Rick Woldenberg was in his Chicago-area office on the late morning of February 20, 2026, finishing a meeting with his son Stephen, when Stephen’s phone buzzed on the desk. “Dad, we won!” Stephen said, reading the text. The Supreme Court had just ruled, 6-3, that President Trump’s tariffs under the International Emergency Economic Powers Act were illegal. Woldenberg, the fourth-generation CEO of the educational toy company Learning Resources, had spent the previous year suing the federal government. He had won. His company’s import duties, which had climbed from $2.3 million in 2024 toward an estimated $20 to $30 million in 2025, were now built on a legal foundation the nation’s highest court had just declared did not exist.
Here is what the ruling did not do. It did not refund the money. It did not undo the price increases that had already worked their way through the American economy for the better part of a year. The tariffs were illegal. The costs were real, paid, and gone. Those are two different facts, and the gap between them is where this story actually lives.
What the Court Actually Decided
The Supreme Court’s opinion in Learning Resources, Inc. v. Trump, consolidated with Trump v. V.O.S. Selections, Inc., was decided 6-3 on February 20, 2026, with Chief Justice John Roberts writing for the majority. The case had been argued on November 5, 2025. The question before the Court was narrow and specific: Does the International Emergency Economic Powers Act, a 1977 statute originally designed for economic sanctions, give the president the authority to impose tariffs of unlimited amount, duration, and scope on goods from any country, simply by declaring a national emergency?
The Court’s answer was unambiguous. Roberts wrote that the president was asserting “the extraordinary power to unilaterally impose tariffs of unlimited amount, duration, and scope,” and that in light of the breadth, history, and constitutional context of that asserted authority, the executive branch needed to identify clear congressional authorization to exercise it. IEEPA’s grant of authority to “regulate… importation” did not, the Court held, clearly authorize tariffs. Six justices, Roberts, Sotomayor, Kagan, Gorsuch, Barrett, and Jackson agreed on the bottom line, though they differed in their reasoning. Justices Thomas, Kavanaugh, and Alito dissented, arguing that IEEPA’s language did authorize the tariffs and that the president had acted within delegated authority.
The ruling vacated the tariffs that had been imposed under Proclamation 10886 and several executive orders, covering the sweeping duties on imports from Canada, Mexico, and China tied to declared emergencies over fentanyl trafficking, as well as the broader “reciprocal” tariffs imposed under a separate emergency declaration concerning trade deficits. The judgment was vacated and remanded with instructions to dismiss for lack of jurisdiction a technical resolution with an unambiguous practical effect: the tariffs, as imposed under IEEPA, were not lawful.
The Number That Was Already Spent
While the legal question worked its way through the courts over roughly a year, the tariffs were not on pause. They were in effect, and importers were paying them, and those importers were passing the costs forward in the way businesses generally do when their costs increase.
The Federal Reserve Bank of New York’s research found that nearly 90 percent of the costs of the tariffs were borne by American firms and consumers, not, as tariff proponents often argue, by the exporting countries. This is a finding about who actually pays a tariff, mechanically. A tariff is a tax collected by the importing country’s government on goods entering that country. The importer pays it at the border. What happens next, whether the importer absorbs the cost, passes it to retailers, or passes it to consumers, depends on market conditions, but the research consistently found that the overwhelming majority of the cost flowed through to the American side of the transaction.
The cumulative effect on the federal effective tariff rate was historic. The US average effective tariff rate climbed to nearly 17 percent, the highest level since the early 1930s, a period associated with the Smoot-Hawley Tariff Act and its role in deepening the Great Depression. The Tax Foundation estimated that the tariffs added approximately $1,000 to the average household’s costs in 2025, with that figure projected to rise to as much as $1,300 in 2026 had the tariffs remained in place for the full year.
For Learning Resources specifically, the scale of the cost was not abstract. Woldenberg’s company imports most of its educational toys from China, roughly 60 percent of its products, and at the peak of the tariff escalation, goods from China faced duties of 145 percent. The company’s annual import duties, which had run $2.3 million before the tariffs began, were on a trajectory toward $20 to $30 million for 2025. Woldenberg told CBS News at the time the lawsuit was filed that the path was “catastrophic,” not hyperbole, but an executive describing what a roughly tenfold increase in his company’s largest cost category actually meant for a 500-employee family business that has operated since 1984.
The Survey Data From the Businesses Living It
The economic impact was not confined to large importers or to abstract macroeconomic indicators. A survey by Main Street Alliance, an advocacy organization representing small businesses, found that 81.5 percent of respondents had raised or were considering raising prices in response to the tariffs, 41.7 percent had delayed or were considering delaying business expansion, and nearly one-third anticipated layoffs.
Those numbers describe a chain reaction that does not reverse simply because a court ruling changes the legal status of the policy that triggered it. A small business that raised prices in March 2025 because its costs had increased did not necessarily lower those prices again in February 2026 when the Supreme Court ruled. Prices, once raised, tend to be sticky businesses that absorbed the pain of one price increase are reluctant to absorb the pain of a second adjustment in the other direction, particularly when their underlying costs for other inputs have continued to rise during the same period due to ordinary inflation.
The business decisions that were delayed expansions, postponed, hiring frozen, and investments deferred represent a different kind of cost. These are opportunity costs: things that did not happen, that cannot be definitively traced back and compensated, that simply represent a year of economic activity that occurred at a smaller scale than it otherwise would have. The Supreme Court’s ruling establishes that the legal basis for the policy that caused these decisions did not exist. It does not, and cannot, restore the year.
