Trump's tariffs face crucial court test on eve of latest deadline

NBC News

4 days ago

President Donald Trump's global tariff regime heads to court Thursday in a fight for its survival.
Starting at 10 a.m. ET, a panel of 11 judges in New York will hear about 45 minutes of arguments each from the Trump administration and two small businesses that say many of his import duties are illegal.
Trump's sweeping tariffs are set to go into effect Friday. Since he postponed the biggest hikes in April because of market turmoil, Trump has announced an array of tariff levels with about a dozen trading partners. Many of them closely resemble the rates Trump threatened to impose in early April, although some are higher and a few are slightly lower.
Businesses of every size have said tariffs have caused confusion and uncertainty and have made it extremely difficult to plan. "Retailers typically plan their inventories six to nine months in advance to meet seasonal demand. However, unpredictable and rapidly changing tariff policies are making it nearly impossible to forecast costs, place orders and manage supply chains effectively," the National Retail Federation said in June.
V.O.S. Selections Inc., a wine and spirits importer, and Plastic Services and Products, a pipe and fittings company, sued Trump over his use of the International Emergency Economic Powers Act (IEEPA) of 1977, saying he has 'no authority to issue across-the-board worldwide tariffs without congressional approval.'
The Court of International Trade initially blocked the tariffs in late May. It found that the import duties lacked 'any identifiable limits' and that the law Trump cited in many of his executive orders did not 'delegate an unbounded tariff authority to the President.' It also said the tariffs did not meet the test of an 'unusual and extraordinary' risk to the country.
All of Trump's tariffs on major trading partners, such as Canada, Mexico, China, the European Union, Japan, India, Brazil and a handful of other countries, have been deployed using the law.
'Congress has not delegated any such power,' the companies' initial legal filing said. 'And the President's justification does not meet the standards set forth in the IEEPA. His claimed emergency is a figment of his own imagination: trade deficits, which have persisted for decades without causing economic harm, are not an emergency."
'IEEPA nowhere mentions tariffs, duties, imposts, or taxes, and no other President in the statute's nearly 50-year history has claimed that it authorizes tariffs,' the companies added in a filing with the appeals court.
The White House said in May about the case that trade deficits 'have created a national emergency that has decimated American communities, left our workers behind, and weakened our defense industrial base.'
The court battle would not affect tariffs Trump implemented under other laws, such as 10% steel tariffs on the United Kingdom and 50% steel and aluminum tariffs on all other worldwide trading partners. Those tariffs were implemented under various sections of the Trade Act of 1974 and the Trade Expansion Act of 1962.
The companies also argue that such sweeping tariffs would be 'devastating' to small businesses across the United States.
The panel of judges is not expected to rule this week. Regardless of the outcome, the losing party is likely to appeal to the Supreme Court, and the lingering uncertainty that has kept consumers and businesses in a bind for the better part of this year could remain.
The lawsuit is not the only challenge Trump's tariffs and trade deals face, either. There are at least a dozen other lawsuits filed or in the early stages of being heard by courts.
In a similar lawsuit filed this month, an orange juice importer warned that the price of its products could soar as much as 25% for U.S. consumers. Trump said he would hit Brazil with 50% tariffs, citing a trade deficit that is actually a surplus. But Trump's extraordinarily high levy is primarily due to the treatment of a political ally, former Brazilian President Jair Bolsonaro, and the treatment of tech companies — notably Elon Musk's X.
Even if the court rules that Trump's tariffs are illegal and blocks them, there are still a few other avenues the administration could take to keep them in place.
Trump could instruct the commerce secretary and the U.S. trade representative to launch investigations under Section 301 of the 1974 U.S. Trade Act against various trading partners, which would allow tariffs to be implemented after an investigation runs its course. Trump could also use Section 232 of the 1962 trade law, which he is already using for steel and aluminum duties.
Then, there is a never-before-used trade law. 'Section 338 of the Trade Act of 1930 allows the President to impose tariffs of up to 50% on imports from countries that discriminate against the US,' Goldman Sachs' chief U.S. political economist, Alec Phillips, said in a statement.
'This authority, which has never been used ... limits the amount of the tariffs but does not require a formal investigation,' Phillips said.
In an essay on trade issues, Max Yoeli, a senior fellow at the U.K. think tank Chatham House, and Leslie Vinjamuri the president and CEO of the Chicago Council on Global Affairs, note that Trump could also 'work with Congress to pass new legislation underpinning additional tariff authorities, but his administration has shown a strong preference for executive action to date."
"The president has many other tools to coerce states and pursue his objectives, including expanding his use of sanctions and export controls,' they wrote.
Trump could also negotiate and agree to formal trade deals. So far, though, most of what he and his administration have called deals are not full-fledged pacts. Instead, they are framework agreements light on details announced on social media followed by slim executive orders.
However, formal trade deals typically take years to reach because of the highly complex nature of the U.S. and global economies. The United States alone has more than 12,000 possible tariff categories among 200 trading partners, according to the financial services firm UBS.