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Wednesday, June 11, 2025

The Latest Court Action on Tariffs

 


The Latest Court Action on Tariffs

The most recent court action on tariffs occurred on May 29, 2025, when the U.S. Court of Appeals for the Federal Circuit granted a temporary stay on a ruling by the U.S. Court of International Trade (CIT) from May 28, 2025. The CIT had unanimously struck down President Donald Trump's "Liberation Day" tariffs, which were imposed under the International Emergency Economic Powers Act (IEEPA). These tariffs included a 10% baseline tariff on nearly all U.S. imports, 25% tariffs on Canada and Mexico, 20-145% tariffs on China, and "reciprocal" tariffs on countries with trade surpluses with the U.S. The CIT ruled that Trump exceeded his authority under IEEPA, as the law does not grant the president "unbounded" power to impose tariffs, and that trade deficits do not constitute an "unusual and extraordinary threat" justifying emergency powers. The court also found that the tariffs on Canada, Mexico, and China were not sufficiently tailored to address the cited issues of fentanyl smuggling and illegal immigration.
The Federal Circuit's stay, issued less than 24 hours after the CIT's decision, temporarily reinstates these tariffs while the court considers the Trump administration's appeal. The plaintiffs (including small businesses and a coalition of 12 Democratic-led states) were ordered to respond by June 5, 2025, and the administration by June 9, 2025. Additionally, a separate federal court ruling on May 29, 2025, by U.S. District Judge Rudolph Contreras, blocked tariffs for two specific companies (Learning Resources, Inc. and hand2mind, Inc.), finding that IEEPA does not authorize tariffs. This ruling was narrower and stayed for 14 days to allow for an appeal.
Implications
  1. Economic Uncertainty: The rapid sequence of the CIT's ruling and the Federal Circuit's stay has created significant uncertainty for businesses and global markets. Companies face challenges in planning supply chains, production, and pricing due to the fluctuating status of tariffs, which have already cost businesses over $34 billion in lost sales and higher costs. If the tariffs remain, they could lead to higher consumer prices, slowed economic growth, and job losses. However, the temporary reinstatement has led to cautious optimism in financial markets, with stock gains reported in Asia and Europe.
  2. Trade Negotiations: The tariffs were a key leverage tool for the Trump administration in trade negotiations with countries like China, Canada, Mexico, and others. The CIT's ruling weakened the administration’s bargaining position, as countries may delay or reconsider trade deals, anticipating that the tariffs could be permanently struck down. The temporary stay restores some leverage, but ongoing legal battles may deter rapid agreements, especially with the 90-day pause on reciprocal tariffs set to end in mid-July 2025.
  3. Legal and Political Precedent: The CIT’s decision is a significant check on executive power, reinforcing that Congress, not the president, holds primary authority over trade policy under the U.S. Constitution. The ruling invoked the nondelegation and major questions doctrines, emphasizing that major economic actions require clear congressional authorization. If upheld, this could limit future presidents’ ability to use emergency powers for trade actions. Conversely, a successful appeal by the administration could expand executive authority in trade policy.
  4. Alternative Tariff Mechanisms: The Trump administration has signaled it may pursue other legal avenues to impose tariffs if the IEEPA-based tariffs are permanently blocked. Options include:
    • Section 122 of the Trade Act of 1974: Allows up to 15% tariffs for 150 days without congressional approval to address balance-of-payment issues.
    • Section 301 of the Trade Act of 1974: Permits tariffs after investigations into unfair trade practices, though this process takes weeks or months.
    • Section 232 of the Trade Expansion Act of 1962: Allows tariffs for national security reasons, already used for steel, aluminum, and autos, with ongoing investigations for other sectors like semiconductors and pharmaceuticals. These alternatives may be slower or more limited, potentially reducing the scope or immediacy of the tariff agenda.
Potential Final Decision
The final outcome of the tariff litigation remains uncertain, as the case is likely to progress through the Federal Circuit and possibly to the U.S. Supreme Court. Several scenarios are possible:
  1. CIT Ruling Upheld: If the Federal Circuit or Supreme Court upholds the CIT’s decision, the IEEPA-based tariffs (10% baseline, 25% on Canada/Mexico, 20-145% on China, and reciprocal tariffs) would be permanently blocked. The administration would need to rely on alternative legal authorities (e.g., Sections 122, 301, or 232) to impose tariffs, which could be less sweeping or take longer to implement. Refunds for tariffs already paid (estimated at $68 billion in 2025, though only a portion relates to IEEPA tariffs) could be ordered, providing relief to importers. This outcome would reduce the effective U.S. tariff rate from 18% to about 7%, still high but lower than projected with the IEEPA tariffs. It would also set a precedent limiting presidential power to impose tariffs unilaterally.
  2. CIT Ruling Overturned: If the administration’s appeal succeeds, the IEEPA tariffs would be reinstated, allowing Trump to continue using them as leverage in trade negotiations. This would likely lead to higher consumer prices, potential inflation, and continued market volatility, as well as strained relations with trading partners. The administration could also expand tariff use under IEEPA, further escalating trade tensions. This outcome would strengthen executive authority over trade policy, potentially weakening congressional oversight.
  3. Supreme Court Involvement: If the Federal Circuit issues conflicting rulings with other courts (e.g., the D.C. Circuit handling the Contreras case), the case could reach the Supreme Court, potentially delaying resolution for over a year. The Supreme Court’s conservative majority may apply the major questions or nondelegation doctrines, which could favor the plaintiffs by requiring clear congressional authorization for tariffs. However, the Court’s stance on IEEPA’s scope (e.g., whether “regulate importation” includes tariffs) is uncertain, given limited precedent like the 1975 Yoshida case, which supported tariffs under the Trading with the Enemy Act but may not apply directly to IEEPA.
  4. Alternative Tariff Implementation: Regardless of the court outcome, the administration has indicated it will pursue other legal mechanisms to impose tariffs, as noted by trade advisor Peter Navarro. These could include accelerated Section 232 investigations or Section 301 actions, though these may face their own legal challenges or delays. This could result in a patchwork of tariffs, less comprehensive than the IEEPA-based plan but still impactful.
Timeline and Next Steps
  • June 5-9, 2025: The Federal Circuit reviews responses from plaintiffs and the administration to decide on a longer-term stay.
  • Mid-July 2025: The 90-day pause on reciprocal tariffs ends, potentially triggering higher tariffs (20-50%) on over 60 countries unless deals are reached or the CIT ruling is upheld.
  • Longer Term: The appeal process could take weeks to months at the Federal Circuit. If escalated to the Supreme Court, a final decision might not occur until mid-2026 or later, prolonging uncertainty.
Conclusion
The temporary reinstatement of Trump’s tariffs keeps them in place for now, but the CIT’s ruling represents a significant legal challenge to his trade agenda. The outcome hinges on whether the courts uphold the view that IEEPA does not authorize broad tariffs or if the administration can leverage other legal tools to achieve its goals. Businesses and consumers face continued uncertainty, with potential for higher prices and disrupted trade if the tariffs persist, or relief if they are struck down. The case’s progression to the Supreme Court could reshape the balance of power between Congress and the executive in trade policy, with lasting implications for U.S. economic and foreign policy.


