Federal Courts Deliver Major Blow to America First Trade Policy, But Tariff Uncertainty Continues

Tariff and trade uncertainty continues unabated after a federal appeals court temporarily reinstated many of the Trump Administration’s tariffs a day after the nation’s trade court held that the president lacked the authority to impose the tariffs and ordered their immediate termination.

On May 28, 2025, a three-judge panel of the U.S. Court of International Trade (CIT) unanimously struck down the “fentanyl” and “reciprocal” tariffs imposed earlier this year by President Trump under the International Emergency Economic Powers Act (IEEPA). The IEEPA passed by Congress in 1977 is considered the heart of America’s “sanctions” regime and allows the President to declare national emergencies based on extraordinary and unusual threats to the U.S. and to craft economic measures enumerated in the statute in response to those declared emergencies. IEEPA does not include the imposition of tariffs in the enumerated measures, and no previous president has ever used IEEPA to impose tariffs in response to a declared national emergency.

In its ruling in V.O.S. Selections, Inc. v. United States, the CIT held that President Trump’s use of IEEPA to impose the fentanyl and reciprocal tariffs via Executive Orders exceeded the authority granted to the president by Congress pursuant to the statute. The CIT issued a permanent injunction to block the administration from enforcing the IEEPA tariffs and gave the administration 10 days to issue the necessary orders to end the collection of the offending tariffs.

Also on May 28, a federal district court judge refused to transfer a case to the CIT as two other district court judges had done with cases challenging IEEPA filed in their courts. (The applicable statute directs that the CIT has exclusive jurisdiction over all cases “arising out of any law . . .  providing for . . . tariffs, duties, fees, or other taxes.”). The court in Learning Resources, Inc. v. Donald J. Trump, et al. also found that IEEPA only permits the president to issue economic sanctions and not tariffs and that President’s Trump’s Executive Orders imposing these tariffs were outside the ambit of the statutory authority granted to the president by Congress in enacting IEEPA. Unlike the CIT, the court issued a preliminary (not permanent) injunction prohibiting further enforcement and collection of the IEEPA tariffs and then stayed the injunction for 14 days pending further appeal.

Both the CIT and federal district court decisions emphasized that under Article 1, Section 8, Clause 1, the U.S. Constitution expressly assigns the power to impose tariffs (and other taxes, imposts, and excises) to Congress. Any delegation of that authority by Congress to the president must be construed narrowly.

Importantly, both courts also held that IEEPA does not grant the Executive Branch unbounded authority to unilaterally impose tariffs. Instead, the Courts read IEEPA as providing two important limits on the tariffs:

• Section 1702 of IEEPA (which replaced the Trading With the Enemy Act of 1917) permits the president to “regulate . . . importation.” The legislative history of this provision indicated that the 1917 law gave too much authority to the president to interfere with international trade in non-emergency, peacetime situations. Hence, Congress limited the president’s powers when enacting IEEPA and thus the courts found that the power to regulate importation should be narrowly construed. The court in Learning Resources also opined that the power to regulate does not include the power to tax, i.e., to impose tariffs.
  
  

Both courts thus held that IEEPA does not authorize broad, unbounded duties like the fentanyl and reciprocal IEEPA tariffs levied via Executive Orders. The lack of “any identifiable limits” placed these measures outside the scope of the statute. The CIT also determined that the IEEPA retaliatory tariffs imposed in response to persistent trade deficits had to conform within the limits of Section 122 of the Trade Act of 1974, the statutory authority that deals with remedies for balance-of payments deficits. (The administration later indicated it was looking into doing exactly that, i.e., reimposing the tariffs under the authority of this 1974 law.)

• The CIT ruled that section 1701(b) of IEEPA limits the President’s authority to actions that “deal with an unusual and extraordinary threat” and prohibits the use of IEEPA “for any other purpose.” The IEEPA fentanyl tariffs were implemented to encourage foreign countries to arrest or detain bad actors responsible for the flow of fentanyl and precursor drugs into the U.S. Because these tariffs do not bear a sufficient connection to the alleged threat to constitute “dealing with” the identified threat, the CIT determined that the IEEPA fentanyl tariffs failed to satisfy the statutory threshold.
  
  

The U.S. Department of Justice (DOJ) immediately appealed the CIT ruling to the U.S. Court of Appeals for the Federal Circuit (CAFC) and filed a motion to stay the CIT’s permanent injunction with both the CIT and the CAFC. The CAFC granted the DOJ’s motion on May 29 and ordered a final briefing on this issue by June 9. A ruling could come any time after this date, which will likely be appealed immediately to the U.S. Supreme Court. Any final ruling at this juncture would only impact the continued collection of the IEEPA tariffs, i.e., whether the injunction remains on hold while the appeal on the merits proceeds.