Appeals court rules Trump's global tariffs unlawful, but stays enforcement

A U.S. appeals court has ruled that Mr. Trump's global tariffs are unlawful but has delayed enforcement, creating a period of major legal uncertainty for importers.

US-tariffs

A federal appeals court on August 29 ruled that President Donald Trump's use of emergency powers to impose wide-ranging tariffs is unlawful, but has stayed any action until mid-October to await a review by the Supreme Court.

In a 7-4 decision, the Federal Court of Appeals sided with the Court of International Trade, which had concluded in May that Trump lacked the authority under the International Emergency Economic Powers Act (IEEPA) to order indefinite tariffs on nearly all goods from almost every country in the world.

"It seems unlikely that Congress intended, in enacting IEEPA, to depart from its past practice and grant the President unlimited authority to impose tariffs," the appeals court's decision said. "The statute neither mentions tariffs (or any of its synonyms) nor has procedural safeguards that contain clear limits on the President’s power to impose tariffs."

However, the court stayed the issuance of its mandate invalidating Trump’s duties until Oct. 14 to allow the administration time to seek a review of the decision from the Supreme Court. In addition, the judges decided that, based on recent Supreme Court decisions, the Court of International Trade (CIT) should review certain aspects of its ruling, such as whether an injunction affects all entities paying the tariffs or only the plaintiffs in the case, V.O.S. Selections, Inc. v. Trump.

On Sunday, Trump reacted to the ruling on the social media platform Truth Social.

"Without Tariffs, and all of the TRILLIONS OF DOLLARS we have already taken in, our Country would be completely destroyed, and our military power would be instantly obliterated," Trump said. "In a 7 to 4 Opinion, a Radical Left group of judges didn’t care."

At stake are the trillions of dollars in global trade affected by the various tariffs Trump has imposed since the beginning of the year. A loss at the Supreme Court could derail the president's trade policy and force the administration to face having to issue refunds.

However, Michael Lowell, a partner and chair of the Global Regulatory Enforcement Group at the international law firm Reed Smith, said it is impossible to predict how the Supreme Court will rule if the administration seeks a review of the appeals court decision. A majority on the court could side with the four dissenting appellate judges whose opinion seems aimed at the six conservative justices of the high court.

The dissent, Lowell said, argues that the tariffs are constitutional because Congress chose not to challenge the president's argument that the duties counter a national security threat.

"Congress can make its own findings on the national security concerns that the president has made, and effectively invalidate the president’s determination, which would have the effect of taking away the tariffs," Lowell said.

Indeed, the dissent argues that the president has "broad emergency authority in this foreign affairs realm."

"We conclude that IEEPA’s authorization of presidential action in this realm is not an unconstitutional delegation of legislative authority under the Supreme Court’s decisions, which have upheld broad grants of authority, including tariffing authority, in this foreign-affairs-related area," the judges said.

The majority opinion, on the other hand, focuses on the fact that the IEEPA does not explicitly allow the president to impose tariffs on such an unprecedented scale without the approval of Congress, which, under the constitution, is the only branch of government that can set long-term tariffs.

"We would probably have a unanimous view if the president had done narrow tariffs on one country, of one amount," Lowell said. "It’s really the scale of what the president is doing here that I think is causing the majority a lot of concern. [He] is effectively remaking the entire international trade system."

The appeals court decision covers several types of tariffs the Trump administration has imposed over the past several months. It includes what the court called the "Trafficking Tariffs" imposed on Mexico, China, and Canada earlier in the year, as well as the "Reciprocal Tariffs" that placed additional duties on nearly every country in the world.

"We are not addressing whether the President’s actions should have been taken as a matter of policy. Nor are we deciding whether IEEPA authorizes any tariffs at all," the decision reads. "Rather, the only issue we resolve on appeal is whether the Trafficking Tariffs and Reciprocal Tariffs imposed by the Challenged Executive Orders are authorized by IEEPA. We conclude they are not."

Reed Smith, Lowell said, is telling clients that while it's unknown how the Supreme Court will rule if they take up the case, they should still prepare for the possibility that the Trump administration loses at the high court. That means clients should have a clear record of their import shipments and the duties paid.

Many of Reed Smith's clients rely on brokers to file, he said, so many companies may not have the records readily available.

"If the president loses in the Supreme Court and you’ve got your documentation ready to go, you can do very simple post shipment corrections to recover tariffs paid or tariffs that are coming due on these entries," Lowell said. "If you’re not ready to go, you’re going to have to go through protests, and it’s a more difficult row to hoe and more likely to be stuck in customs backlogs."

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