Leibowitz: IEEPA tariffs take a hit, but Trump has other weapons

The reaction was interesting: Some stories apparently noticed the court for the first time. (“What is the Court of International Trade anyway?”) Experienced hands know the court very well.

A high-stakes legal fight over Trump’s IEEPA tariffs

The next day, the U.S. District Court for the District of Columbia entered a preliminary injunction against the IEEPA tariffs in favor of two small businesses, Learning Resources and hand2hand. That court denied the government’s motion to transfer the case to the Court of International Trade (CIT). Two other courts had transferred IEEPA cases to the CIT earlier.

This time, the court ruled that IEEPA did not authorize the president to impose tariffs at all, and therefore the case was not subject to the exclusive jurisdiction of the CIT. Interestingly, the court did not issue a nationwide injunction against the IEEPA tariffs. Only the plaintiffs in that case benefit from the ruling.

Within 48 hours, the situation became even more tense. The president announced on Friday in Pittsburgh that steel and aluminum tariffs would double on Wednesday to 50%. And the newly relabeled “partnership” between Nippon Steel and US Steel was touted to the cheers of USW members (but not the union leadership).

Let’s rewind to what went down at the CIT

On Wednesday evening, a three-judge panel of the CIT decided that the president’s declaration of “reciprocal” tariffs on virtually all US trading partners – as well as the tariffs on China, Canada, and Mexico based on imports of fentanyl and other drugs – were not authorized by law.

The president grounded these tariffs on IEEPA. But the CIT ruled that IEEPA does not permit the president to impose tariffs of unlimited scope, amount and duration. That, the court ruled, was precisely what President Trump had tried to do.

Three-judge panels are unusual at the CIT. The court knew this was an important case. The decision was heard and decided by one appointee of Ronald Reagan, one of Barack Obama, and one of Donald Trump.

The opinion covered nearly 50 pages and was unanimous. Loyalty to the president that appointed them was obviously less important than adherence to the Constitution and the laws of the United States.

The limits of IEEPA

The court found that IEEPA was not intended to abrogate the explicit power of Congress to “lay and collect Taxes, Duties, Imposts and Excises,” and to “regulate Commerce with foreign Nations.” It was for emergencies, which are defined as “an unusual and extraordinary threat.”

Are trade deficits, a chronic fact of life since the Arab Oil Embargo in 1973, an “unusual and extraordinary threat”? The court did not think so.

To be sure, the language of the IEEPA statute is broad. It stems from the World War I-era Trading with the Enemy Act. The Trump team obviously thought they could do what they did without going to Congress for additional authority. But giving that sort of power to the executive branch would, the court said, be an excessive delegation of legislative authority by Congress and would violate the Constitution.

Significantly, while the court found that the power Congress gave to the president in IEEPA fell short of authorizing the tariffs in their current form, the court did not draw the line between excessive and non-excessive actions. That remains to be determined.

The CIT ordered the administration to unwind the tariffs based on the IEEPA authority within ten days.

Team Trump will take it to the Supreme Court

The Trump team immediately appealed the ruling to the next level up, the Court of Appeals for the Federal Circuit. The administration asked for an emergency “stay” of the effect of the CIT’s decision. The following day, May 29, the Court of Appeals granted an emergency stay that will remain in effect until that court can determine whether to grant a full stay pending appeal.

Briefing on the stay motion will be completed by June 9. If a stay pending appeal is granted, it will likely remain in effect until the Court of Appeals issues a decision, which could be months in the future. The case is almost certain to be appealed to the Supreme Court.

In short, the fate of reciprocal and fentanyl tariffs based on IEEPA will remain uncertain for a while. The CIT decision means that countries that have approached the administration to make “deals” on tariffs are, like all of us, not convinced that the president can make these tariffs stick.

That was a key argument the administration made in asking for a stay pending appeal. The court decision interfered with the conduct of foreign affairs. Perhaps so—but, as the court indicated, if the statute does not authorize the actions taken, then those actions cannot stand. The echoes of Youngstown Sheet & Tube Co. v. Sawyer—the 1952 case invalidating President Truman’s seizure of steel mills—are unmistakable.

Section 232 and 301 remain in effect

The president has other powers: Section 232 and Section 301 tariffs remain in effect. That means tariffs on steel, aluminum, and, more recently, automotive goods, remain in effect. But Sections 232 and 301 require due process (notice and an opportunity to be heard) before they are put in place.

Previous Section 232 actions on uranium, titanium sponge, and transformer components could be resurrected. The Section 301 tariffs on Chinese goods remains in litigation. (Disclosure—I was involved in some of these cases.).

The president claims authority under these statutes to increase tariffs and other trade barriers on these products. On Friday, the President announced a doubling of steel and aluminum tariffs to 50%. And these apply to imports whether or not the products are made in the United States.

New cases under Section 232 and Section 301 will happen too. And we must not forget the threat of antidumping, countervailing duty, and safeguard actions. The IEEPA tariffs are important weapon. But they are not the only weapon available to the president.

Trump’s efforts to reshape global trade continue

The larger issue is the president’s effort to change global trade patterns beyond recognition. A lot has already been done to disrupt the former trade rules that were developed over decades. The new US tariffs sparked retaliatory levies by many countries, reinforcing the president’s trade initiatives. Much about trade has already changed, and it cannot easily be undone.

Perhaps overlooked in all this is the sudden reversal by the president in approving, at least in part, the investment by Nippon Steel in US Steel. The details are still not fully known. But a major foreign investment in American steelmaking appears to be in the offing. It might be a brief glimpse of blue sky among the thunderheads.

Editor’s note

This is an opinion column. The views in this article are those of an experienced trade attorney 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.