Five small businesses and 12 state governments in the United States filed lawsuits against the federal government on April 14 and April 23, respectively, based on the International Emergency Economic Powers Act (IEEPA) legislated in 1977, over tariffs on fentanyl imposed by U.S. President Donald Trump and the reciprocal tariff nullification against 58 countries. The United States Court of International Trade (CIT) ruled on May 28 that the IEEPA does not grant the president the authority to impose tariffs on fentanyl and reciprocal tariffs. The following day, on May 29, a district court in the District of Columbia also rendered a similar ruling. Following the ruling, the Trump administration immediately appealed to the U.S. Court of Appeals for the Federal Circuit (CAFC), which temporarily suspended the enforcement of the CIT's ruling on the tariff executive order until the appeal was resolved. This means that the tariffs based on the IEEPA will remain in place for the time being, siding with President Trump.
The CIT, established in 1926, was elevated to a trade specialist federal court in 1980. The CIT's location is in New York, and it specializes in interpreting trade-related treaties and laws. It primarily handles complaints against tariff decisions by the U.S. Customs and Border Protection (CBP), lawsuits regarding anti-dumping and subsidy determinations by the International Trade Commission (ITC), litigation concerning trade remedy measures by the Department of Commerce, and constitutionality assessments regarding presidential tariff imposition actions under Section 232 (national security) of the Trade Expansion Act of 1962 and the IEEPA. Since the beginning of his second term, President Trump has invoked the IEEPA to impose tariffs on many countries. While tariffs on steel and automobiles are implemented under Section 232, that section requires prior investigation of impacts on national security.
In contrast, the IEEPA allows the president to impose tariff measures immediately if the conditions for declaring a national emergency are met. While the IEEPA can be activated at the president's discretion, there has been controversy over whether it permits tariff measures. The United States is unique in the world in that Congress holds the authority over trade policy based on the Constitution, delegating tariff policy to the president under limited conditions and criteria.
IEEPA tariff lawsuits and rulings
On May 28, three judges of the CIT unanimously ruled that all tariffs imposed by President Trump based on the IEEPA were unconstitutional. This ruling includes tariffs on Canada, China, and Mexico as well as reciprocal tariffs. The court determined that Trump exceeded the authority granted under the IEEPA. This is regarded as the most significant legal setback for Trump's trade policy. The Trump administration quickly appealed the ruling, obtaining a temporary suspension of its enforcement until June 9, allowing tariffs under the IEEPA to remain in place. During the appeal process, the Trump administration has the option to impose tariffs on specific countries or products using Section 301 (unfair trade practices) or Section 232, and could also seek to impose a 15% temporary tariff based on Section 122 due to balance of payments deficits. However, circumvention measures take time, have constraints, and may become subject to further legal issues. As Trump's tariff measures come under judicial scrutiny, tariff negotiations are bound to be delayed. The CIT ruling represents a judicial intervention in the balance of power between the executive and Congress regarding trade issues.
The Council on Foreign Relations (CFR), an American foreign affairs think tank, evaluated the CIT ruling from various perspectives. The CIT ruling serves as a reminder that trade policy is not solely determined by unilateral decisions of the president and demonstrates that the judiciary and Congress still play significant roles. There was unanimous agreement that, even if Trump does utilize circumvention methods to implement similar tariff systems, there will be limitations on the president's tariff policies.
CFR's Director of International Economics, Ben Steel, assessed the ruling as a counterattack against the abuse of presidential power. This ruling acts as a brake on the trend of unchecked expansion of presidential powers under the IEEPA and others over decades. The Trump administration is likely to seek to impose tariffs again via Sections 232 and 301 while appealing the ruling. Negotiations with trade partners are expected to become even more chaotic, and disputes regarding the legality of tariffs could last several months. Brad W. Setser, a senior fellow at the CFR, noted that the president's arbitrary actions, such as imposing a 145% tariff on China and then reducing it to 30% following two days of ministerial-level negotiations, will no longer be permitted under the IEEPA. This means that the original purpose of the IEEPA, which is limited to a 'real emergency,' must be adhered to. Current or planned actions under Section 232 could cover approximately 40% of U.S. trade (about 4% of GDP), and countries like the European Union, Korea, Japan, and Taiwan face high tariffs on sectors like automobiles, semiconductors, and aerospace. A 30% tariff re-imposition on China under Section 301 is also possible, and actions targeting countries with non-market economies, such as Vietnam, could be considered. However, these measures will require more time and procedures, making it increasingly difficult for the president to make sudden tariff adjustments.
Key issues and outlook
The recent CIT ruling criticizes President Trump for extensively using emergency powers to establish trade policies. It warns against excessive government intervention disguised as a national emergency and calls for the restoration of Congress's constitutional authority over tariffs. Although the CIT ruling places significant checks on Trump's trade policy, it does not imply that tariffs will end even if the ruling is upheld, as the White House is likely to seek circumvention methods. Robert Lighthizer, the former U.S. Trade Representative, who was a designer of protectionist policies during the Trump administration, argued at a forum in Seoul that, despite the CIT ruling, "we will not see the end of the tariff war." He emphasized that, while there may be constraints on universal tariff impositions, tools to impose tariffs on specific items under Section 232 or on specific countries under Section 301 are available for President Trump to use at any time.
Lighthizer's judgment aligns with the White House's stance. Karoline Leavitt, White House spokesperson, emphasized the day after the CIT ruling that the court's decision, even if upheld, would not impact ongoing tariff negotiations with other countries due to the various legal means available for imposing tariffs. Currently, the ratio of conservative to liberal justices on the Supreme Court is 6 to 3, with conservative justices holding the majority. As Trump's tariff policies become embroiled in legal disputes, delays in the negotiation schedules of U.S. trade authorities are inevitable; however, this does not mean that negotiations concerning tariffs with the United States can be neglected. Tariffs on steel and automobiles are not subject to the CIT ruling, and President Trump may expand the application of Sections 232 and 301. Additionally, the conservative-dominated Supreme Court could overturn the CIT ruling. The new government that assumes power following the presidential election on June 3 will need to devise a tariff negotiation strategy based on matters negotiated with the previous administration while continuing negotiations concerning tariffs with the United States.
※ This article is published in the June issue of 'Trade'. Please search for 'Monthly Trade' on Naver.