Trade Tidbits – May 29, 2025

Liberation Day II: Electric Boogaloo

In the May 2 and May 16 Tidbits, I wondered aloud what might happen if the Court of International Trade (CIT) strikes down the IEEPA tariffs. And, welp. Here we are.

Last night, the CIT released an opinion in a consolidated challenge to the IEEPA reciprocal/universal tariffs and the IEEPA fentanyl tariffs. With the typical caveat that I’m not a lawyer, let’s walk through the CIT opinion and talk through where things might go from here.

The three-judge panel unanimously struck down the IEEPA reciprocal/universal tariffs (called “Worldwide and Retaliatory Tariffs” in the opinion) and the IEEPA fentanyl tariffs (called “Trafficking Tariffs”) on Canada, Mexico, and China. The judgment gave the government 10 calendar days to wind down the tariffs. The Department of Justice has already filed an appeal.

The IEEPA action removing de minimis from China is mentioned in passing, but I don’t see anything that specifically strikes that action down – I don’t think it was challenged in any of the suits. The (threatened but not implemented) IEEPA tariff on countries importing oil from Venezuela isn’t mentioned at all, I’m guessing for the same reason.

In striking down the IEEPA reciprocal/universal tariffs, the Court “[did] not read IEEPA to delegate an unbound tariff authority to the President” and found that the reciprocal/universal tariffs “lack any identifiable limits.” It also highlights that Congress already empowered the President, via Section 122 of the Trade Act of 1974, to act on the type of balance-of-payments deficit issue the IEEPA tariffs sought to address.

In striking down the IEEPA fentanyl tariffs, the Court notes that the IEEPA statute requires an action “deal with an unusual and extraordinary threat” (Court’s emphasis). It interpreted “deal with” to “[connote] a direct link between an act and the problem it purports to address.” However, the broad IEEPA fentanyl tariffs are designed to create leverage, which, the Court found, does not constitute enough of a direct link: “It is hard to conceive of any IEEPA power that could not be justified on the same ground of ‘pressure.’”

As of writing, I haven’t seen any sort of reaction on President Donald Trump’s Truth Social page, the White House website, or from USTR or the Treasury and Commerce Departments. The decision was applauded by House Ways and Means Committee Ranking Member Richard Neal (D-MA) and Senate Finance Committee Ranking Member Ron Wyden (D-OR).

Where do things go from here? Let’s try to game some stuff out – plus some other assorted observations.

• We’ll have to see where things go on appeal. The full May 2 and May 16 musings boiled down to: What if they’re struck down, then reversed on appeal, then struck down by the Supreme Court? Snip snap snip snap.
• Sooo would everyone get a refund on tariffs paid then? Customs duties paid hit $16.5 billion in April…
• What does this mean for all the negotiations? USTR Jamieson Greer called the prospect of a loss “a foreign policy disaster scenario.” The government’s lawyer said himself, “An injunction would completely kneecap the president.” And yes, that’s true as it pertains to IEEPA, but IEEPA ain’t the only game in town (more on that in a second).
• Is the UK a genius or a sucker for securing the only trade deal before the IEEPA rugpull? I shade toward you’d rather have a deal in hand than not because, again, IEEPA ain’t the only game in town. The question is how much the deal insulates them from what’s possibly/probably coming down the pike.
• Which is also to say, other countries should probably keep their heads down and continue to negotiate because, all together now, IEEPA ain’t the only game in town.
• The CIT all but lays out the path for a more legally airtight universal tariff via Section 122, so let’s brush up on that. It allows the President to impose an up to 15% tariff on imports for 150 days, subject to an extension by Congress. To take an action, there must be a “large and serious” balance of payment deficit; an “imminent and significant” dollar depreciation; or coordination with other countries to correct an “international balance-of-payments disequilibrium.”
• The revving sound you hear off in the distance is the Commerce Department kicking its Section 232 investigations into high gear. Commercial aircraft and jet engines is the only one whose comment period isn’t over. All the others (copper, lumber, pharmaceuticals, chips, critical minerals, and trucks) are fair game at this point.
• AND don’t forget: Nearly all of these Section 232 investigations include the word “derivative,” which, as I’ve harped on in the past, could be interpreted very widely such that – if all 232s were cranked up to 11 – you could create a sort of patchwork universal tariff.
• Does Commerce Secretary Howard Lutnick benefit most from this decision since the Section 232s now seem like the most readymade, wide-ranging, and legally-defensible tariff lever?
• That said, let’s also not forget our friend, Section 301. The IEEPA fentanyl tariffs on China could probably be compensated for by an adjustment to the Section 301 tariffs. The Biden Administration only suspended – not ended – Section 301 tariffs related to digital services taxes and the Large Civil Aircraft WTO dispute. The Biden Administration also handed a Section 301 investigation into chips to the Trump Administration that could be primed for action.
• For the sake of completeness, another statute to watch is Section 338 of the Tariff Act of 1930. This was on the pre-election list of statutes that Trump orbit people floated. It allows the President to impose tariffs on countries that are determined to have discriminated against U.S. commerce.