Overview
Summary
On May 28, 2025, a three-judge panel of the US Court of International Trade (CIT) unanimously held that the International Emergency Economic Powers Act (IEEPA) did not provide President Trump the authority to impose the so-called "reciprocal tariffs" or tariffs on Canada, Mexico, and China in response to the flow of fentanyl and other illicit drugs into the United States. The following day, on May 29, 2025, the US District Court for the District of Columbia went further and found that IEEPA does not permit the President to impose tariffs at all, and issued a preliminary injunction for the benefit of the two small businesses that filed the case.
On May 29, 2025, the US Department of Justice filed an emergency motion asking the US Court of Appeals for the Federal Circuit to stay the CIT's order. The Court of Appeals granted an administrative stay later the same day in order to give the court more time to consider the motion for stay, which means that for the time being these IEEPA-based tariffs remain in place.
This post summarizes the opinions and forecasts potential next steps and considerations for businesses.
Background
During his second term in office, President Trump has relied on IEEPA to impose tariffs on a wide range of countries and products.
The first set of IEEPA-based tariffs was applied to Canada, Mexico and China, ostensibly to address both illegal immigration and trade in fentanyl. These tariffs were set at 25% for most imports from Mexico and Canada, with slightly lower 10% tariffs applied to imports of energy products from Canada, and 10% for all imports from China. Goods compliant with the US-Mexico-Canada Agreement (USMCA) were later exempted, while tariffs on imports from China rose to 20%, and de minimis treatment for low-value imports from China was eliminated.
The second set was announced on April 2, 2025, called "Liberation Day," when President Trump again used IEEPA to impose "reciprocal tariffs" targeting countries with persistent US goods trade deficits, initially setting a 10% global tariff for most countries and higher rates, ranging from 11% to 50%, for a smaller set of countries with the highest trade deficits. However, on April 9, President Trump delayed the higher tariffs by 90 days, urging partners to address trade imbalances. Following escalations with China, tariffs on Chinese imports briefly rose to 125% on April 10, 2025, before being reduced to 30% on May 12, 2025.
In response to these tariffs, lawsuits were filed in a number of courts across the country, some by private litigants and some by states. Over the last two days, the first decisions from these challenges were issued.
Opinions
CIT Opinion
On May 28, 2025, the CIT issued a single opinion for the two cases pending in that court, V.O.S. Selections v. United States and Oregon v. Department of Homeland Security. In the decision, the court granted plaintiffs' motion for summary judgment and vacated several presidential actions that imposed tariffs under IEEPA. The three-judge panel held that both the reciprocal tariffs and the tariffs on China, Canada, and Mexico described above exceeded the President’s authority under IEEPA.
With respect to the reciprocal tariffs, the CIT concluded that the unbounded nature of the tariffs exceeded the President's authority under IEEPA. Because the US Constitution allocates tariff power to Congress, the court held IEEPA does not provide the President with limitless power to impose tariffs. The court also noted that these tariffs were imposed to respond to an imbalance in trade, which is a type of balance-of-payments deficit, and further noted that Congress had included certain provisions in the Trade Act of 1974 that set specific limits on the President's authority to respond to balance-of-payments concerns. According to the CIT, by establishing a non-emergency statute with greater limitations to address this issue, Congress removed the President’s power to respond to trade deficits from the broader powers granted to a president under IEEPA. As a result, the court held that the imposition of reciprocal tariffs to address trade deficits without any limitations in duration or scope exceeded the President’s authority under IEEPA.
The CIT similarly held that the Executive Orders imposing tariffs on Canada, Mexico, and China in response to illegal drug trafficking as well as other criminal activities were beyond the President's authority under IEEPA. The CIT determined that imposing tariffs on lawful imports does not have a direct link to the cited criminal activity it is intended to address. Under the statute, IEEPA powers can only be used to "deal with an unusual and extraordinary threat," and concluded that these tariffs do not "deal with" this particular concern. Specifically, the CIT stated that imposing tariffs to create leverage is not a sufficient justification to "deal with" an issue under IEEPA. The CIT also rejected arguments that this issue was a “political question” and thus unreviewable by the courts.
As the CIT held that both sets of tariffs are unlawful, it issued a permanent injunction against them and gave the US government 10 calendar days to issue the necessary administrative orders to implement the CIT's decision.
