
So, what does this mean for HRAI members?
First and foremost, it is important not to take the repeal of the tariffs as an immediate win. While it is a promising sign for the industry that the Supreme Court is not inclined to take at face value the Trump administration’s justifications for the President’s unilateral authority to set tariffs, when this will actually see resolution and a return to the status quo remains uncertain. President Trump certainly seems to be genuinely ideologically committed to tariffs as a tool of international diplomacy and negotiation and is happy to use any pretext available to retain personal control of them. Even though the IEEPA approach has been struck down, and even if using the Trade Act of 1974 tactic of “temporary surcharges” faces similar legal obstacles, there is every indication that he will continue to impose tariffs by any means: either legally or illegally. This means that HRAI members working in various sectors will experience more of the same cost increases they have been seeing for important materials and components.
Secondly, just because one legal question has been resolved does not mean that the air of uncertainty has diminished. At least for the near future, it looks like tariffs of one kind or another will continue to be levied, with varying and unknown effects. Now that country-specific tariffs have been exchanged (at least for now) for global tariffs, countries that signed trade deals in the past year with the United States may renege given that the situation is completely different. The evident failure of the Supreme Court’s decision to temper at all the Executive’s willingness to impose his will on global trade brings its own new questions: will the legal opposition of these new tactics use the same process, and with the same delay? In some respects, there is now greater confusion as to the future of international trade than there was before. This will have a continued paralyzing effect on the planning of governments and private businesses, which is likely to negatively impact the amount of business HRAI members do because of postponed or cancelled construction or refitting of buildings.
One positive outcome – that select Canadian goods facing tariff rates higher than 10% may now face the lower global rate instead – is probably of limited relevance to HRAI members. Many of the key inputs that HRAI members rely on, such as steel, copper, aluminium, iron, and automobiles, are subject to tariffs under §232 of the Trade Expansion Act, not IEEPA. These tariffs have not been struck down by the courts, nor are they expected to be, and Canadian counter-tariffs on these goods remain in place.
Finally, the response by the US government to this legal setback is more troubling news for the future of the CUSMA trade deal. Renewal of the agreement between Canada, the US, and Mexico that shields most goods from tariffs is this July, and an American government that is increasingly hostile and uncompromising on trade will be even more difficult to work with and squeeze concessions from. Ostensibly, the Trump administration was supposed to inform Congress in January if it planned to terminate the deal, but it is abundantly clear that they are not inclined to play within the rules on trade. Trump’s negative reaction to Prime Minister Carney’s success in achieving trade détente with China, and U.S. Treasury Secretary Scott Bessent’s statement that they would “absolutely not” agree to a similar deal to drop opposing tariffs, suggests that there are more storms to come. Impact’s team in Ottawa has been in touch with representatives both in Washington and Ottawa concerning how this might affect trade talks, and while many are assuring us that they will try to seek a calm and rational approach to the CUSMA renegotiation, there is no guarantee that tensions will ease.
The Supreme Court decision comes just days after United States Trade Representative Jamieson Greer signaled that the Trump administration is open to changing its broad tariffs on steel and aluminum amid pressure from businesses groups and trading partners. However, Greer continued to say that the underlying metals tariffs have been “very successful” in boosting the domestic industry, and that they “are going in the right direction” and will remain in place. While the newest tariff mechanisms in place are not import-specific, it is clear that these major inputs in the HVACR sector remain a focal point of Trump’s trade strategy, as the administration is encouraged by their perceived success for U.S. industry. Originally aimed at Chinese overcapacity, the steel and aluminum tariffs have wound up hitting other major trading partners hard, including Canada, Mexico, South Korea and the E.U.
Given how reliant many HRAI members are on cross-border trade, this Supreme Court decision appears only to be a symbolic victory for now. It confirms the illegality of retaliatory tariffs issued by the President, but for now only restricts the method, not their ultimate implementation. Worse, the Trump administration’s response to the legal rebuke suggests a continued drift away from free trade that is very ominous, given the upcoming CUSMA negotiations over renewal. While there may ultimately be a return to the status quo, there is no guarantee it will happen until Donald Trump is out of office. For the near future, expect no immediate relief from the impacts of tariffs.
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