IEEPA Tariffs on Hold Following Court Ruling

The US Court of International Trade (CIT) has rejected the Trump administration’s use of the International Economic Emergency Powers Act to apply the “Worldwide,” “Retaliatory” (CIT definition) and “Trafficking” tariff plans. The CIT ruled the Executive Orders enacting the tariffs “are declared to be invalid” as they “exceed the authority of the president to regulate importation by means of tariffs.” 

The order, which takes the form of a summary ruling, gave the administration 10 calendar days to put its order into action. The Department of Justice appealed the ruling at the Court of Appeals for the Federal Circuit, which in turn has ordered the tariffs remain in place while appellate process continues.

Depending on the outcome of the Court of Appeals review, the administration may also appeal to the Supreme Court for a final ruling in an attempt to quicken the judicial process. A delay in the repeal of the tariffs could be as long as several months as the judicial process unfolds.

Normally, federal cases can take years to reach the Supreme Court, with the high court often sending cases back to lower courts for further clarifications. However, due to the importance of the CIT decision, the appeal process could be resolved in a matter of weeks or months.

If the appeal court stays the CIT decision, leaving the current tariffs in place until it reaches a decision, a delay in the repeal of the tariffs could be as long as several months as the judicial process unfolds. 

If the IEEPA tariffs are ultimately removed, the administration is likely to look for alternative mechanisms to apply the tariffs. These could include reframing the IEEPA tariffs to meet the CIT’s concerns or wider use of sector-specific investigations using the Section 232 (national security) or Section 201 (safeguarding) review processes, among other options. 

The CIT ruling does not include the Section 232 reviews of seven industries that are underway, nor the three already in place, which together account for 42% of US imports and were in any event excluded from the IEEPA tariffs. 

Actions under the Section 232 review results could be brought forward to allow the administration to demonstrate continued action on tariffs, with the president recently flagging that tariffs on smartphones could be increased to 25% as soon as late June.

Should duties be removed, this would reduce the pressure on ongoing negotiations with countries to sign improved trade conditions. Part of the CIT’s ruling was based on the administration’s argument that IEEPA was being used to “pressure” countries into reaching a deal. 

Continuing negotiations

At a minimum the ruling makes the July 9 deadline for most countries and Aug. 12 for mainland China irrelevant, though negotiations may continue because of the chance that a Supreme Court appeal succeeds or that the CIT decision gets narrowed. That could prove particularly important for situations where negotiations are proving contentious or where elections are complicating the negotiating process.

Mexico’s President Claudia Sheinbaum is likely to continue tariff negotiations with the US despite the court suspension, particularly as she seeks to bring forward the review of the USMCA from 2026 to the second half of 2025. Separately, negotiations on the 25% duty on steel, aluminum and automotive imports are likely to continue, as these were not affected by this court process.

Countries with higher-than-average exposures to the existing and ongoing Section 232 reviews, including South Korea and Japan in the case of steel, aluminum, autos and electronics, and for the EU in regard to autos and pharmaceuticals, also have an incentive to continue negotiations.

Even with IEEPA relief, a significant portion of mainland Chinese exports would remain exposed to other tariff mechanisms (such as Section 232 or Section 301), should the Trump administration pursue them. Sectors where mainland China dominates global supply chains (including consumer electronics, telecommunications equipment or solar panels) would be particularly vulnerable to Section 232 national security reviews.

With regard to the overall impact on supply chains, the US administration still has other channels to increase import costs, so businesses may still not have enough certainty to plan their investments and production. The sectors that would benefit most from the IEEPA duties being overturned are consumer goods industries where mainland China has a high proportion of US imports. 

Among the larger import sectors those include toys (75.8% imported from mainland China in 2024), homewares, and audio-visual equipment among others. All three are also highly seasonal and face sourcing uncertainties heading into the peak shipping season, which typically involves exports from Asia running from June through September.

Thus far, companies have focused on tactical actions including inventory front-loading, price increases and cost negotiations, and may continue to do so during the period of tariff uncertainty.

This article was published by S&P Global Market Intelligence and not by S&P Global Ratings, which is a separately managed division of S&P Global.