What Are the Tariffs? 

The tariffs are all the answer to President Donald Trump’s frequent campaign promises to bring U.S. trade power to bear on our trading partners. Thus far, they include new duties between 10 percent and 25 percent on products from Canada, Mexico, and China, as well as expanded steel and aluminum tariffs. The latter set of duties build upon the 25 percent steel and 10 percent aluminum tariffs that Trump enacted in 2018 and then expanded in 2020 under Section 232. In the latest action, he raised the aluminum tariffs to 25 percent, included more downstream steel and aluminum products in the tally, and eliminated all national exemptions that had been granted on a country-by-country basis.

The duties on Chinese, Mexican, and Canadian goods, however, present a new issue, as those tariffs were enacted through the International Economic Emergency Powers Act (IEEPA), which authorizes the president to take action in response to a declared national emergency. The law is typically used to impose sanctions, and multiple observers couldn’t recall a prior instance in which a president used IEEPA for imports.

Although the law is untested as an import authority, there are multiple advantages of using IEEPA for tariffs, according to Greta Peisch, who previously served as general counsel for the Office of the U.S. Trade Representative. The law doesn’t require a lengthy investigation or public process, meaning a remedy can be imposed quickly. Additionally, the statute “lends itself to remedies that are broader in scope more readily than 301 or 232… potentially covering all trade from a country,” said Peisch, now a partner at Wiley & Rein.

The Legal Case Against the Tariffs

In analyzing the tariffs, experts repeatedly stressed the U.S. courts’ deference to presidential trade authority, as proven during the Section 301 and Section 232 cases. IEEPA is “more broadly deferential” than other statutes, said Weronika Bukowski, a Crowell & Moring trade attorney who previously clerked for Senior Judge Timothy Stanceu in the trade court. While an IEEPA tariff is new, sanctions under the statute are not, and Bukowski added that the case precedent there is weighted against challengers. Sanctions-related IEEPA cases have gone to the courts, and “it’s generally a high hurdle to get the court to reverse the president,” she said.

Central to the matter is that an IEEPA remedy is rooted in a presidential determination of emergency. Courts tend to defer to such a declaration, or decline to review it, according to Joel Trachtman, an international law professor at The Fletcher School of Law and Diplomacy at Tufts University. But Trachtman speculated that the decision to impose tariffs may be reviewable under a decades-old decision known as Yoshida.  Although this was the first time IEEPA was used to issue tariffs, former President Richard Nixon used a predecessor law—the Trading with the Enemy Act—to impose a 10 percent global tariff. In Yoshida, the Supreme Court upheld those duties, after finding that they bore a reasonable relationship to the emergency.

At the current moment, Trachtman is unsure whether the IEEPA tariffs are aligned with the emergency, which includes the flow of drugs into the United States. “A court may find that an import ban was more appropriate,” Trachtman said.

Steve Charnovitz, a George Washington University Law School professor, roundly criticized the IEEPA tariffs during a call with the New York Law Journal and raised other potential arguments on their legal validity. But despite his disbelief in the tariffs’ legal backing, he kept returning to the issue of emergency power. “CIT and the Federal Circuit tend to side with the government in close calls and on something where the issue is an emergency, a declared emergency by the president,” he said.

Any challenges against the Section 232 tariffs are also running up against the courts’ records. Despite that hurdle, however, Bond questioned whether the latest round of Section 232 tariffs are procedurally sound. Unlike IEEPA, the president can only enact Section 232 tariffs based on the results of a national security investigation into foreign imports. According to Bond, the order for new Section 232 tariffs appeared to tie back to the findings made during the first Trump administration, which are now years old. A critic could potentially challenge the broadened tariffs based on the underlying fact-finding, he said.

Charnovitz, however, felt that any challenge would fail based on Transpacific, a Federal Circuit decision backing the first Trump administration’s decision to expand the Section 232 duties on Turkish steel. That decision seemingly allowed the president to change the tariff rate based on prior findings, Charnovitz said.

Even if the trade court decided to question whether a new investigation was completed, the Trump administration could “cure” the new Section 232 duties by opening a new investigation, Charnovitz added.

Is There Other Relief?

Lingering in the background of several conversations was the role, if any, that the World Trade Organization (WTO) could play. As a member, the United States is required to provide fellow WTO members preferential trade treatment, an obligation that may be in tension with the new tariffs. China has already filed a complaint before the WTO against the IEEPA duties.

But any attempt at getting WTO intervention will be “symbolic,” according to Bukowski. The WTO’s Appellate Wing has been shuttered since 2020, after the U.S. blocked new appointments to the panel based on concerns over U.S. sovereignty. Any adverse decision may simply be appealed “to the void,” as the U.S. has done to WTO decisions against its steel and Section 301 tariffs.

With that outlook, Bond said that companies should be looking into complying with the new tariffs. He further added that future relief could be on the horizon. Speaking on just the IEEPA tariffs, Bond felt that there eventually would be an exclusion process. “The actions here are so broad that, as people start to understand the economic consequences, I think people will feel the need to have exclusion processes like they did in the past, to try and moderate the impact on U.S. users,” said Bond.

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From: The National Law Journal