Trump's Tariffs Reinstated as Appeal Succeeds — But Legal Fight Looms

President Trump secured a temporary legal victory on 29 May, when a federal appeals court reinstated the tariffs at the heart of an escalating legal battle.

The court’s decision allows the levies to remain in place while judges assess the underlying legal arguments, although it does not indicate how the court will ultimately rule.

The case hinges on Trump’s unprecedented use of the International Economic Emergency Powers Act (IEEPA) to justify wide-ranging tariffs. The IEEPA, a 1977 law, permits the president to block transactions with foreign adversaries that pose a threat to the United States. Traditionally used for sanctions and embargoes, it does not explicitly allow tariffs, placing Trump’s actions in uncertain legal territory.

Earlier rulings in two lower federal courts - the U.S. Court of International Trade and the U.S. District Court in Washington, DC - rejected the use of IEEPA as a valid basis for these tariffs. But the appeals court's intervention has paused those defeats, pending further judicial review.

The legal process could stretch over a year and may ultimately reach the Supreme Court, depending on how the two appeals courts handling related challenges rule. If those courts issue contradictory decisions, the likelihood of a prolonged legal process increases. If they align, a quicker resolution could follow. For now, the legal status of the tariffs remains unsettled despite their temporary reinstatement.

Even with the current pause in place, there is still significant uncertainty for businesses, with no clarity yet on whether the courts will ultimately uphold or strike down the policy.

Should the courts eventually reject the tariffs, the White House is expected to consider alternative legal pathways to reinstate similar trade measures. One likely option is Section 301 of the Trade Act of 1974, which allows the executive to impose tariffs in response to adverse foreign trade practices. This provision was used to justify many of Trump’s China tariffs during his first term and remains in use under the Biden administration.

The administration is also exploring the possibility of using Section 301 to reimpose tariffs on countries such as Mexico, Canada, and China, based on their alleged involvement in the transshipment of fentanyl to the U.S. However, each use of Section 301 requires a separate federal investigation, which would take time and could limit the scope of any new measures.

Other options under consideration include another provision of the 1974 Trade Act, which permits short-term tariffs of up to 15% for 150 days, and further use of Section 232 of the 1962 Trade Expansion Act. Section 232 has already been used to justify tariffs on steel, aluminium, and automobiles, and could potentially be expanded to cover other sectors such as pharmaceuticals and semiconductor chips.

For importers affected by the current tariffs, the stakes are high. If the levies are eventually ruled unlawful, companies that paid them could be entitled to substantial refunds. However, the federal government is likely to delay issuing any repayments until the legal disputes are fully resolved.

While the temporary reinstatement of the tariffs provides the Trump administration with a short-term win, the broader legal and political battle over presidential tariff powers is far from over.

As legal challenges continue and the administration considers its next move, we’ll keep you informed of the fast-changing implications for global trade and supply chains.