The White House's Tariff Ambitions Bend -- But Do Not Break -- Under the Weight of a Court Ruling

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A U.S. courthouse facade with columns in lower Manhattan, New York.

Editor's Note: On May 29, a federal appeals court issued a stay of a U.S. court ruling from May 28 that blocked several of the Trump administration's tariffs. The appeals court did not indicate how long the pause will last, but its current briefing schedule runs through June 9.

The U.S. Court of International Trade's permanent injunction against most new U.S. tariffs will temporarily halt the Trump administration's aggressive trade policies, reducing other countries' incentive to offer the United States substantial concessions, but the White House will likely expand its use of sectoral tariffs and other trade tools. On May 28, a three-judge panel under the U.S. Court of International Trade, or CIT, unanimously ruled against the Trump administration's use of the 1977 International Emergency Economic Powers Act, or IEEPA, to implement the majority of tariffs introduced during Trump's second term, issuing a permanent injunction against the tariffs. In doing so, the CIT effectively nullified all of the Trump administration's April 2 "reciprocal" tariffs — including the 10% baseline tariff on virtually all imports and higher country-specific tariffs that were suspended until July 9 — as well as fentanyl-related tariffs on China, Mexico and Canada. In its ruling, the CIT found that the IEEPA did not give the president power to set tariffs without congressional approval, and even if Congress did grant the president such unlimited powers, it would be unlawful due to the Constitution's separation of powers provision. The CIT's ruling does not affect tariffs the Trump administration has implemented using other powers, most notably sectoral tariffs on steel, aluminum and automobiles, which were implemented using Section 232 of the Trade Expansion Act of 1962.

The Trump administration filed an appeal in the D.C. Court of Appeals. The court has the power to issue an immediate stay of the injunction, though if the court does not do so, it could be weeks or months before the court takes action on the case.
The CIT is a federal U.S. court set up by Congress in the 1980s and has jurisdiction over all trade matters. The CIT's panel also ordered the U.S. government to refund tariffs importers have paid since IEEPA tariffs were introduced earlier this year.

In response to the ruling, the Trump administration will almost certainly seek to replicate many of the IEEPA tariffs using other trade authorities that are more likely to survive court challenges, though many of these alternative mechanisms have more strings attached, reducing their scope and requiring longer implementation timelines. The Trump administration used the IEEPA in large part due to the fact that it does not require a lengthy investigation, like Section 301 tariffs of the Trade Act of 1974, which underpinned Trump's tariffs on China in his first term, or the Section 232 so-called national security tariffs that remain in effect. Both of those latter tools need months-long investigations requiring the Commerce Department or the Office of the U.S. Trade Representative to effectively create a paper trail of evidence justifying the tariffs, even if opponents criticize some of the investigations as shams. The White House will likely lean heavily on Section 232 and especially Section 301 investigations to replicate high tariffs on many countries to use as leverage. The White House has already triggered a host of Section 232 investigations, including those on imports of copper, critical raw materials and semiconductors. However, tariffs resulting from Section 232 investigations must be global, limiting the government's ability to target individual countries, though the United States can exempt countries that accept quotas. Conversely, Section 301 investigations are country-specific and are designed to introduce tariffs over foreign countries' alleged unfair trade policies and practices. The Trump administration will likely use Section 301 investigations if the injunction against the IEEPA remains in place following an appeal. The White House will almost certainly find a policy or set of policies to investigate in each targeted country to justify tariffs, such as the European Union's restrictions against U.S. tech companies and Japan's and South Korea's protection of their agricultural markets. Trump also has the authority to replace IEEPA tariffs on China with preexisting Section 301 tariffs on Chinese goods to make up the gap. However, because Section 301 is far more administratively intensive than the IEEPA, the White House will likely concentrate on priority trading partners — those that have a large trade surplus with the United States — meaning that smaller countries may dodge investigation. For businesses, trade uncertainty remains high, and while the CIT's ruling gives some immediate tariff relief, it also drives more uncertainty as the Trump administration seeks to use other tools, meaning that the medium-term supply chain risk for companies is far from over.

