On Friday evening, the Federal Circuit court struck down the vast majority of US President Donald Trump’s tariffs, ruling them illegal under laws that give Congress control of tariffs and tax policy.
The 7-4 decision rules that the International Emergency Economic Powers Act was used improperly in the case of fentanyl tariffs against Mexico/Canada/China and for the broader reciprocal tariffs.
This isn’t a huge surprise as the justification he used was a 1977 U.S. law that gives the President broad powers to regulate commerce after declaring a national emergency in response to an “unusual and extraordinary threat” from outside the United States. Traditionally, these have only been used to sanction places like Iran and North Korea.
The majority zeroed in on the text of the IEEPA and that Congress has historically used words like “duty” or “tariff” when it meant to delegate tariff authority, but IEEPA only lets the President “regulate… importation.”
Critically though, the decision was stayed until October 14 for appeals and the case is surely headed to the Supreme Court. The case was also referred back to the Court of International Trade to decide how broad the injunction should be and whether tariffs should continue to be collected.
Notably, the tariffs on Brazil over Bolsonaro and the tariffs on India over Russian oil were not at issue in the case and not part of the ruling. Still, this would totally de-fang the tariff threat and completely change the game. It could also set up a showdown if Republican majorities in Congress are forced to vote on this, as many have spent their entire careers arguing in favor of free trade.
Article 1 of the US Constitution also says:
The Congress shall have Power To lay and collect Taxes, Duties, Imposts
and Excises, to pay the Debts and provide for the common Defence and
general Welfare of the United States; but all Duties, Imposts and
Excises shall be uniform throughout the United States.
Now this will be a big test of the Supreme Court. It’s not a clear all-or-nothing decision as they could find some middle ground that would tighten up tariffs but the odds favor the removal of tariffs now and that will set up an interesting start to the week
