Supreme Court Ruling Won’t Lower Equipment Costs Any Time Soon

In a 6-3 decision last week, the Supreme Court ruled that the Trump administration overstepped its authority by using emergency powers under the International Emergency Economic Powers Act (IEEPA) to impose broad tariffs. That ruling knocks down a major chunk of the administration’s tariff framework, but don’t start celebrating cheaper iron just yet. Trump immediately signaled a new 10 percent global duty and additional trade investigations. Over the weekend, Trump raised that broad global tariff to 15 percent. It may be higher or lower tomorrow. For equipment dealers and fleet managers, this moment is mostly about watching to see what happens next, but the equipment makers are pleased with the decision.

The Association of Equipment Manufacturers (AEM's) senior vice president of government and industry relations Kip Eideberg issued the following statement:

“Today’s Supreme Court ruling that the IEEPA tariffs are unlawful is welcome news for equipment manufacturers, who have spent the last year navigating higher input costs and mounting trade uncertainty. We support the Administration's efforts to bring manufacturing back to the United States and secure domestic supply chains, but tariffs on critical parts and components have significantly raised the cost of domestic manufacturing and have made U.S.-made equipment less competitive in America as well as in foreign markets. This has resulted in disrupted supply chains, delayed capital investments, reduced investment in R&D, and a slowdown in the expansion of domestic manufacturing capacity."

Construction equipment is global

A lot of the construction equipment sold in America is not made in America. In fact, some sectors, let’s say excavators, sometimes have a higher quality halo when they're made in a foreign country like Japan. Much of the off-highway machinery made in America sources parts and systems from around the world. All construction equipment runs on steel, aluminum, electronics, and global supply chains. It’s a multinational market where brands like Komatsu and Kubota sell alongside brands like Cat and John Deere.   

Major construction brands and associations share cost increases

John Deere has openly acknowledged tariff exposure in recent earnings discussions. According to this Reuters article, Deere noted in November that the company expected pre-tax tariffs to cost around $1.2 billion in fiscal 2026, compared with nearly $600 million in 2025. The company projected roughly half of that $1.2 billion was tied specifically to IEEPA-based duties. Brands like Caterpillar, Komatsu, Hitachi, and beyond have chronicled hundreds of millions of dollars in tariff costs. When tariffs rise, OEMs juggle instability in pricing, sourcing, and production strategy. For fleet managers, that balancing act shows up in longer quote cycles, tighter allocations, and more frequent price adjustments.

Raw material costs continue to rise. According to the Associated General Contractors of America (AGC), the producer price index for materials and services used in nonresidential construction rose 3.3 percent from December 2024 to December 2025, propelled by double-digit increases in aluminum, steel, and copper prices. The producer price index for aluminum mill shapes soared 30.5 percent from December 2024 to last December. The index has been accelerating every month since the president imposed a 50 percent tariff last June. The index for steel mill products, which are also subject to a 50 percent tariff, jumped 17 percent in 2025. From this press release:

“Even though these indexes are based on selling prices of domestic producers, it is clear that the steep tariffs on imported metals and products are enabling U.S. sellers to push up costs for construction materials and equipment,” said Ken Simonson, the association’s chief economist. “Construction costs are sure to rise further in 2026 as long as the current tariffs remain in place.”

Manufacturers overall are feeling tariff costs

The National Association of Manufacturers (NAM) represents 14,000 member companies from across America, in every industrial sector. The trade org recently released its Q4 2025 Manufacturers’ Outlook Survey, which shared this data:

• A majority of manufacturers (80.3 percent) report paying tariffs on imported manufacturing inputs since the start of 2025, led by 58.6 percent of respondents paying Section 232 tariffs, 52.1 percent paying reciprocal tariffs on other countries under IEEPA, and 50 percent paying Section 301 tariffs on China.
• Tariffs are impacting manufacturers of all sizes, with 72.8 percent small and medium-sized manufacturers with less than 500 employees paying tariffs on inputs this year — alongside 97 percent of large manufacturers.

