Asset-based lending is fundamentally focused on capital-intensive and asset-heavy businesses.  Because tariffs impact the sales of goods (as opposed to the provision of services) they will typically have an outsized impact on the borrowers under asset-based credit facilities.  This article will discuss recent tariff-related developments and analyze potential impact on the users and providers of asset-based financing.

The Supreme Court Tariff Decision and Follow-On Developments

On February 20, 2026, the U.S. Supreme Court ruled in a 6–3 decision in Learning Resources, Inc. v. Trump, 607 U.S. ___ (2026), that the International Emergency Economic Powers Act (IEEPA) does not grant the President of the United States authority to impose tariffs.

The majority opinion begins with a recitation of the exclusive constitutional authority that belongs to Congress — the “Power To lay and collect Taxes, Duties, Imposts and Excises.” The Court embraces the definition of a tariff as “a tax levied on imported goods and services” and underscores that the Constitution “does not vest any part of the taxing power in the Executive Branch.”

The Court’s holding, however, rests on narrow statutory grounds: “Our task today is to decide only whether the power to ‘regulate ... importation,’ as granted to the President in IEEPA, embraces the power to impose tariffs. It does not.” The portions of the Court’s opinion that invoke the major questions doctrine and would have required the President to identify “clear congressional authorization” for tariffing authority garnered only a plurality of support among the Justices.

Impact on Current Tariff Regimes and Trade Deals

The Court’s decision invalidated the imposition of all tariffs under IEEPA. This includes the specific IEEPA tariffs challenged in the cases before the Court — the tariffs imposed in response to the fentanyl crisis and the reciprocal tariff regime imposed on goods of almost all countries. The Court’s decision leaves no room for the continued imposition of IEEPA tariffs on goods from Brazil associated with the Brazilian election results. (The United States had already suspended IEEPA tariffs on goods from India effective February 7, 2026.)

The Court’s decision has no impact on existing tariffs imposed under Section 301 of the Trade Act of 1974, or the tariffs imposed under Section 232 of the Trade Expansion Act of 1962. These include the tariffs on steel, aluminum, copper, automobiles, auto parts, lumber and timber, medium- and heavy-duty trucks, and semiconductors. The decision also does not affect the ongoing Section 232 investigations into imports of pharmaceuticals and ingredients, commercial aircraft and engines, polysilicon, unmanned aircraft systems, wind turbines, personal protective equipment, medical consumables, medical equipment, robotics, and industrial machinery. The decision also does not affect the availability of duty-free treatment for low-value shipments; on February 20, the President issued a proclamation continuing the suspension of de minimis treatment for all countries.

The Court’s decision will not likely have any immediate impact on the trade agreements the administration has negotiated with other countries. The administration will expect U.S. trading partners to continue to honor commitments secured in trade deals negotiated to date.

Securing Tariff Refunds

The Court’s opinion and judgment create a refund opportunity for importers that paid IEEPA tariffs. The Court did not address how refunds should be effectuated. The administration is now in the process of deciding how the refund process will work. While President Donald Trump initially signaled resistance to paying refunds, he also signed an executive order on the same day the Supreme Court decision was issued directing the heads of the relevant executive branch agencies to cease collection of IEEPA tariffs.

Companies that have paid IEEPA tariffs have legal rights to seek refunds through U.S. Customs and Border Protection (CBP) administrative processes. Such companies will likely be securing official records of import activity from CBP, filing protests on liquidated entries, and initiating court cases to effectuate refunds. CBP has also announced the creation of a system for “Consolidated Administration and Processing of Entries (CAPE)” through which the CBP intends to make most (and potentially all) IEEPA tariff refunds available.

Importing companies that mitigated IEEPA tariff impact by passing along surcharges or price increases should anticipate demands from commercial customers looking to recover their contributions. Nonimporting companies that bore the cost of IEEPA tariffs will be considering all available avenues of recoupment. Some companies that passed on the cost of IEEPA tariffs to customers are already facing lawsuits regarding refunds.  

The New Tariff Regime

The administration will replace some or all of the IEEPA tariffs with tariffs imposed under other legal authorities that expressly authorize the imposition of tariffs. On February 20, the President issued a proclamation to impose new 10% global tariffs under Section 122 of the Trade Act of 1974 to address a balance-of-payments crisis, broadly subject to the same exemptions that previously applied under the reciprocal tariffs. The next day, he posted on social media that this rate would increase to 15%, but this has not yet been implemented. These tariffs are already the subjects of two lawsuits before the U.S. Court of International Trade.

