We used to get bombshell trade news like once a decade. These days? Try once a day. Wednesday spiced things up when a US court you never heard of overruled most of President Trump’s tariffs. Then an appeals court took Thursday by overruling the overrule.
First, who’s the Court of International Trade (CIT)?
It’s a federal court with exclusive authority to decide trade-related lawsuits against the US.
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US presidents themselves appoint the nine judges, who then get confirmed by the US senate. Basically, if you have a gripe about US trade or customs law, you bring it to the CIT.
Which leads us to…
Who brought the gripe?
A group of small US businesses (including a pipe-maker and a sportswear firm) brought one of the suits. They were miffed that, all of a sudden, they had to pay crippling taxes (tariffs) before they could collect the foreign goods they already bought.
As for the other case? A group of Democrat-run states filed it, arguing this new tax would hit consumers (higher prices) and taxpayers (slower growth → lower tax revenue → worse public services).
So which tariffs did the CIT overrule?
The ruling ditched two out of the president’s three main groups of tariffs:
- First, it ditched the tariffs he placed on China, Mexico, and Canada in response to what he argued was their role in the US fentanyl and border crisis, and
- Second, the court also ditched his Liberation Day tariffs which he argued were a reciprocal response to unfair trade practices abroad.
The third group the court didn’t touch? Those tariffs on imported steel, aluminium, and cars, which the president based on different powers (see below).
What was the court’s argument?
The unanimous ruling by three CIT judges (from Reagan, Obama and Trump — yes, shout-out to the long-serving Reagan appointee) found that the president wrongly invoked emergency powers in launching both his fentanyl and Liberation Day tariffs. They didn’t say whether those tariffs were good or bad ideas, just that they weren’t lawfully enacted.
Why? Tariff powers typically rest with Congress, but Trump 2.0 bypassed that branch by instead invoking the Carter-era International Economic Emergency Powers Act (IEEPA), which allows a president to grab the tariff wheel during a national emergency.
But the CIT panel basically found the administration’s reasons (fentanyl, trade deficits) weren’t the “unusual and extraordinary threats” IEEPA had in mind.
Now what?
Barely 18 hours passed before a federal appeals court then hit pause on the CIT’s ruling! That allows Trump’s tariffs to remain in place while the appeals court considers the case.
Everyone now has until (at least) June 9th to make their pitch before the appeals court weighs in. But no matter what it decides, there’s a solid chance someone will then appeal this thing all the way to the Supreme Court, and maybe even the Jedi Council at this rate.
But in the meantime, you can bet the Trump administration is already planning for its worst-case scenario, looking for other Trade Act powers it can use for a tariff re-do:
- Section 122 allows for quick tariffs of up to 15% for a limit of 150 days
- Section 232 allows for longer-term tariffs, but only after a national security investigation (Trump used this against steel, aluminium, and cars), and
- Section 301 likewise allows for longer-term tariffs, but only after an investigation into unfair trade practices hurting the US abroad.
They all basically offer the president a way to keep wielding tariffs to pursue his goals, but the latter two will take many months to run the required investigations, and none of the three will really offer the breadth of powers Trump claimed under IEEPA.
So what does all this mean?
While trade ministers from Paris to Hanoi might’ve initially done a quiet fist pump after getting the court’s free reprieve (mid trade negotiation!), the reality of further appeals means the only guarantee right now is just more uncertainty. And after all that plays out, potentially just more tariffs ahead, but with a fresh and zesty new legal justification.
Intrigue’s Take
So nothing has really changed for now, but at least we got to learn about a cool new court, right?
It’s up to the judges to decide, but pinning century-high tariffs on an emergency power perched on fentanyl and trade deficits always felt intuitively like a stretch of what IEEPA had in mind, which is why we flagged it back in March. That’s the risk of pushing for quick results (and yet quick results are also arguably what the American people voted for).
The other question is whether this might end up being a reprieve for the president himself: there’s little known about his Liberation Day deal negotiations, beyond the big US-China de-escalation (which left the underlying imbalances untouched), and the mini US-UK deal (which really recast everyone’s expectations around this whole exercise).
In the meantime, even if the president pursues other paths to lock in his baseline 10% tariffs, sure, that’s a political shock for some, but (yes) it’s a relatively manageable economic shock for many. Economies adapt to 10% shocks every year via (say) currency fluctuations. And that might explain the relatively muted reaction from so many capitals.