Cloudy Legal And Policy Outlook For Trump Tariffs

Forbes

4 days ago

WASHINGTON, DC - APRIL 02: U.S. President Donald Trump holds up a chart while speaking during a ... More 'Make America Wealthy Again' trade announcement event in the Rose Garden at the White House on April 2, 2025 in Washington, DC. Touting the event as 'Liberation Day', Trump is expected to announce additional tariffs targeting goods imported to the U.S. (Photo by)
On May 28 the specialized U.S. Court of International Trade (CIT) struck down major new tariffs imposed by President Trump over the last few months. The U.S. Federal Circuit Court of Appeals temporarily reinstated those tariffs the next day, pending its review of a Trump Administration appeal. Various other challenges to the Trump tariffs are before other courts. The Supreme Court likely will have to step in to resolve the tariff issue, possibly on an expedited basis.
The Trump tariffs raise major issues of foreign economic policy as well as significant legal questions. The ultimate resolution of this intertwining of law and policy could have a substantial impact on the American economy.
The CIT Opinion
The President based his authority to impose broad new tariffs on the International Economic Emergency Powers Act. IEEPA empowers the president to regulate imports or exports 'to deal with' an 'unusual and extraordinary threat' which has been declared a national emergency under IEEPA.
The CIT struck down two categories of Trump tariffs.
The first category, 'trafficking tariffs,' were levied on Mexico, Canada, and China by Trump executive orders in February 2025. The President imposed these tariffs in response to his prior orders declaring a 'national emergency' at the U.S. borders stemming from uncontrolled drug and human trafficking.
The second category, 'worldwide and retaliatory tariffs,' were applied by April executive order to 57 nations (including China). In imposing these tariffs, whose rates varied by country, the President cited the existence of an IEEPA national emergency based on 'large and persistent goods trade deficits' stemming from harmful foreign economic policies, including high tariff rates and non-tariff barriers.
The President subsequently paused and temporarily adjusted downward several tariffs, based on various conversations and anticipated negotiations with senior foreign officials.
Twelve states and five companies jointly sued the U.S. Government to have the tariff orders vacated. The CIT first found that the tariffs had imposed economic injury on the plaintiffs, giving them legal 'standing' to sue.
The CIT next stressed that an unlimited delegation by Congress to the President of Congress's authority to levy tariffs would be unconstitutional. To avoid constitutional problems, it held that IEEPA's reference to 'regulating imports' provided the President with only limited authority over tariff-setting.
The CIT then held that IEEPA authorized neither the 'trafficking tariffs' nor the 'worldwide and retaliatory tariffs.'
The trafficking tariffs did not meet the IEEPA requirement of 'dealing with' the cited border emergency because the collection of tariffs 'does not evidently relate to foreign governments' efforts to . . . seize bad actors within their respective jurisdictions.'
The worldwide and retaliatory tariffs dealt with a balance of payments deficit and thus had to conform with the limits of a separate law, Section 122 of the Trade Act, which deals specifically with such deficits. The words 'regulate importation' within IEEPA did not therefore 'permit the President to impose tariffs in response to balance of payments deficits.'
Judicial Review of the Opinion
The CIT decision is defensible but not impregnable. It is based on careful interpretation of IEEPA in light of other trade laws and constitutional limits on delegating legislative power to the President.
The Administration may be expected to argue that, contrary to the CIT's holding, tariffs are an appropriate way of 'dealing with' the trafficking crisis. It will also argue that the existence of Section 122 (which does not deal with emergencies) does not preclude the President from imposing tariffs under other laws, such as IEEPA, that empower the President to regulate trade in an emergency.
More generally, the Administration will also probably argue that the President has broad foreign affairs authority under the Constitution, and that the CIT's narrow reading of IEEPA constitutes unwarranted judicial interference in the President's exercise of that authority, contrary to the constitutional separation of powers.
The resolution of this case is uncertain. It could well turn on how a Supreme Court majority resolves the tension between two separation of powers questions – the limitation on Congress's assignment of legislative authority to the President and the President's ability to carry out foreign policy free from judicial micromanagement.
Alternatives to IEEPA
The Administration may, if it chooses, turn to a variety of other trade statutes that could authorize Trump tariffs.
Compared to IEEPA, however, those laws give the President less flexibility to act quickly and decisively in setting policy. They may thus prove less effective in spurring negotiations with other countries.
Furthermore, immediate efforts to invoke other laws could perhaps undermine the Administration's IEEPA litigation posture.
Policy Considerations
The Trump tariff dispute highlights major questions of economic policy. The tariffs have been controversial from the start, and have generated competing narratives.
Tariffs are Bad
Large numbers of distinguished mainstream economists have attacked them as economically harmful measures that distort the efficient working of markets and impose higher costs and diminished welfare on American consumers and many U.S. industries. Some expert commentators are cautiously optimistic that the CIT decision, if it holds, will bolster the American economy.
Tariffs May Incentivize Beneficial Trade Deals
A contrarian argument economic argument is that the tariffs provide needed leverage to bring foreign countries to the negotiating table. Negotiations could potentially lead to other nations' reduction of their tariffs and of their high non-tariff barriers that harm their own economies as well as American businesses.
A series of negotiations, seen in the best light, could potentially yield a 'win-win' result (perhaps even with China), featuring lower tariffs and fewer anticompetitive market distortions that serious reduce economic welfare.
The Trump Administration could point to the fact that the U.S. and UK have already entered into a new trade agreement that reduced various tariffs. Furthermore, '[t]he European Union, Canada, and China all announced minor tariffs on U.S. products, escalating the possibility of companies negotiation lower rates for US workers and companies.'
Nevertheless, the CIT holding may reduce the Administration's leverage by causing potential negotiating partners to take a 'wait and see' attitude, and delay coming to the table. Even with expedited judicial review, a final resolution of the case will take a while.
Tariffs Generate Costly Uncertainty
A third less encouraging perspective is that even if tariff adjustments by the U.S. generate some negotiations, the end result is unpredictable. In particular, the very fact of 'up and down' U.S. adjustments in proposed tariff rates by the Trump Administration generates substantial business uncertainty.
Such uncertainty may be expected to discourage economically beneficial investments and commercial agreements, to the detriment of the American economy. According to one report, tariff-related uncertainty has already slowed U.S. GDP growth.
Final Observations (As of Now)
Trump tariff policy will play a significant role in shaping the Administration's legacy. These are early days still. Stay tuned for further developments.