Why “The Refunds Are Not Automatic” Is the Real Story
This is where the story moves from a legal narrative of government overreach, courts checking executive power, into something that affects ordinary households directly, and where the picture becomes considerably more complicated.
The refund mechanics matter because of who actually paid the tariffs versus who actually bore the cost. Tariffs are formally paid by the importer of record, the company that brings goods into the United States, like Learning Resources. Under existing customs regulations, refunds for invalidated duties are paid to the importer of record. But the importer of record is not necessarily the entity that ultimately absorbed the cost. If Learning Resources raised the wholesale price of its toys to retailers to cover the tariff cost, and retailers raised retail prices to cover their increased wholesale costs, and consumers paid those higher retail prices the $1,000 to $1,300 per household that the Tax Foundation estimated then a refund paid to Learning Resources does not reach the consumers who, in aggregate, bore a substantial share of the actual economic burden.
In January 2026, ahead of the ruling, the Court of International Trade revised its filing forms specifically to require plaintiffs to identify any third-party financing supporting their claims. This procedural change anticipated exactly the scenario the ruling created: a wave of refund claims in which the ultimate economic benefit of any recovery would flow to a party other than the one who bore the original cost. The revision does not solve the problem. It documents that the institutions processing these claims recognized that the problem exists.
The Steelman: What the Dissent and Tariff Supporters Argue
The strongest version of the argument for the tariffs, articulated by the three dissenting justices and by the administration that imposed them, deserves to be stated honestly.
IEEPA’s text grants the president authority to “regulate… importation” of property in which a foreign country or national has an interest, during a declared national emergency. The dissent, led by Justice Kavanaugh and joined by Justices Thomas and Alito, argued that this language is broad enough to encompass tariffs as a form of import regulation, and that the statute does not contain the kind of express carve-out for tariffs that would be necessary to read them out of the “regulate importation” authority if Congress had intended to exclude them.
The administration’s policy argument, separate from the legal one, was that the trade deficits the emergency declarations cited represented a genuine structural problem, which the executive orders described as a “hollowing out” of the American manufacturing base and an undermining of critical supply chains. Tariffs, in this framing, were a tool to address a real economic vulnerability, not merely a revenue mechanism or a negotiating tactic.
There is also a legitimate argument that some of the tariff revenue did flow to the federal government, and that revenue funded government operations during the period the tariffs were in effect, meaning the $1,000 to $1,300 per household figure, while representing a real cost to households, was not simply destroyed. It was transferred, in part, to public spending, the same way any tax revenue is.
These arguments matter for understanding the case. They do not change what the Court held. The Court did not rule on whether tariffs are a good policy. It ruled on whether this president, under this specific statute, had the legal authority to impose them in this way, and on that narrow question, six justices agreed he did not. The policy debate about trade deficits and manufacturing remains open. The legal question of whether IEEPA was the tool to address it has been closed, at least under the reasoning in this opinion, unless Congress acts to grant that authority explicitly.
What Happens to the Money Now
The Congressional Research Service’s summary of the decision confirmed that the ruling affirmed lower court decisions invalidating two sets of IEEPA tariffs: those on Canada, Mexico, and China tied to the fentanyl emergency declarations, and the broader “reciprocal” tariffs tied to the trade deficit emergency declaration. Both sets of tariffs are now without the legal authority under which they were imposed.
For importers like Learning Resources, the path forward involves filing claims for refunds of duties paid under the invalidated tariff programs, a process that, per Skadden’s analysis, remains genuinely uncertain in its mechanics, timeline, and the scope of what will ultimately be recoverable. Woldenberg told Reuters after the ruling that he was hopeful the money his company had paid in tariffs would be refunded by the government.
For the households that absorbed $1,000 to $1,300 in increased costs over the period the tariffs were in effect, there is no equivalent claims process. The mechanism by which a tariff cost travels from an importer’s customs payment to a consumer’s grocery bill or electronics purchase has no reverse gear built into customs law. The same structural reality that determines who bears the cost when supply chains are disrupted, whether by tariffs, by the Strait of Hormuz closure, or by any other shock to the cost of imported goods, means that the costs distribute downstream through the economy in ways that a single court ruling, however significant, cannot simply reverse.
The Supreme Court’s ruling in Learning Resources v. Trump answered an important constitutional question about the separation of powers between Congress and the executive branch over tariff authority. The same institutional question, who has the authority to make decisions that affect millions of households, and what happens when that authority is exercised without the legal foundation to support it, runs through other major rulings this term, from labor law to administrative agency authority. The Court answered the constitutional question clearly. The economic question of what happens to a year’s worth of costs that were imposed under authority the Court says never existed does not have a clear answer, because the legal system was not built with a mechanism to answer it.
Stephen’s Text Message
“Dad, we won!” The text Stephen Woldenberg sent his father captured something true and something incomplete at the same time. Learning Resources won. The legal question that mattered to the company, whether the tariffs that had pushed its import costs from $2.3 million toward $20 to $30 million were lawfully imposed, was answered in its favor by the highest court in the country, 6-3, in an opinion that left little ambiguity about the reasoning.
What the win does not undo is the year. The $1,000 to $1,300 added to the average household’s costs. 81.5 percent of small businesses raised prices. The 41.7 percent that delayed expansion. Nearly one-third are bracing for layoffs. Those numbers describe an economy that absorbed a shock, adjusted to it, and is now being told the shock was never legally authorized in the first place, with no comparably clear answer to the question of what, if anything, comes back.
Rick Woldenberg’s company may get its refund. The mechanism exists, however uncertain its details. For the households whose grocery bills and electronics purchases carried a portion of that $1,000 to $1,300, there is no form to file. The Supreme Court ruled on the law. The economy already happened.
