Recent legal challenges to the Trump Administration’s tariff agenda have generated heightened uncertainty within the trade environment, and companies are encouraged to take note.
On May 28, 2025, the US Court of International Trade (CIT) issued an order invalidating tariffs President Donald Trump imposed under the authority of the International Emergency Economic Powers Act (IEEPA) and ordered a permanent injunction on the tariffs within ten business days. The US government immediately appealed and sought a stay of the decision from the US Court of Appeals for the Federal Circuit (CAFC) pending appeal. On May 29, 2025, the CAFC granted a temporary administrative stay until at least June 9, 2025 while it considers the merits of a stay pending appeal.
Separately, on May 29, 2025, the US District Court for the District of Columbia (DC District Court) issued a preliminary injunction against President Trump’s use of IEEPA to impose tariffs but limited the scope of the injunction to the specific plaintiffs in that case, which were two Illinois-based toy companies. The US government immediately appealed and sought a stay of the decision from the US Court of Appeals for the DC Circuit (CADC). On June 3, 2025, the DC District Court stayed its decision pending appeal.
Following the appeals, on June 3, 2025, President Trump issued a proclamation increasing existing tariffs on steel, aluminum, and certain steel and aluminum derivative products from 25 percent to 50 percent effective June 4, 2025. This latest tariff action was taken pursuant to Section 232 of the Trade Expansion Act of 1962 to protect US national security, demonstrating that the Trump Administration is committed to continuing its tariff-driven trade policy and has authorities other than IEEPA to do so.
In this alert, we discuss how these developments affect the trade landscape and what companies can keep in mind.
Tariff regimes challenged by judicial decisions and anticipated next steps
The judicial decisions challenged two sets of IEEPA-based tariffs:
- Trafficking Tariffs: As discussed in our previous alert, shortly after taking office, President Trump imposed (1) a 25-percent tariff on articles that are products of Canada and Mexico, with certain exemptions and (2) a 10-percent tariff – later raised to 20 percent – on products of China under IEEPA, pursuant to a national emergency relating to international criminal cartels and fentanyl trafficking (Trafficking Tariffs).
- Worldwide and Retaliatory Tariffs: Further, as discussed in our subsequent alert, President Trump imposed pursuant to IEEPA a universal ten-percent “reciprocal” tariff in April 2025 on imports from all countries. The tariff was expected to increase to a country-specific rate for certain countries, and has since been paused – until August 12, 2025 for China, and until July 9, 2025 for other countries (referred to collectively by the CIT as the “Worldwide and Retaliatory Tariffs”). In order to impose the Worldwide and Retaliatory Tariffs under IEEPA, President Trump declared a national emergency due to “large and persistent annual U.S. goods trade deficits,” resulting from trading partners' alleged lack of reciprocity in underlying bilateral trade relationships, their imposition of non-tariff trade barriers, and their economic policies that suppress domestic wages and consumption.
Since both judicial decisions have been stayed, importers are required to continue paying both the Worldwide and Retaliatory Tariffs and the Trafficking Tariffs to US Customs and Border Protection (CBP) upon importation. The CIT ruling is only temporarily stayed while the CAFC considers the government’s emergency motion to stay the judgement pending appeal. It is unclear whether the CAFC will grant a longer stay and how the two pending cases challenging these IEEPA-based tariff regimes will ultimately be decided, resulting in considerable uncertainty regarding the current and future tariff environment.
It is possible that the US Supreme Court will eventually review these cases given the significant effects of these tariffs on the economy and international trade. If the courts permanently enjoin the President from using IEEPA to impose tariffs on imports, this could impact ongoing bilateral negotiations with US trading partners, a prospect our partner Brian Janovitz addressed in a recent article for the Atlantic Council.