On March 11, 2026, the United States Trade Representative (“USTR”) announced investigations into “structural excess capacity and production in manufacturing sectors” of 14 countries and the European Union under Section 301(b) of the Trade Act of 1974. The next day, USTR targeted 60 “economies,” consisting of the U.S.’s largest trading partners, regarding “the failure to impose and effectively enforce a ban on the importation of goods produced with forced labor.” In the course of its investigation, USTR will determine whether policies undertaken by the targeted economies are “unreasonable or discriminatory” against U.S. commerce and thus warrant the imposition of tariffs.

Some of these legal authorities have been tested in court more than others, but all contain procedural prerequisites, substantive limitations, or both. The administration is seeking to implement these replacement tariffs swiftly to minimize any gap in revenue collection.

Tariff Impact on Asset-Based Borrowers and Lenders

As noted above, many companies will need to consider how and when to address the topic of tariff refunds, both refunds that an importing company may pursue as well as requests for recoupment by non-importing companies that absorbed the cost of tariffs. This will, in many cases, involve legal expense, may lead to reimbursement obligations, and overall will necessitate attention and focus from corporate management teams who might prefer devoting their time and energy to other matters.

Companies that were previously protected by various tariffs that were deemed illegal by the Supreme Court will now need to analyze the impact on their businesses of the reversal of the decision.  Attendant supply chain analyses, revenue projections and valuations for borrowing base purposes, etc., will need to be revisited and adjusted, potentially meaningfully.

Loan documentation for credit facilities provided to tariff-affected companies may face heightened scrutiny because tariffs and any subsequent tariff refunds generally flow through GAAP earnings via inventory cost and COGS, and therefore can materially influence EBITDA-based fixed charge coverage ratio and leverage financial covenants.  Depending on the (often heavily negotiated) definition of EBITDA, certain formulations—particularly those permitting add-backs or exclusions for items labeled “extraordinary,” “unusual,” or “non-recurring”—may give borrowers an argument to adjust covenant EBITDA for tariff-related charges (and/or for the timing and classification of tariff refunds, which are often accounted for as reversals of prior tariff costs, but may not be recognizable until the refund is realized or realizable where uncertainty exists).  Beyond existing credit facilities, this tariff-driven uncertainty materially impacts analysis and underwriting for new transactions, as the noise of tariffs and/or the recission of future tariffs has put both revenue and profitability of companies in many industries under considerable pressure.  Further, as noted above, this uncertainty makes diligencing COGS and EBITDA very challenging. 

In split-lien financing structures, tariff refunds may also present complex collateral allocation questions. Parties will need to determine whether such refunds constitute ABL-priority collateral (for example, proceeds of accounts) or term lender-priority collateral (such as general intangibles) under the applicable intercreditor agreement.

Another area of impact will be mergers and acquisitions activity and capital markets generally.  The M&A market, investor sentiment and the ability of buyers and sellers to reach agreements on valuations were strained by the imposition of tariffs in 2025, and this reversal now likely puts companies, as well as those investors who would seek either to sell or to purchase them, back in the position of needing to revisit projections and modeling rather than transacting.  The early market indications are that there is ongoing flight to quality assets, particularly to businesses with structural advantages that insulate them from the direct impact of tariffs, i.e., unique branding, differentiated supply chains (e.g., direct-to-consumer) and, in particular, a domestic manufacturing base or strong services component. In a similar theme, debt refinancing options for companies with looming maturities may face challenges as they need to revise their projected performance for potential refinancing sources.

At a macroeconomic level, it is likely that the new tariff regime will continue to be a drag on the economic performance of individual companies, and by extension, affected sectors including many asset-based borrowers.  For asset-based lenders, the Court’s decision does not eliminate tariff-related risk. Rather, it reshapes it. Borrowers may experience short-term liquidity opportunities through refunds, but medium- and long-term volatility in trade policy, replacement tariffs, and macroeconomic conditions will continue to pressure performance metrics, collateral values, and refinancing markets. Active monitoring and disciplined documentation review will remain essential.