Court Ruling Throws Uncertainty Into Trade Policy

The trade policy landscape has been tough to navigate in recent months, given the amount and scale of announcements (and changes to those announcements) related to tariffs.  From two rounds of reciprocal tariffs announced and the 90-day pause, to Section 232 tariffs to agreements with major trading partners that have yet to be finalized, and more, planning around so much activity has been a challenge for businesses and consumers.  Enter the courts…

The U.S. Court of Appeals has now ruled in a 7-4 decision that the President does not have authority under the International Emergency Economic Powers Act (IEEPA) to mandate tariffs, while providing enough time for the Supreme Court to weigh in as well.  The Court argued that it was unlikely that Congress intended for the IEEPA to be used to justify tariffs when it was signed into law in 1977 by President Carter, noting that "the statute bestows significant authority on the President to undertake a number of actions in response to a declared national emergency, but none of these actions explicitly include the power to impose tariffs, duties, or the like, or the power to tax."  The President disagreed and said that- “If allowed to stand, this Decision would literally destroy the United States of America."

It goes without saying, there is a lot of speculation around what happens should this ruling be upheld by the Supreme Court.  Some of that remains up in the air, but there are some "knowns" within this scenario as well.  For example, the tariffs issued that were not done so under the IEEPA would not be impacted by this ruling; specifically, the Section 301 tariffs in place from the first Trump Administration and the Section 232 tariffs implemented would remain in place regardless of what position the Supreme Court would take.  On the other hand, the reciprocal tariffs issued by the President (most recently this past August) were done so under the authority of the IEEPA and, therefore, would be subject to the ruling of the Supreme Court.  The President also stopped duty-free de-minimis shipments into the United States under the authority of the IEEPA, but Congress subsequently instituted a similar ban within the One Big Beautiful Bill (HR 1), which would remain in place.

All that said, the uncertainty everyone is trying to avoid is officially back.  Regardless of whether the reciprocal tariffs are or are not fully upended, the uncertainty makes it tough to drive business decisions going forward as we all wait for the Supreme Court.