The White House may also attempt to use unprecedented or outdated powers, which would open the door to short-term tariffs and/or more legal challenges that could halt tariffs again. The White House may consider invoking Section 122 of the Trade Act of 1974 to introduce up to a 15% tariff against one or more U.S. trading partners to cope "with large and serious United States balance-of-payments deficits" as a way to replace the 10% baseline tariff. However, Section 122 only authorizes the president to introduce such tariffs for 150 days, after which Congress must extend the tariffs. Despite Republicans' narrow majorities in the Senate and House, securing congressional approval for such an extension could be a tall order due to the unpopularity of Trump's tariffs. Moreover, use of Section 122 would be subject to legal challenges, as a large trade deficit may not constitute "large and serious United States balance-of-payments deficits," which would consider nontrade financial flows unaccounted for in bilateral trade data. A potential attempt by Trump to reuse the powers after 150 days in the absence of a congressional extension would also provoke significant legal challenges. Nevertheless, the CIT appeared to suggest in its ruling against the IEEPA tariffs that it would not block Section 122 tariffs, at least initially, stating, "Trade deficits are one of the key balance-of-payment deficits and can be directly impacted by mechanisms such as import quotas and tariffs, as authorized by Section 122." Finally, the Trump administration may also seek to use Section 338 of the Tariff Act of 1930 to implement large tariffs quickly against countries. Section 338 is designed for the president to place tariffs on countries if they discriminate against U.S. commerce, similar to Section 301. Section 338, however, has not been invoked since before World War II and has largely been superseded by Section 301 tariffs, though, unlike Section 301, Section 338 does not appear to require as many administrative processes to implement.

An extension of Section 122 tariffs would be particularly difficult to pass in the Senate, which in April voted 49-49 against Trump's IEEPA Liberation Day tariffs. Additionally, the split vote occurred in the absence of two senators who would have voted against Trump's tariffs, Mitch McConnell and Sheldon Whitehouse, suggesting at least 51 senators would vote against an extension of any Section 122 tariffs.

The CIT's ruling significantly weakens the Trump administration's leverage in trade talks ahead of the planned July 9 reintroduction of higher IEEPA tariffs on most countries, giving U.S. trading partners little incentive to offer concessions in the short term and enabling many of them to take a wait-and-see approach to the United States or prioritize talks over sectoral tariffs. Without the looming threat of high IEEPA tariffs, countries have little incentive to quickly enter vague trade agreements with the United States and offer politically costly concessions to forestall the implementation of higher tariffs. Thus far, the Trump administration has only been able to reach an agreement with the United Kingdom, a country that was not slated to face higher tariffs in July, as other countries have reportedly expressed concern that the Trump administration's demands were too high and that the United States was looking for a one-sided deal. EU officials, for example, have reportedly been frustrated by U.S. demands that the European Union unilaterally reduce tariffs on U.S. industrial goods. Without the threat of Trump placing a 50% tariff on the European Union through the IEEPA in a matter of weeks, the bloc will have little incentive to offer larger concessions, especially as the European Union will likely need to reserve potential concessions to the United States for later in the Trump administration's term when the White House likely tries to use some of the aforementioned tools against the bloc. Other major trading partners that had been seeking deals with the United States, including Japan, South Korea, India and members of the Association of Southeast Asian Nations, are now in a position to take their time in talks with the United States. Nevertheless, Trump's extensive use of Section 232 tariffs does affect certain countries more than others, and Germany (thus, the European Union), Japan, South Korea, Mexico and Canada, for example, all still have an incentive to engage in talks with the United States to transition 25% U.S. auto tariffs, which remain in place, into quotas, which the U.S.-UK agreement did. However, the Trump administration's willingness to reach similar agreements with large car-producing countries remains unclear.

Canada and Mexico are in a unique bind and will likely still need to engage with the White House because the U.S.-Mexico-Canada Agreement is due for a review by July 1, 2026, and Trump will likely threaten to exit the pact as part of those talks.