In a major legal setback, the US Supreme Court ruled against former President Donald Trump’s tariffs, saying he exceeded his authority under a 1977 law. The decision came after multiple lawsuits challenged his use of emergency powers to impose import taxes.

The case combined three separate lawsuits. One was filed by Learning Resources, a family-owned toy company with about 500 employees. Another was brought by the Liberty Justice Center on behalf of small businesses including wine distributor V.O.S. Selections. The third case was filed by 12 US states, including Arizona, Colorado, New York and Illinois.

Lower courts had already ruled that Trump went beyond his legal limits by using a law meant only for national emergencies. The Trump administration appealed after losing at the US Court of Appeals for the Federal Circuit and before US District Judge Rudolph Contreras.

In a 6-3 ruling, the Supreme Court upheld the lower court decisions. The justices said Trump’s use of the International Emergency Economic Powers Act to impose so-called “reciprocal” tariffs was unlawful.

Trump had argued that trade deficits and drug trafficking, including fentanyl imports from China, Canada and Mexico, created a national emergency.

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Economists from the Penn-Wharton Budget Model estimated that more than $175 billion had been collected under these tariffs. With the ruling against the IEEPA-based tariffs, this amount may now need to be refunded.

The decision is seen as a major test of presidential powers and could have wide effects on US trade policy and the global economy.

The ruling limits presidential emergency powers. Businesses may receive refunds if tariffs are struck down. Future presidents may face stricter legal checks. Global markets could react to this legal clarity.