Current State of Play: The United States Court of Appeals for the Federal Circuit consolidated and temporarily stayed the first decision from the U.S. Court of International Trade (USCIT). This temporary stay keeps the tariffs in effect and will likely last until at least June 9, 2025. At that point the Federal Circuit will determine whether to issue a longer stay. The second order out of DC is stayed by the issuing judge for 14 days from issuance.
Overview
Within the span of 24 hours, two federal court orders dealt potentially significant blows to President Trump’s tariff regime. On May 28, the U.S. Court of International Trade (USCIT) unanimously issued a permanent injunction blocking enforcement of the Trump administration’s 10% “baseline” tariff, higher country-specific “reciprocal” tariffs and the additional “fentanyl” tariffs imposed under the International Emergency Economic Powers Act (IEEPA, 50 U.S. Code § 1701), and ordered the administration to rescind the relevant executive orders within 10 days.
Then, on May 29, Judge Rudolph Contreras of the U.S. District Court for the District of Columbia issued a preliminary injunction restricting the administration from imposing IEEPA-based tariffs on two specific plaintiffs, Learning Resources, Inc. and hand2mind, Inc. If not overturned on appeal, the two decisions would mark a significant setback to the president’s attempt to remake the multilateral trading system through aggressive new tariffs.
Later on May 29, the United States Court of Appeals for the Federal Circuit temporarily stayed the USCIT decision—keeping the tariffs in effect. The appeals court set a deadline of June 5 for responses to the government’s motion for a longer stay, making it likely that the temporary stay will remain in effect until at least June 9, 2025. At that point, the appeals court will determine whether to issue a longer stay that would keep the tariffs in effect until that court rules on the merits. Regardless of the outcome, the appeals court’s decision is likely to be appealed to the Supreme Court.
The two court orders do not affect the tariffs imposed on specific sectors including steel, aluminum and autos under Section 232 of the Trade Expansion Act of 1962. These will remain in effect regardless of how this legal process plays out. The orders will also not impact the sector-specific tariffs that the Trump administration is expected to impose under Section 232 in the near future on pharmaceuticals, critical minerals and semiconductors/smartphones. Finally, they do not impact the tariffs imposed on China under Section 301 of the Trade Act of 1974 during President Trump’s first term.
The Trump administration characterized the court’s decision blocking his sweeping tariffs as “blatantly wrong,” arguing that the judiciary was overstepping its bounds and failing to recognize the president’s constitutional and statutory powers to regulate trade and protect national security. White House officials described the court’s decision as a temporary setback or a “hiccup,” insisting that U.S. trade policy would continue largely unchanged and that the administration would pursue every available avenue to maintain or reinstate the tariffs.
Senior administration officials have also said that the Supreme Court “must put an end” to the tariff challenges, At the same time, the White House has made clear that negotiations with U.S. trading partners will continue—although other countries may be reluctant to finalize deals given the uncertain tariff landscape. Officials have also raised the possibility of the president reimposing similar levies under more established tariff authorities.
This alert provides a summary and analysis of the USCIT ruling.
Court of International Trade Ruling
The USCIT ruled on whether the president may invoke IEEPA to impose unlimited broad-based tariffs on imports by declaring trade deficits or related economic concerns as a “national emergency.” The Trump administration invoked IEEPA to impose a series of broad tariffs, including a general 10% “baseline” tariff, higher country-specific reciprocal tariffs and additional fentanyl tariffs targeting imports from China, Mexico and Canada. Under IEEPA, the president is granted the authority to “deal with any unusual and extraordinary threat, which has its source in whole or substantial part outside the United States, to the national security, foreign policy, or economy of the United States” following the declaration of a national emergency. Traditionally, IEEPA has been used to impose sanctions, not tariffs, and the court noted that it has never been used to impose broad-based tariffs.
Plaintiffs, which included private businesses and a coalition of U.S. states, challenged President Trump’s novel use of IEEPA to impose broad-based tariffs. The plaintiffs argued that IEEPA does not delegate to the president the authority to impose worldwide tariffs, citing Article I, Section 8 of the U.S. Constitution, which grants to Congress the power to “lay and collect Taxes, Duties, Imposts and Excises.” Plaintiffs argued that the president’s actions exceeded both statutory and constitutional limits and that IEEPA does not delegate the claimed authority to impose unlimited worldwide tariffs.
The USCIT’s three-judge panel held that President Trump exceeded his delegated authority under IEEPA while also finding that the president may invoke IEEPA to impose tariffs with specific limitations. First, tariffs imposed under IEEPA must be limited in scope and duration. The panel stated that IEEPA “does not authorize the President to impose unbounded tariffs.” The law was never intended to allow the president to reshape U.S. trade policy through open-ended, global tariffs. Second, tariffs imposed under IEEPA must be directly tied to the specific “unusual and extraordinary threat” for which the national emergency was declared. In this case, there is no direct link between the tariffs and the problem it purports to address—trade deficits and the fentanyl crisis. Instead, the tariffs aim to create leverage to “deal with” the problem, which does not meet the standard in IEEPA.