DC District Court Opinion
On May 29, 2025, the DC District Court in Learning Resources Inc. et al v. Trump granted plaintiffs' motion for a preliminary injunction against the same set of tariffs. Like the CIT, the DC court held that the President did not have the authority to impose the challenged tariffs. However, it came to a broader conclusion, concluding that IEEPA does not authorize the President to impose tariffs at all, and as a result the challenged tariffs were ultra vires. Also, unlike the CIT decision, the court found (but without further explanation) that the agencies implementing the tariffs also violated the Administrative Procedures Act.
In its decision, the court also held that the plaintiffs would suffer irreparable harm without an injunction due to the effect the tariffs would have on their businesses. It rejected arguments from the government that enjoining the tariffs would affect foreign policy and national security concerns, noting that those concerns would come from the CIT’s decision, which was described as "sweeping," not this case where the tariffs were enjoined against only two companies. Finally, the court ruled against the government's request to transfer the case to the CIT under the grounds that the IEEPA was not a US law providing for tariffs (even though it was being used to impose tariffs in this instance).
Next Steps
Litigation
Within hours of the CIT's decision, the administration filed a motion with the CIT to stay the court's decision and filed a motion to stay in the Federal Circuit the following day. Shortly thereafter, the Federal Circuit temporarily paused enforcement of the CIT's orders while it considers a full stay pending appeal. This administrative stay keeps the tariffs in place for now but does not reflect how the Federal Circuit might ultimately rule. Such administrative stays are common in high-profile cases. The Federal Circuit ordered the parties to complete briefing on the stay motion by June 9. The tariffs will thus remain in place at least until then—and perhaps a bit longer as the Federal Circuit considers the motion.
The administration has also filed a notice of appeal from the DC District Court decision. We anticipate a motion to stay in the DC District Court and the DC Circuit in short order.
If the administration's motions for a stay of the judgment are not granted, the administration could seek a stay before the Supreme Court, which in turn could be converted by the Court into a petition for certiorari before judgment. This would allow the Supreme Court to hear a case directly from a lower court before a final ruling, which it typically does in matters of urgent national importance. See 28 U.S.C. § 2101(e). It would not be surprising if the Supreme Court granted certiorari before judgment here, and it is possible the Court will depart from its usual schedule to hear argument. The Supreme Court has already heard one oral argument outside its typical schedule to address an unprecedented move by the administration (addressing an executive order on birthright citizenship).
Trade Deals
In mid-April, the President claimed that the country-specific reciprocal tariffs were being paused in response to expressions of interest by US trading partners in addressing the "lack of trade reciprocity" in the respective bilateral trade relationships. In the weeks following, several countries reportedly sought negotiations with the administration to avoid the reimposition of the higher tariff rates. On May 14, 2025, the US and the United Kingdom announced a limited trade deal focused on reducing certain market access barriers and increasing trade facilitation. While some of the largest US trading partners are reportedly negotiating agreements (i.e. the EU, Japan, South Korea, Taiwan, Vietnam, and India), no further agreements have been announced. These court decisions now cast some doubt over the future of these negotiations. At the same time, the President could use other tariff authorities as leverage to advance the negotiations (e.g. Section 232 of the Trade Expansion Act of 1962 or Section 301 of the Trade Act of 1974).
De Minimis
On April 2, 2025, President Trump modified the Executive Order imposing tariffs on China in response to illegal drug trafficking to eliminate de minimis treatment for low-value imports. If these tariffs are ultimately invalidated, it is unlikely that the elimination of de minimis for imports from China will stand.
Impact for Businesses
Given the Federal Circuit's issuance of a temporary stay, the CIT's decision has no immediate effect, and companies will need to continue to pay these duties while the appeal is pending. However, if the CIT’s decision is upheld on subsequent appeals, companies currently paying these tariffs may be eligible for refunds of IEEPA duties already paid. Companies should make certain that they are taking all necessary steps, including monitoring entries on which IEEPA-based tariffs have been paid, to ensure that they will continue to be eligible for refunds at the end of the litigation if applicable.
Note that this decision only relates to certain tariffs imposed under IEEPA as described above. This decision does not affect tariffs imposed under Section 232 on automobiles, steel, or aluminum products, all of which remain in place.