A quick tariffs explainer from a construction equipment bent

Since the start of his first administration, President Donald Trump has used tariffs as a central economic tool. The administration maintains that these tariffs are necessary to protect national security, reduce the trade deficit, and encourage domestic manufacturing. Our current government has used a variety of laws to justify these tariffs. Right from the start of his first administration, January 2018, Trump announced the first “safeguard” tariffs under Section 201 of the Trade Act of 1974. It targeted solar cells and washing machines. By March of 2018, the administration used Section 232 of the Trade Expansion Act of 1962 to first impose tariffs on steel and aluminum. Then in July 2018 came massive Section 301 tariffs on roughly $370 billion of Chinese goods, which remained largely in place through the Biden administration.

These 2018 actions marked the beginning of a trade strategy that has significantly intensified during Trump's second term in 2025.

What’s a “section?” In legal terms, a section refers to the specific, numbered paragraph or block of text in a parent law. So, Section 201 is a basic unit of a law or statute, and its parent law is the Trade Act of 1974. These different sections grant the President different tools to adjust policy.

Upon returning to office in January 2025, the administration immediately aggressively expanded its trade tools, including using IEEPA.

What is IEEPA and how is it being used? 

The International Emergency Economic Powers Act (IEEPA) is a 1977 law. It lets a president declare a national emergency tied to an “unusual and extraordinary threat” that comes from outside the United States. Once that emergency is declared, the president can regulate financial transactions, freeze assets, block trade, and restrict economic activity involving foreign entities. In early 2025, Trump declared national emergencies tied to issues like fentanyl trafficking and trade imbalances. After declaring those emergencies, his administration argued that IEEPA gave the president authority to regulate imports through things like “reciprocal” tariffs on imports and country-specific tariffs on China, Canada, and Mexico.

On February 20, 2026, the Supreme Court ruled 6-3 that tariffs imposed under the International Emergency Economic Powers Act (IEEPA) were unlawful. The Court said the Trump administration pushed past its authority by using an emergency-powers law to set broad, global duties. That decision wipes out the legal foundation for the “reciprocal” tariff program created under IEEPA, but this does not end all tariffs. These tariffs are still in place

• Steel and aluminum under Section 232
• Copper-related tariffs
• China tariffs under Section 301
• Country-specific duties

Trump’s response: replace the tool, keep the outcome

Last week, Trump moved quickly to keep import taxes alive. He said he would impose a flat 10 to 15 percent global duty in the coming days. He also said he would launch new trade investigations to support more permanent tariffs later. He pointed to Section 122 of the Trade Act of 1974 as one route for a baseline tariff, but that authority comes with a 150-day limit. He also signaled he would keep leaning on other existing tools, including Section 232 and Section 301. From the President:

“Foreign countries that have been ripping us off for years are ecstatic. They’re so happy. And they’re dancing in the streets, but they won’t be dancing for long, that I can assure you.”

The industry reaction: relief with a warning label

As mentioned, AEM called the ruling welcome news for equipment manufacturers. The group said its members spent the last year dealing with higher input costs and trade uncertainty. AEM also argued that tariffs on parts and components raised domestic manufacturing costs and made U.S.-made equipment less competitive at home and abroad. Then AEM underlined the part every fleet manager needs to hear. From this same Eideberg statement:

“Importantly, even with IEEPA tariffs being overturned, equipment manufacturers still face Section 232 tariffs on steel and aluminum, which raise the cost of critical parts and components that are not produced in the U.S. What equipment manufacturers need most is certainty so they can make long-term decisions that benefit their workers, their customers, and the broader U.S. economy.

"We urge the administration to use today’s ruling as an opportunity to chart a new course for tariff policy and secure more trade agreements that expand market access for America’s equipment manufacturers. Fair, balanced, and mutually beneficial trade relationships with our allies and partners keep supply chains resilient, commerce flowing, and support millions of equipment manufacturing jobs across the country."