Even if the decisions are overturned on appeal, President Trump has other tools at his disposal to impose tariffs on imports. Notably, such authorities have a narrower delegation and more process around the implementation, making them less flexible than IEEPA, but still effective. These include Section 122 of the Trade Act of 1974 to address balance-of-payment issues (described in further detail below); Section 301 of the Trade Act of 1974 to address other nations’ unfair trade practices; Section 338 of the Tariff Act of 1930; and Section 232 of the Trade Expansion Act of 1962 to address threats to national security.
Any tariff-related actions taken by President Trump under these authorities – such as the existing Section 301 tariffs on Chinese-originating goods and a pending Section 232 investigation into pharmaceutical products (see our alert) – will not be impacted by the CIT or DC District Court litigation. Therefore, President Trump is expected to rely more heavily on these authorities to drive forward his tariff agenda until the cases are resolved.
Reasoning and determinations of the courts
After President Trump took executive action to impose the Worldwide and Retaliatory Tariffs and the Trafficking Tariffs, several plaintiffs (including importers and US states) filed suit challenging the tariffs. In both the CIT and DC District Court cases, the courts found that the power delegated by Congress to the Executive Branch under IEEPA relating to imports is limited, and President Trump exceeded that limited authority with his actions – although the reasoning and scope of the two decisions differed to some extent.
IEEPA provides the President with the authority to “regulate…importation” if the President declares a national emergency with respect to an “unusual and extraordinary threat” from abroad. See 50 U.S.C. §§ 1701-1702. The CIT explained that an unlimited delegation of tariff authority from Congress to the President would be unconstitutional and therefore read IEEPA’s delegation more narrowly.
The CIT found that the President’s assertion of tariff authority in this case, unbounded by any limitation in duration or scope, exceeds any authority delegated under IEEPA. Moreover, based on legislative history, the CIT determined that IEEPA does not grant the President the authority to impose tariffs in response to trade deficits. Instead, the CIT stated that Congress delegated certain tariff-related authority to the President to deal with such imbalances under a different statute – Section 122 of the Trade Act of 1974.
The Trade Act of 1974 sets strict limits on the President’s ability to use tariffs to respond to such “balance-of-payments” issues (including a 15-percent cap on tariffs and a maximum duration of 150 days). Therefore, the CIT concluded that President Trump’s use of IEEPA to impose the Worldwide and Retaliatory Tariffs in response to trade deficit issues was unlawful.
The CIT also noted that IEEPA requires that any action taken by the President under its authority must “deal with” unusual and extraordinary threats. The CIT rejected the government’s argument that inflicting a burden on a counterparty to exact concessions – such as in the case of the Trafficking Tariffs, which President Trump implemented to prompt trading partners to address drug trafficking – was authorized under IEEPA, as the tariffs did not directly “deal with” the threat of transnational crime. Instead, the tariffs were intended to put pressure on trading partners to get them to deal with the declared threat. Therefore, the CIT also enjoined the Trafficking Tariffs.
In the other case challenging tariffs imposed under IEEPA, the DC District Court found that the plain meaning of IEEPA, specifically the statutory language authorizing the President to “regulate” imports, does not allow him to impose tariffs (which the DC District Court said the President could only impose if the statute authorized him to “tax”). The court thus issued a preliminary injunction to block the imposition of the Worldwide and Retaliatory Tariffs and the Trafficking Tariffs on the Illinois toy companies that had filed suit.
Steel and aluminum tariffs doubled
Soon after appeals to the CIT and DC District Court decisions were filed, President Trump doubled the Section 232 tariffs on steel and aluminum to 50 percent effective June 4, 2025. The proclamation announcing this latest tariff hike excludes steel and aluminum imports from the UK, which will continue to be tariffed at 25 percent until at least July 9, 2025, pursuant to the US-UK Economic Prosperity Deal. It also calls on CBP to issue “authoritative guidance mandating strict compliance” with the steel and aluminum tariffs and outlines maximum penalties for non-compliance, including “significant monetary penalties, loss of import privileges, and criminal liability, consistent with United States law.”
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