International Emergency Economic Powers Act (IEEPA), 1977

The International Emergency Economic Powers Act, or IEEPA, is a United States law passed in 1977. It allows the US President to control economic dealings with foreign countries, people or companies after declaring a national emergency about an "unusual and extraordinary threat" that comes mainly from outside the US. It is the main legal tool behind most American economic sanctions, like freezing a country's money held in US banks.

Why does it exist?

A country sometimes needs to act fast against a foreign threat: a hostile government, a terror group or a cyber-attack. Passing a new law in Congress (the US Parliament) takes time. IEEPA gives the President a ready set of economic powers to use quickly in such emergencies. At the same time, it was written to put limits on those powers, which an older law did not do.

Where did it come from?

Before IEEPA, Presidents used the Trading with the Enemy Act (TWEA) of 1917, a First World War law. Presidents used TWEA even in peacetime, declared emergencies without time limits, and faced little oversight from Congress. For example, in August 1971 President Nixon used it to put a 10% extra duty on most imports during a dollar crisis. To control such open-ended use, Congress passed:

• the National Emergencies Act (NEA), 1976, which sets the process for declaring, renewing and ending national emergencies; and
• IEEPA in 1977, which limited TWEA to wartime and created a separate, narrower emergency power for peacetime.

First use

President Jimmy Carter first used IEEPA on 14 November 1979 (Executive Order 12170) to freeze Iranian government property in the US during the Tehran hostage crisis. That Iran emergency has been renewed every year since.

How does it work, step by step?

1. The President declares a national emergency under the NEA, naming a specific foreign threat.
2. The President then uses IEEPA powers to block assets, ban transactions, or "regulate" imports and exports linked to that threat.
3. The President must report to Congress and explain the action.
4. The emergency lasts one year unless the President renews it. Congress can end it by passing a joint resolution, but that needs the President's signature or a two-thirds vote to override a veto, so it rarely happens.

IEEPA and tariffs: the big legal fight

For over 40 years, no President used IEEPA to impose tariffs. In 2025, the US government used it to put "trafficking tariffs" on Canada, Mexico and China (over drug flows) and "reciprocal tariffs" on almost all countries, including India. Importers challenged this in court:

• The US Court of International Trade (May 2025) and then the US Court of Appeals for the Federal Circuit (en banc, 29 August 2025, by 7-4) held that IEEPA did not authorise these tariffs.
• On 20 February 2026, the US Supreme Court, by 6-3, in Learning Resources, Inc. v. Trump (decided with Trump v. V.O.S. Selections), held that IEEPA does not allow the President to impose tariffs. The main reason: the law's text never mentions tariffs or duties, and the power to tax belongs to Congress under the US Constitution.

What replaced the IEEPA tariffs?

The US then turned to other trade laws:

• Section 122 of the Trade Act of 1974: Allows a temporary import surcharge of up to 15% for up to 150 days to deal with a serious balance-of-payments problem. Going beyond 150 days needs an Act of Congress. A 10% global tariff was imposed under it from 24 February 2026. Congress did not extend it, so it expired on 24 July 2026.
• Section 232 of the Trade Expansion Act, 1962: Tariffs on grounds of national security (for example, steel and aluminium). It was not affected by the ruling.
• Section 301 of the Trade Act of 1974: Tariffs against "unfair" trade practices after an investigation. When the Section 122 tariff ended, the US Trade Representative (USTR, the US government's chief trade negotiator) put Section 301 tariffs of 10% or 12.5% on 60 economies from 24 July 2026. They were based on an investigation into whether these countries stop goods made with forced labour from entering their markets. India was placed in the 10% group.

Commonly confused concepts

• IEEPA vs Trading with the Enemy Act: TWEA (1917) now applies only in wartime. IEEPA (1977) is the peacetime emergency law.
• IEEPA vs National Emergencies Act: The NEA sets the process for declaring and ending emergencies. IEEPA gives the economic powers used once an emergency is declared.
• IEEPA vs CAATSA: CAATSA (Countering America's Adversaries Through Sanctions Act, 2017) is a separate US law aimed at sanctioning Russia, Iran and North Korea, including countries that buy major Russian defence equipment.
• Primary vs secondary sanctions: Primary sanctions stop US persons from dealing with a target. Secondary sanctions punish third countries or their companies for dealing with the target. The 2025 extra tariff on India over Russian oil worked like a secondary measure.
• Section 122 vs Section 232 vs Section 301: Section 122 is about balance of payments (short-term, capped). Section 232 is about national security. Section 301 is about unfair trade practices.

Issues, criticism and the way forward

• Separation of powers: Critics argued that using an emergency law for broad tariffs let the President bypass Congress, which holds the power to tax. The Supreme Court ruling restored that balance for tariffs.
• Overuse of emergencies: Dozens of US national emergencies remain in force, many renewed every year almost automatically. Experts have proposed that emergencies should lapse unless Congress approves them.
• Refunds and uncertainty: The ruling left open how importers would get back tariffs already paid, creating uncertainty for businesses.
• Impact on partners like India: Sudden tariff changes make trade deals harder to finalise, because the starting point keeps shifting. Countries now prefer agreements with clear, lasting legal commitments.

Concepts to Know

• Tariff: A tax on goods brought in from another country.
• Reciprocal tariff: A tariff set to "match" the barriers another country places on one's own exports.
• Executive order: A written order issued by the US President to run the government, which has legal force within the powers the President has.
• Balance of payments: The record of all money flowing into and out of a country, from trade, investment and loans.
• En banc: A case heard by all the judges of a court together, not just a small panel.
• Forced labour: Work that people are made to do against their will, under threat or punishment.
• Veto: The President's power to reject a bill passed by Congress; Congress can override it only with a two-thirds vote in both Houses.