The U.S. Supreme Court has issued a ruling that restricts the President’s ability to impose tariffs using emergency powers, a decision that adds complexity to an ongoing lawsuit filed by Chinese automaker BYD against the U.S. government. While the ruling does not immediately alter existing auto tariffs, it opens new avenues for legal challenges and potential refunds.
Court Ruling Restricts Presidential Authority
On February 20, the Court ruled 6–3 that tariffs imposed under the International Emergency Economic Powers Act (IEEPA) overstepped presidential authority, as tariff-setting powers are constitutionally assigned to Congress. This means any tariffs enacted solely through emergency powers may now be invalidated, and companies could seek reimbursement for duties paid since 2025.
The ruling is significant because it clarifies the separation of powers when it comes to trade policy. Historically, presidents have used IEEPA to bypass congressional approval for tariffs, citing national security or economic emergencies. The Court’s decision now forces a more deliberate, legislative approach to tariff changes.
BYD Lawsuit Gains New Ground
BYD filed its lawsuit on January 26, 2026, in the U.S. Court of International Trade, contesting tariffs imposed since April 2025. The case, brought by four BYD-affiliated entities, seeks both refunds and a formal declaration that the tariffs were unlawful. The Supreme Court ruling strengthens BYD’s position, though the outcome remains uncertain.
The lawsuit’s success hinges on proving the tariffs were illegally imposed under IEEPA. While the ruling doesn’t guarantee a win for BYD, it increases the pressure on the U.S. government to justify its tariff policies.
Existing Tariffs Remain Largely Unaffected
Despite the ruling, the bulk of automotive tariffs currently in place against Chinese imports are unaffected. These tariffs are primarily enforced under Section 232 (national security) and Section 301 (trade enforcement) provisions, which the Court’s decision did not address.
Chinese legal analysts have confirmed this: Section 232 and 301 tariffs continue to apply independently of the emergency powers law now deemed unconstitutional. This means the core trade barriers remain in place, regardless of the Court’s ruling.
Future Trade Actions Still Possible
The ruling does not prevent the U.S. from imposing tariffs through other legal means. President Donald Trump has indicated his administration will explore alternative pathways to maintain trade barriers. This suggests that the trade war with China is far from over and may evolve as the U.S. seeks new ways to exert economic pressure.
BYD’s Market Entry Still Uncertain
BYD currently sells electric buses and commercial vehicles in North America but has yet to launch passenger cars in the U.S. market. The company’s future expansion remains contingent on court decisions, regulatory changes, and broader trade policy shifts. The Supreme Court ruling adds another layer of uncertainty to BYD’s plans, but does not eliminate them entirely.
The Court’s decision establishes a clear constitutional limit on emergency tariff powers, but broader trade barriers affecting Chinese automakers remain intact. The path forward for Chinese automakers will depend on litigation, regulatory developments, and the evolving dynamics of U.S. trade policy.
