FLASHBACK: Judicial Risk to Trump Tariff Policy (4/7/25)

President Trump has announced aggressive tariff policies that are rattling investors and paralyzing business activity, escalating fears of recession and global trade wars.  If the tariffs go into effect this week as contemplated by the White House, legal challenges to the President's authority to impose the tariffs will likely be filed in multiple federal courts.  Although we question whether federal judges will second-guess the President's declaration of a national emergency to justify his tariff policy, the statutory authority to use tariffs generally and the legal scope of such tariffs are questionable.  The upcoming judicial battles could become a factor as investors consider the prospect of suspension or derailment of the current tariff policy and the consequences of legal uncertainty on the Administration's leverage in multilateral trade negotiations.

Convenient Reliance of Questionable Statutory Authority:  The President has relied on the International Emergency Economic Powers Act (IEEPA) to implement his tariff policies.  Unlike other tariff statutes, the IEEPA allows President Trump, upon identifying a national emergency, to bypass time-consuming and procedural predicates normally required before adopting new tariff policies.  In this case, the President has declared that trade imbalances and risk to supply chains constitute a national emergency that justify the new tariff policy.  

Under the IEEPA, a national emergency is "any unusual and extraordinary threat to the national security, foreign policy or economy of the United States" that emanates substantially from outside the country.  Upcoming legal challenges will challenge the President's declaration that longstanding trade imbalances qualify as a "national emergency," but we doubt federal judges will have the stomach to jump down the rabbit hole.  Federal courts are simply reluctant to parse the details and underpinnings of a President's national security and foreign policy judgements.  These are political and policy calls outside the competence of the judiciary.  It may be litigated but we think it probably fails as a line of attack.

The use of tariffs and the scope and duration of the tariffs, however, are fair game.  The word "tariff" does not appear in the IEEPA and the President relies on general statutory language that allows the regulation of imports as one of the tools to address the declared national emergency.  At the same time, Congress has passed laws specifically addressing tariff authority, including the Trade Expansion Act of 1962 and Trade Act of 1974.  The IEEPA was passed in 1977 and it has never been used to impose tariffs on imported products.  

So can the President impose tariffs under the IEEPA?  About 50 years ago, President Nixon imposed import duties under the Trading With the Enemy Act (TWEA), the precursor to the current IEEPA.  A federal appeals court upheld Nixon's tariff authority but noted such power is limited and must be reasonably tailored to the declared national emergency.  The precedent, however, at least suggests that a tariff could be a legitimate component of regulating imports to respond to the declared emergency.

Still, the IEEPA was one of several laws passed in response to concerns that the White House had gained unchecked authority to implement trade and tariff policies.  The National Emergencies Act of 1976 and the IEEPA of 1977 were enacted to curb Presidential power, not expand it.  Congress, not the President, has the explicit constitutional tariff and taxing power.  The President can only act through delegated powers granted by Congress.  In this context, the absence of specific tariff authority in the IEEPA and the explicit delineation of tariff powers in other statutes (like the Trade Expansion Act of 1962) raise significant concerns that President Trump lacks the authority he asserts for the reciprocal tariffs announced last week.  And even if a generous reading of the IEEPA confers some level of tariff authority, such authority could be viewed as far more limited or restricted than the scope of tariff power now asserted by the White House.

A Federal Case Already in Progress:  A case was filed last week in a Florida federal court challenging the imposition of tariffs on China under the IEEPA.  A company asserts the higher import costs pose an economic threat to its business but the company is not, as yet, seeking a preliminary injunction to block the tariffs, figuring litigation over an injunction and any subsequent appeals will only delay the ultimate resolution of the matter.  Absent an injunction request, the case is not likely to produce a near-term major ruling spotlighting the legal threat to the ongoing tariff regime.

More Cases Likely that Challenge Trump's Legal Power:  If they are actually enforced, the upcoming reciprocal tariffs will probably trigger lawsuits that will seek an injunction to suspend the tariff policy pending full litigation on the underlying legal authority questions.  There will be straightforward statutory interpretation fights over tariff power in the IEEPA and deeper constitutional questions about implying such power when Congress has explicitly addressed executive tariff power in other statutes.  Under the "major questions doctrine," the Supreme Court will strike down executive actions of major economic and political significance when the actions are not explicitly authorized in the relevant congressional statute.  

Recall that the Supreme Court recently abandoned the Chevron Doctrine, an approach to statutory interpretation that deferred to the executive branch when interpreting regulatory power asserted in ambiguous statutory provisions.  Without such deference, federal courts review executive branch actions de novo, no longer giving the relevant federal agency the benefit of the doubt when the asserted statutory power is unclear.  The bottom line question is whether "regulating imports" under the IEEPA indeed encompasses a general power to impose tariffs and impose them in the manner now asserted by President Trump.

Uncertainty Itself May Have Impact:  The mere filing of credible lawsuits could have meaningful political effects.  If judicial uncertainty over the sustainability of the new tariff policy becomes an issue, foreign governments may drag their feet in resolving trade issues with the Trump Administration.  A judicial defeat for the Administration's reliance on the IEEPA would diminish the President's bargaining power.  The President could appeal any court setbacks and even consider reliance on other, more cumbersome statutory provisions for his tariff policies, but the timing and trajectory of current policy would likely be adjusted.  Meanwhile, congressional activity addressing the scope of the President's tariff authority could pick up steam.

Although cases granted review in the Supreme Court this spring are usually docketed for arguments in the next term that starts in October, the impact of the President's tariff policy would likely justify a fast track approach.  If cases are soon filed in federal district court to challenge the tariffs, preliminary injunctions could come down fairly soon and move on to appellate court review.  It would not be surprising if multiple cases land in appellate courts before Memorial Day and ultimate Supreme Court appeals move forward by early summer.  The High Court would probably call for expedited briefing but given the political fluidity and policy volatility of the situation, the timing for resolution is highly speculative.