Tariff Updates: From Chaos to Convention

What We Know:

The future of President Trump’s “Liberation Day” tariffs hit a significant obstacle last week. On May 28, the U.S. Court of International Trade (CIT) struck down core pieces of the so-called reciprocal tariffs, ruling that the President had overstepped his authority under the International Emergency Economic Powers Act (IEEPA) of 1977. Some of President Trump’s tariffs were unaffected by the ruling, including restrictions on auto imports and steel. Many others were significantly curtailed including the 10% baseline tariffs and those targeting fentanyl-related imports from countries like China, Canada, and Mexico.

A three-judge panel, made up of appointees from Reagan, Obama, and Trump, unanimously concluded the tariffs exceeded the powers delegated to the executive branch under IEEPA. They focused on the administration’s misunderstanding of the statute and emphasized that the Constitution assigns tariff-setting authority to Congress, and that IEEPA does not provide an “unbounded” delegation of this power to the president.

What It Means:

Notably, the court granted summary judgment in favor of the plaintiffs, which included 12 U.S. states and several small businesses. This procedural move indicates that the court found no genuine dispute of material fact, allowing it to decide the case without a full trial and underscoring the judiciary’s role in checking executive overreach. It also reaffirms the principle that significant economic policies require clear legislative authorization. Reimposing these procedural structures marks a shift toward a more stable trade environment, and one that investors can feasibly navigate.

The Trump administration promptly appealed the decision to the U.S. Court of Appeals for the Federal Circuit, which has temporarily allowed the tariffs to continue until it can rule on the merits of the case. That will likely be in the next month or so based on preliminary scheduling. Once the appeals court rules, the expectation is the case will be appealed to the U.S. Supreme Court. The key takeaway: this still has some way to go before we know how it ends.  

The administration has already stated it is assessing alternative pathways to impose tariffs. However, its remaining options have various limits or restrictions in terms of timing, scope, and magnitude. The most established routes involve procedural requirements that would delay when tariffs can be imposed. There also remain some untested pathways to introduce tariffs. Section 122, for example, creates an opening for tariffs to address “balance-of-payments deficits” but prohibits tariffs from exceeding 15% and limits duration to 150 days. The exact legal basis and process could also be fought in court, as it has not been used before to impose tariffs. If this week’s decision stands, and is prologue, it makes it more likely that novel interpretations of executive authority on tariffs will receive significant judicial scrutiny. Additional Section 301 tariffs could be imposed swiftly for China but imposing them for other trading partners would require initiating an investigation.

The story continues to develop, and Trump continues to announce new tariff plans. What is apparent from the initial court ruling is that far-reaching and open-ended tariffs stand on shaky legal footing. Durable tariffs are likely to be those that follow conventional pathways, such as the Section 232 investigations the administration is pursuing in parallel to the global trade negotiations. We’re now making steps toward convention with known processes and procedures that the industry has a decade-plus experience navigating, making for a less volatile investment landscape.