Following a federal appeals court ruling that President Donald Trump’s broader tariffs are unlawful, the Trump administration has taken the fight to the U.S. Supreme Court.
In a 7-4 decision filed Aug. 29, the U.S. Court of Appeals for the Federal Circuit upheld the Court of International Trade’s finding that Trump’s sweeping tariffs are unconstitutional. The ruling does not affect all tariffs currently in place.
On Sept. 3, administration filed its petition for the Supreme Court to take up the case in an expedited manner.
The dispute centers on the 1977 International Emergency Economic Powers Act (IEEPA). This law gives the president broad authority to regulate international economic transactions after declaring a national emergency. It requires the president to show an “unusual and extraordinary threat” to the U.S. that comes from outside the country.
Earlier this year, Trump invoked IEEPA to impose tariffs on Canada, China and Mexico. He claimed the three countries have allowed fentanyl and illegal immigrants to pour into the U.S., creating a national emergency.
Trump also used IEEPA to establish a universal 10% tax on nearly every country and reciprocal tariffs of up to 50% on dozens of nations. He claimed large trade deficits created a national emergency.
This is the first time IEEPA has been used for tariffs in its nearly 50-year history.
A recent Congressional Research Service report notes that 69 national emergencies have been declared under IEEPA. All of those are some form of economic sanctions, not tariffs.
In April, New York-based wine importer V.O.S. Selections and a coalition of states sued Trump over the tariffs. They argued that IEEPA does not allow the president to bypass Congress and impose tariffs on his own.
The Court of International Trade agreed and ordered an injunction on the tariffs. That order was paused while the Trump administration appealed, allowing the tariffs to move forward.
This past Friday, the appellate court sided with the lower court. The majority opinion stated that IEEPA does not authorize the tariffs in question. The court did not decide whether the law allows tariffs at all.
The Federal Circuit emphasized Congress’ express powers of the purse, including control over tariffs.
“Tariffs are a tax, and the Framers of the Constitution expressly contemplated the exclusive grant of taxing power to the legislative branch,” the court states. “When Patrick Henry expressed concern that the President ‘may easily become king,’ James Madison replied that this would not occur, because ‘the purse is in the hands of the representatives of the people.’”
Regarding the government’s claim that exceptions are made in IEEPA, the appeals court pointed out that nowhere in the law is the word “tariff” or any of its synonyms mentioned.
All other statutes dealing with delegating tariff power to the president are unambiguous.
The Trump administration argued that “regulate … importation” means implementing tariffs. However, the appeals court maintained that if IEEPA intended to grant that power, Congress would have stated it clearly.
“… we discern no clear congressional authorization by IEEPA for tariffs of the magnitude of the Reciprocal Tariffs and Trafficking Tariffs,” the court ruled. “Reading the phrase ‘regulate … importation’ to include imposing these tariffs is ‘a wafer-thin reed on which to rest such sweeping power.’”
Trump won a minor victory as the appeals court overturned the lower court’s injunction. After the injunction was issued, the Supreme Court limited lower courts’ ability to impose universal or nationwide injunctions. The Court of International Trade must now reevaluate the injunction’s scope.
IEEPA was used only for the tariffs in question. Other tariffs, like those on steel and aluminum, remain unaffected.
The Federal Circuit decision will likely have little to no effect on freight.
When the Court of International Trade issued the initial ruling, freight economists noted businesses had already adjusted to volatile trade policy.
At the time, Hamish Woodrow, director of strategic analytics at Motive, said companies are less reactive to trade policy news, as it is likely to change.
“Based on what we’ve been seeing, we don’t expect another significant boom or disruption during the appeal period – these policy shifts have become too frequent and too unpredictable for most businesses to anchor long-term decisions around them,” Woodrow said. “We expect a more muted impact on freight movement compared to the volatility we saw earlier this year.” LL
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