Tariff uncertainty deepens as appeals court rejects IEEPA duties

Late last week, the U.S. Court of Appeals for the Federal Circuit issued a ruling, by a 7-4 margin, in which it stated the majority of the IEEPA (International Emergency Economic Powers Act) tariffs rolled out by the White House are illegal. Tariffs will remain temporarily in place until October 14, which will give the White House time to appeal its case to the Supreme Court.

This ruling was similar to one made in May, when a three-judge panel at the U.S. Court of International Trade (CIT) ruled that President Trump had misused the International Emergency Economic Powers Act (IEEPA) of 1997, in steps he took to implement tariffs on various consumer and industrial products, including the 10% global tariff on U.S. trading partners, 25% tariffs placed on Canada and Mexico, 30% tariffs on China related to fentanyl and border crisis concerns, the elimination of the de minimis exemption on imports from China and called for a permanent halt of the majority of tariffs and also ruling against future modifications against them, the White House received a reprieve one day later.

A New York Times report stated that the White House told the court that weakening the administration’s tariffs “could unleash economic chaos,” specifically in regard to trade agreements the U.S. has made with other nations’ governments.

These developments come at a time when supply chain decision-makers continue to navigate tariff- and trade-driven uncertainty on various fronts, including: where to invest; how much capital should be allocated for investments; hiring decisions; and the potential need to reconfigure supply chains, among others.

Prior to the May stay being granted, an industry observer told LM that there are expected to be various impacts, should tariffs eventually be removed, including on economic activity, inventory front-loading, and the since-passed budget bill moving through Congress, at the time, as it pulls the tariff revenue out of it.

An S&P Global Market Intelligence research report issued earlier this summer said that should the initial CIT ruling be upheld, it would remove roughly half of U.S. imports from tariff coverage, while adding that in terms of the overall impact on supply chain costs, the White House still has other channels to increase import costs, so businesses may still not have enough certainty to plan their investments and production.  

“The sectors that would benefit most from the IEEPA duties being overturned are consumer goods industries where mainland China has a high proportion of U.S. imports,” the report stated. “Among the larger import sectors those include toys (75.8% imported from mainland China in 2024), homewares (75.1%) and audio-visual equipment (37.0%) among others. All three are also highly seasonal and face sourcing uncertainties heading into the peak shipping season, which typically involves exports from Asia running from June through September. Thus far, companies have focused on tactical actions including inventory front-loading, price increases and cost negotiations, and may continue to do so during the period of tariff uncertainty.”

Jonathan Todd, Vice Chair, Transportation & Logistics, for Cleveland-based law firm Benesch, told LM that, at the core of these rulings, is the question of whether IEEPA grants the President blanket authority to issue tariffs on a worldwide basis at will.

“You have these two cases and rulings and also an appeal to the deferral appeals court, and alongside this you have the White House press secretary making comments about how the administration is displeased with unelected judges essentially doing what judges do,” he said. “It really is a constitutional issue, and the question is, which body in our government holds tariff authority and to what degree can it be delegated? There is this soap opera of forces.

You have importers litigating, you have states litigating two cases. You have judges in the mix, you have an administration who's taking issue with judges doing what they're doing. And at the core of it, you have the Constitution of the United States of America, which grants tariff authority to Congress, and the question is whether Congress did or could grant kind of blanket authority to the President. So, it's very much a wild game.”

Greg Hussian, partner and litigation attorney with Foley & Lardner LLP, observed that there is what he called a pretty strong chance that the IEEPA tariffs, which he said are the reciprocal tariffs being used by the U.S. on myriad global trading partners, are eventually struck down by the Supreme Court.

“It is on very tenuous legal ground,” he explained. “IEEPA doesn't really mention tariffs into the extent that there is tariff authority. It's supposed to be temporary. And in fact, IEEPA was put in place in reaction to President Nixon trying to put in place global tariffs. And Congress said, ‘that's not right. We're supposed to be doing that. We need to rein that in.’ So, the use of IEEPA is a bit ironic. The reason why President Trump likes it rather than using Section 302 or Section 232, is because basically, you can just do things on a whim. It gives like a huge amount of discretion, but that also makes it even more difficult to defend at court. My guess is, though, that even if the Supreme Court strikes it down, that they will go back and very quickly do a section 301 investigation and use that as the authority. If I were the Trump administration, I would be telling foreign governments this doesn't matter. Because if the Supreme Court strikes it down, it will say it has other trade authorities to do this. My guess is that it would be messy, and then we'd have the question of whether or not there needs to be a refund of the old duties, but that the Trump administration's trade team will come up with a way to support these tariffs using a different trade authority, if push comes to shove.”

National Foreign Trade Council President Jake Colvin said that it’s positive to see the appeals court confirm the lower court ruling that the administration wrongfully invoked IEEPA to implement global tariffs with the caveat that it is still unclear whether businesses will see any relief from this decision as the appeals process continues. 

“If these tariffs are ultimately struck down, it ought to serve as a wake-up call for Congress to reclaim its constitutional mandate to regulate duties and bring some long-term certainty for U.S. businesses and relief for consumers,” said Colvin. “While the court's ruling ought to serve as an opportunity for the administration to pivot, given the president's affinity for tariffs as a trade and foreign policy tool, it’s likely they will seek to leverage other authorities to continue to impose high duties, limiting any relief for businesses and consumers.”

As for what happens on the import front following this ruling, Mike Short, President of Global Forwarding at C.H. Robinson, said that importers remain in limbo, in the interim, with enforcement delayed until October 14, as well as an expected appeal to the Supreme Court, too.

“This decision concerns reciprocal tariffs on goods from most countries, in addition to drug-related tariffs affecting imports from Canada, Mexico, and China,” said Short. “These tariffs account for the lion's share of the duty outlay for many of our customers, so despite no immediate change, they’re eager to know and plan for the ‘what ifs’. Since Friday, we’ve had multiple customers reaching out for clarity on the likelihood of this going to the Supreme Court, if they’ll uphold the ruling, and what the refund process could look like. We’re helping our customers not only navigate those unknown scenarios, but also look at their broader supply chain landscape to help offset unexpected costs and identify efficiencies for long-term supply chain resilience during this ongoing period of tariff uncertainty.”