Global Trade - U.S. Tariffs

May 31, 2025

Ruling by the U.S. Court of International Trade

On May 28, 2025, the United States Court of International Trade (USCIT) issued a consolidated ruling on two separate cases, which challenged the constitutionality of worldwide and retaliatory tariffs and trafficking tariffs imposed by reason of the executive orders issued by President Trump.

The first case was filed by four businesses as plaintiffs.
The second case involved twelve states as plaintiffs—Oregon, Arizona, Colorado, Connecticut, Delaware, Illinois, Maine, Minnesota, Nevada, New Mexico, New York, and Vermont.

These cases present a significant legal challenge to the President’s authority to impose tariffs under the International Emergency Economic Powers Act (IEEPA), raising fundamental constitutional and statutory interpretation concerns.

The court ultimately ruled against the President’s actions, limiting the President’s ability to impose worldwide, retaliatory, and trafficking tariffs under IEEPA without Congressional approval. However, such tariffs remain in effect pending appeal.

Key Findings

The court ruled that IEEPA does not grant the President unlimited authority to impose broad tariffs, reaffirming that such power remains with Congress.
As a result, the court struck down tariffs imposed under IEEPA—worldwide retaliatory (aka reciprocal) tariffs and trafficking tariffs—citing concerns over excessive delegation of legislative power.
The court referenced previous rulings questioning the scope of executive tariff authority under emergency powers. It cited United States v. Yoshida Int’l. Inc., 526 F.2d 560, 584 (C.C.P.A. 1975) (“Yoshida II”), stating that:

“President Nixon imposed a limited surcharge as a temporary measure to help meet a particular national emergency, which is quite different from imposing whatever tariff rates he deems desirable.”

Summary of Key Legal Arguments

Plaintiffs’ Position

The plaintiffs argued that imposing tariffs under IEEPA exceeded constitutional and statutory authority.
They contended that the phrase "regulate … importation" in IEEPA does not grant the President power to impose tariffs.
They further argued that an unlimited tariff authority would violate the nondelegation doctrine and major questions doctrine, both essential in ensuring that significant policy decisions remain within Congress, not the executive branch.

2️. Government’s Defense

The government maintained that IEEPA provides sufficient limitations on the President’s power, such as:
- The requirement to declare a national emergency.
- The necessity for the threat to be "unusual and extraordinary."
They argued that the President’s actions were within the intended scope of IEEPA, citing the flexibility needed to address national security threats.

Court’s Conclusions

The court ruled that IEEPA does not authorize the President to impose worldwide and retaliatory tariffs, as these lacked clear statutory limits and did not satisfy legal conditions.
The trafficking tariffs also failed to directly address the national security concerns outlined in IEEPA—instead being used as leverage, which is impermissible under the statute.

Thus, the court ruled that the tariffs were ultra vires (beyond legal authority) and unlawful, issuing a summary judgment in favor of the plaintiffs.

Impact of Ruling

By vacating the tariff orders, the court removes their legal standing and issues a permanent injunction to prevent their enforcement—providing lasting relief to affected businesses and states.

Temporary reinstatement of tariffs during the appeals process

The Trump Administration immediately appealed court’s ruling, and the Federal Circuit Court of Appeals temporarily reinstated the tariffs while the appeal is under review. Therefore, the worldwide retaliatory tariffs and trafficking tariffs are still in effect.

Next Steps for Businesses

Closely and actively monitor developments in trade policy for impacts to your business, including:

o Actions from the executive branch and its agencies (e.g., US Trade Office, U.S. Customs and Border Protection, etc.),

o Judicial developments that could influence trade regulations

o Trade agreements and negotiations

o Any additional executive orders or proclamations

·Prepare contingency plans for potential tariffs recovery if the Federal Circuit Court of Appeals—or even the Supreme Court—upholds the USCIT ruling.

Monitor U.S. Customs and Border Protection guidelines for updates on tariff enforcements and compliance procedures.

Observations

Trade policy uncertainty can be highly disruptive for businesses.

To remain resilient and competitive, companies must proactively adapt to evolving trade policies and global economic shifts. This will require attention, resources, and strategies.

Strategic levers are key mechanisms or adjustable actions that businesses can use to optimize performance, reduce costs, and improve efficiency. These tools help companies manage demand fluctuations, mitigate disruptions, and respond to competitive pressures, ensuring long-term adaptability in a changing economic landscape.

If upheld in higher courts, the vacating and permanent injunction of tariff orders could lead to financial adjustments, shifts in market dynamics, supply chain modifications, compliance updates, and strategic planning considerations. These changes may have both positive and negative effects, depending on the specific circumstances of each business.

For more information, contact us.

Previous articles on global trade:

Global Trade: Free Trade Zones and Bonded Warehouses

Global Trade Pressures

Disclaimer

The contents of this insight are intended for general information only. illumina CPA Group, Inc. is not, by means of this communication, rendering professional advice or services. Before making any decisions or taking any action that may affect your finances or your business, you should consult a qualified professional adviser.