https://time.com/7289394/trump-tariffs-uscit-court-international-trade-ruling-appeal-reactions-explainer/

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Opposing Viewpoint

Yes, several U.S. presidents have imposed tariffs without congressional approval, relying on delegated authority from Congress through various laws. The U.S. Constitution (Article I, Section 8) grants Congress the power to impose tariffs, but over time, Congress has passed legislation allowing presidents to act unilaterally under specific conditions, such as national security or economic emergencies. Here are examples of presidents who have imposed tariffs without direct congressional approval, based on historical and legal precedent:
  • Franklin D. Roosevelt (1934 onwards): The Reciprocal Trade Agreements Act of 1934 allowed Roosevelt to adjust tariff rates by up to 50% and negotiate bilateral trade agreements without congressional approval. This marked the beginning of significant delegation of tariff authority to the executive branch.
  • Richard Nixon (1971): Nixon imposed a 10% surcharge on all imports to address a balance-of-payments crisis, using the Trading with the Enemy Act (TWEA). This was upheld by a federal appeals court as a lawful exercise of presidential power, despite legal challenges.
  • Ronald Reagan (1983, 1987): Reagan imposed tariffs on motorcycles (1983) and Japanese electronics (1987) under Section 301 of the Trade Act of 1974, which allows the president to address unfair trade practices without congressional approval.
  • George H.W. Bush (1991): Bush imposed tariffs on Canadian lumber, also using Section 301 authority to address trade disputes.
  • Bill Clinton (1995): Clinton imposed tariffs on Japanese luxury cars under Section 301 to counter unfair trade practices.
  • Donald Trump (2018, 2025): Trump imposed tariffs on steel (25%) and aluminum (10%) imports in 2018 under Section 232 of the Trade Expansion Act of 1962, citing national security. In 2025, he used the International Emergency Economic Powers Act (IEEPA) to impose tariffs on Canada (25%), Mexico (25%), and China (10%), declaring a national emergency over immigration and fentanyl issues. These actions were controversial, with some arguing they stretched the legal scope of IEEPA, which does not explicitly authorize tariffs.
  • Joe Biden (2021-2025): Biden retained many of Trump’s Section 232 and Section 301 tariffs and imposed additional tariffs on Chinese electric vehicles and technology products under Section 301, without requiring congressional approval.
Legal Basis: These actions rely on laws like the Trade Expansion Act of 1962 (Section 232), the Trade Act of 1974 (Sections 122 and 301), and IEEPA (1977), which grant presidents authority to impose tariffs for national security, trade imbalances, or emergencies. However, the use of IEEPA for tariffs, as seen with Trump in 2025, has been challenged as an overreach, with court rulings in May 2025 declaring some IEEPA-based tariffs illegal.
Context and Controversy: While Congress has delegated tariff authority, critics argue that broad interpretations (e.g., using national security or emergency powers) undermine the constitutional balance, as tariffs are taxes that should originate with Congress. Efforts to reclaim congressional oversight, like the STABLE Trade Policy Act, have been proposed but haven’t succeeded due to political hurdles, including the need for veto-proof majorities.
In summary, presidents since Roosevelt have used delegated powers to impose tariffs without Congress, with Nixon, Reagan, Bush, Clinton, Trump, and Biden as notable examples. The extent and legality of these actions remain debated, particularly when emergency powers are invoked.

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