Appeals court ruling adds new doubts to Trump tariff agenda

A federal appellate court ruling declared illegal the majority of President Donald Trump’s tariffs imposed this year, casting more uncertainty around the long-term viability of much of the administration’s efforts to rewrite the post-World War II global trade structure. 

In a 7-4 ruling issued on Aug. 29, the U.S. Court of Appeals for the Federal Circuit decided that the administration’s use of the International Emergency Economic Powers Act (IEEPA), a national security law, to swiftly implement, and subsequently change, tariffs on imports from across the globe this year went beyond the powers granted by that law. The tariffs will remain in place until at least Oct. 14 and could remain in place pending final appeal to the Supreme Court, which the administration formally petitioned for on Sept. 3. 

Congress, “… did not give the president wide-ranging authority to impose tariffs,” the court majority wrote in its opinion, though the court specified that it was only ruling on current executive orders, rather than whether any tariffs at all might be legal under IEEPA. 

“The stakes in this case could not be higher,” U.S. Solicitor General D. John Sauer wrote to the Supreme Court, asking them to take up the administration’s appeal. “The President and his Cabinet officials have determined that the tariffs are promoting peace and unprecedented economic prosperity, and that the denial of tariff authority would expose our nation to trade retaliation without effective defenses and thrust America back to the brink of economic catastrophe.”

If the administration’s final appeal fails, it could set up an unprecedented rush for refunds of most of the over $136 billion the Treasury Department estimates it has collected so far this year.

Still, Trump has several other statutory powers to impose tariffs if his IEEPA tariffs are overturned. Those include Section 232 of the Trade Enforcement Act and Sec. 301 of the Trade Act of 1974, which Trump has used for tariffs on raw and component imports of steel, aluminum, copper, automobiles and parts, as well as ships and shipping-related equipment. He also says he will use these powers this year on lumber, timber, critical minerals, semiconductors, and pharmaceutical drugs, among other products. The first Trump administration also used Section 232 to impose tariffs on Chinese products, and launched a Section 301 investigation that likely would have resulted in retaliatory tariffs on French products over that country’s adoption of a digital services tax. The current Trump administration also launched a Section 301 investigation into Brazil in mid-July, partly over the country’s implementation of its own digital services tax. 

In an Aug. 25 social media post, Trump threatened further tariffs if other countries move forward on digital services taxes. The administration continues to negotiate with several countries over the service taxes after an abrupt détente around global minimum tax negotiations in June.

“Digital Taxes, Digital Services Legislation, and Digital Markets Regulations are all designed to harm, or discriminate against, American Technology,” Trump wrote in his post on the topic. “I put all Countries with Digital Taxes, Legislation, Rules, or Regulations, on notice that unless these discriminatory actions are removed, I, as President of the United States, will impose substantial additional Tariffs on that Country's Exports to the U.S.A., and institute Export restrictions on our Highly Protected Technology and Chips.”

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