Price: What’s next for the IEEPA tariffs?

In the recent case, plaintiffs challenged two categories of tariffs issued under the IEEPA: (1) “reciprocal” tariffs imposed on all countries based on their trade deficits with the United States and (2) tariffs imposed on Canada, Mexico, and China in response to fentanyl flows. For slightly different reasons, the CIT vacated executive orders underlying both categories of tariffs and enjoined their operation, which included preventing the collection of any customs duties.

However, the situation is changing by the day. The administration has already appealed the CIT’s decision to the Federal Circuit, the appellate court responsible for reviewing decisions from the CIT. The appeals court imposed an “administrative stay,” a common procedural measure that temporarily suspends the lower court’s ruling while the appellate court determines if a longer pause is warranted. The Federal Circuit will hear the appeal on an expedited basis, and the case is likely to end at the US Supreme Court. Separately, the US District Court for the District of Columbia claimed jurisdiction over a similar challenge and issued its own opinion, striking down the IEEPA duties, which has already been appealed to the US Court of Appeals for the D.C. Circuit. There will undoubtedly be new developments by the time you read this.

For now, interested observers should keep a few items in mind. The administration has other tools it could use to impose broad-based tariffs, including:

• Section 232 of the Trade Expansion Act of 1962 allows the administration to impose duties when imports threaten national security. The second Trump administration has already initiated new Section 232 investigations into copper, timber and lumber, semiconductors, pharmaceuticals, trucks, critical minerals, and aircraft. Existing Section 232 measures on steel and aluminum have been expanded to include derivative products. The administration may use this mechanism to impose duties on more products with large import volumes, but this would be a much more piecemeal approach and take several months.
• Section 301 of the Trade Act of 1974 allows the administration to take actions, including imposing duties, to counter unfair trade practices by US trading partners. There were several Section 301 investigations during the first Trump administration, including an investigation into China’s technology transfer practices that resulted in sweeping duties. This, too, would require an investigation and reflect a much more piecemeal approach, as it would likely need to be country-by-country.
• Section 122 of the Trade Act of 1974 gives the president the authority to impose up to 15% duties on imports for up to 150 days to remedy a balance-of-payments. This could serve as a stopgap measure while the IEEPA tariffs wind through the courts and give the administration time to develop new Section 232 and Section 301 investigations.
• Section 338 of the Tariff Act of 1930 gives the president authority to respond to discriminatory trade practices with tariffs that are capped at 50%. However, this process would likely require a country-by-country finding and face numerous legal challenges, given that the statute is largely untested.

For those in the steel industry, the decision does not alter existing Section 232 duties on steel. Those duties were imposed under a separate legal authority during the first Trump administration after a months-long investigation. The CIT and Federal Circuit have upheld the steel duties under a separate, national security-related legal authority. In fact, the decision only further solidifies the steel duties as one of the remaining levers the administration can pull to counter imports. The CIT’s decision to vacate the worldwide “reciprocal” tariffs does, however, remove duties that covered certain raw materials used in steelmaking that are not domestically available in large quantities.

If the CIT decision sticks, the administration may need to refund duties that were already collected under the IEEPA tariffs. This is not as clear-cut as it may seem. Certain products that were subject to the IEEPA tariffs may also be subject to other tariff regimes. The administration issued a memo clarifying that overlapping tariffs would not “stack” on top of one another, but if IEEPA tariffs are gone, importers may still be liable for unliquidated entries subject to other applicable tariff regimes.

Finally, only time will tell how much the CIT’s decision stymies the administration’s negotiation efforts. IEEPA tariffs are the primary mechanism the administration has used to get trading partners to the table. The CIT’s decision may temporarily scramble ongoing negotiations as parties reevaluate their options. However, US trading partners likely understand that rebalancing the trade deficit is a key priority for the president. The administration is likely to pursue that goal through all available means.

Editor’s note

This is an opinion column. The views in this article are those of experienced trade attorneys on issues of relevance to the current steel market. They do not necessarily reflect those of SMU. We welcome you to share your thoughts as well at info@steelmarketupdate.com.