Additionally, the USCIT held that when tariffs are geared towards correcting trade imbalances, the proper statutory regime is the Trade Act of 1974 (Pub. L. No. 93-618, § 122), rather than IEEPA. Section 122 specifically authorizes the president to impose temporary tariffs or quotas—of up to 15% and for a maximum of 150 days—when the United States faces “large and serious” balance-of-payments deficits or other fundamental international payments problems. This authority is far narrower than IEEPA, both in terms of the size of the tariffs and the limited duration for which they can be imposed.
Notably, the decision also included language indicating that it would find any statute that delegated unlimited tariff authority to the president unconstitutional under the non-delegation doctrine because Congress, not the president, is granted the authority to impose tariffs.
USCIT’s Impact on Existing Tariffs
Outlined below are the implications of the USCIT’s ruling on existing tariffs:
- 10% Baseline Tariff
- Scope: An across-the-board 10% tariff went into effect for goods from most countries on April 5 and remained in place even after plans to impose a country-specific reciprocal tariff regime on April 9 were paused. Goods from Canada and Mexico are not subject to the 10% baseline tariff.
- Reason for Invalidity: This tariff exceeded IEEPA’s delegation of authority because it lacked “identifiable limits” and was not tied to a specific emergency. The court emphasized that IEEPA cannot be used to address general trade deficits, which fall under Section 122 of the Trade Act of 1974.
- Country-Specific Reciprocal Tariffs
- Scope: These tariffs are imposed at varying rates on most nations and are intended to correct long-standing trade deficits, effective April 9. These tariffs were paused before going into effect, with the exception of China. Amid negotiations, the pause for most nations was set to expire on July 9, 2025. On May 14, the 125% “reciprocal” tariff on Chinese goods was also paused until Aug. 12, 2025.
- Reason for Invalidity: These tariffs are geared towards correcting long-standing trade deficits, which the USCIT held was outside of IEEPA’s scope. “Balance-of-payments deficits,” such as trade imbalances, are handled under Section 122 of the Trade Act of 1974 (Pub. L. No. 93-618, § 122).
- Fentanyl Tariffs
- Scope: On Feb. 1, President Trump declared that the importation of fentanyl poses a national security threat. A 25% tariff is in effect until further notice on goods from Canada and Mexico that fail to satisfy United States-Mexico-Canada Agreement (USMCA) rules of origin or that claim and qualify for USMCA preference. Canadian energy resources that fail to satisfy USMCA preference, specifically potash, are subject to a 10% tariff. In addition, a 20% tariff is in effect on all Chinese goods.
- Reason for Invalidity: These tariffs fail to directly “deal with” the threat posed by the influx of fentanyl importations because there is no “direct link between [the] act and the problem it purports to address.” Because the CIT found that the tariff and the “specific threat” lacked any direct, causal link, the CIT held that the fentanyl tariffs also exceeded IEEPA’s delegation.
The following tariffs are not affected by the USCIT ruling and are still in effect:
- Section 232 Tariffs: Sector-specific “reshoring” tariffs on strategic goods including the 25% tariff on steel, aluminum and automobiles imposed under Section 232 of the Trade Expansion Act of 1962. It would also not impact the anticipated tariffs on sectors such as pharmaceuticals, critical minerals and semiconductors/smartphones if imposed under Section 232.
- Section 301 Tariffs: Tariffs on certain goods from China imposed during Trump’s first term, authorized under the Trade Act of 1974.
In addition to Section 232 and Section 301, tariffs imposed under Section 122 may be a pathway for future tariffs. As previously discussed, the USCIT’s decision explains that Congress established Section 122 to provide “remedies for balance-of-payments deficits” because “large and serious United States balance-of-payments deficits do not necessitate the use of emergency powers and justify only the President’s imposition of limited remedies subject to enumerated procedural constraints.” Thus, the decision suggests that the Trump administration could implement broad tariffs as long as it used Section 122 instead of IEEPA. Specifically, Section 122 grants the president the authority to enact a maximum tariff of 15% for 150 days to address the national trade deficit or depreciation of the dollar.
White House Response
During an interview with Bloomberg TV on May 29, Senior Counselor to the President for Trade and Manufacturing Peter Navarro maintained that the national trade deficit and importation of fentanyl threatens national security. He argued the White House has a “strong case,” noting the CIT “basically said we’re right—just use different rules and laws.”
In accordance with the USCIT’s ruling, Navarro cited Section 122 as a possible authority that the administration may use in the interim to maintain tariffs while the appeals process moves forward. He also noted Section 301 of the Trade Act of 1974; Section 232 of the Trade Expansion Act of 1962 and Section 338 of the Tariff Act of 1930 as other possible avenues to maintain the tariff regime.
Press reports indicate that the administration is considering a “plan B” that it could turn to if the courts ultimately prohibit the use of IEEPA to impose tariffs. This could involve invoking Section 122 to impose a 10% “baseline” tariff for up to 150 days while the administration conducts the investigations required to impose higher “reciprocal” tariffs through Section 301. While such an approach would allow the administration to replicate much of its current approach, using these more established, process-driven authorities would not provide the same level of flexibility the administration has claimed under IEEPA.
