Explained: IEEPA, the law behind Trump’s tariffs and why the Supreme Court curbed it

The US Supreme Court’s ruling against President Donald Trump’s sweeping “Liberation Day” tariffs has brought renewed attention to the International Emergency Economic Powers Act (IEEPA) — the 1977 law the administration relied on to justify the duties. 

The Court held that IEEPA does not grant the president blanket authority to impose broad-based global tariffs under a national emergency declaration, sharpening the debate over the limits of executive economic power. 

Here’s what IEEPA is — and why it matters. 

What is IEEPA? 

The International Emergency Economic Powers Act (IEEPA) is a federal law enacted in 1977 that gives the US president authority to regulate certain international economic transactions after declaring a national emergency. 

It allows action in response to what the law describes as an “unusual and extraordinary threat” to the United States that originates, at least in substantial part, outside the country. 

IEEPA was signed into law by President Jimmy Carter. 

Why was it created? 

IEEPA was designed to replace portions of the 1917 Trading with the Enemy Act, which had granted sweeping emergency powers to the executive branch with limited oversight. 

In the post-Watergate era, Congress sought to place clearer guardrails around presidential emergency authority. IEEPA therefore operates within the framework of the National Emergencies Act of 1976, which requires formal declaration and periodic renewal of emergencies. 

When can a president invoke IEEPA? 

To use IEEPA, the president must: 

• Declare a national emergency. 
• Identify an “unusual and extraordinary threat.” 
• Establish that the threat has a foreign source. 
• The threat can relate to national security, foreign policy, or the economy. 

Once invoked, the president can regulate or prohibit specific economic transactions linked to that threat. 

What powers does it grant? 

IEEPA allows the president to: 

• Freeze foreign-owned assets in the United States 
• Block financial transactions 
• Restrict trade and investment 
• Prohibit currency transfers 
• Impose sanctions on individuals, companies, or foreign governments 

These measures are typically implemented through executive orders and enforced by the US Treasury Department. 

What does IEEPA not automatically allow? 

IEEPA does not: 

• Provide unlimited authority over domestic economic activity 
• Override constitutional protections 
• Automatically authorize tariffs unless clearly tied to the statute’s emergency framework 
• Grant permanent emergency powers (declarations must be renewed annually) 

The Supreme Court’s recent ruling clarified that broad global tariffs cannot simply be justified by invoking emergency powers without clear statutory backing. 

How has IEEPA been used historically? 

IEEPA has formed the backbone of US sanctions policy for decades. It has been used to: 

• Impose sanctions on Iran, Russia, and North Korea 
• Target terrorist networks after 9/11 
• Restrict foreign election interference 
• Block transactions tied to cyber threats 

Presidents from both parties have relied on it extensively. 

Why is it controversial? 

IEEPA is often criticised for: 

• Broad executive discretion: Once a national emergency is declared, presidential authority under the law is significant. 
• Long-running emergencies: Some national emergencies declared decades ago remain active today. 
• Expanding scope: Debate intensifies when emergency powers are used to reshape trade relationships rather than address traditional sanctions targets. 

The Supreme Court’s decision in the “Liberation Day” tariffs case has now sharpened the boundaries between emergency sanctions authority and Congress’s constitutional power over tariffs. 

Why this ruling matters 

The ruling underscores a core constitutional tension: while the president can respond swiftly to foreign threats using economic tools, Congress retains primary authority over trade and taxation. 

IEEPA remains a powerful sanctions statute — but the Court’s decision signals that it cannot be used as a blank cheque for sweeping tariff policy. 

In simple terms, IEEPA is an emergency sanctions law — not a general trade law.