New York – U.S. – May 30, 2025 – Global trade is facing more tension after a major court decision by the U.S. Court of International Trade (CIT) on May 28, 2025. The court said that many new taxes on imports recently put in place by the U.S. government were not legal. But businesses didn’t get relief for long.
One day later, the U.S. Court of Appeals for the Federal Circuit quickly put a temporary hold on that decision, bringing back these import taxes while they review the case. This back-and-forth legal battle significantly affects importers, consumers, and international trade relations.
Did the President Go Too Far? CIT’s Major Ruling on Presidential Power
On May 28th, a unanimous ruling from three U.S. Court of International Trade judges dealt a considerable blow to part of the government’s bold tariff plan. The panel states the President had exceeded his legal authority. He was granted authority through the International Emergency Economic Powers Act (IEEPA) 1977, imposing sweeping tariffs.
The court’s primary argument concluded that the IEEPA, which was intended for “unusual and serious threats” and national emergencies, does not permit the President to have “limitless” or “unbounded” authority to impose tariffs on almost every good imported into the U.S.
The CIT stated unambiguously that both the basic 10% tariff on most imports and the 25% tariffs on goods from China, Canada, and Mexico (which were explained by concerns about fentanyl and immigration) were unlawful under the IEEPA. The court concluded that such acts were not appropriately tailored to deal with the asserted threats and, thus, were an illegal delegation by Congress of its power to regulate commerce.
If the ruling had stayed in place immediately, it would have ushered in an era of substantial tariff cuts. This could drop the average U.S. tariff from approximately 6.9% (the highest since 1969) to roughly 2.5%, a significant shift for companies worldwide.
Will the U.S. Court of Appeals Keep Tariffs in Place?
The Appeals Court for the Federal Circuit intervened just 24 hours after the CIT’s ruling, granting a stay on the CIT ruling immediately. This means that, at this time, the questioned tariffs- both the 10% basic tariff and higher “reciprocal” tariffs- remain in place while the government prepares its appeal.
However, the appeals court leaves things as-is for now, and businesses must deal with the legal, logistical, and cost issues associated with these taxes. The legal battle will most likely continue and end up at the U.S. Supreme Court, necessitating continued uncertainty for global supply chains and trade strategies.
What is the Tariff and Economic Impact?
Although the CIT specifically focused its decision on tariffs imposed under IEEPA, it is crucial to note that this specific legal battle does not affect other significant U.S. tariffs:
- Section 232 Tariffs: The 25% tariffs on steel and aluminum imports (including related products) continue to be enforced, as do the 25% tariffs on automobiles and their parts. These tariffs, enacted under a different legal framework related to national security, are still in place.
- Section 301 Tariffs on China: Many tariffs on imports from China, some of which went as high as 145% before, and were enacted under Section 301 of the Trade Act of 1974 to address unfair trade practices, remain in place. A recent 90-day pause temporarily brought some of these down to 30%, but the greater threat, and existing tariffs, remain.
- De Minimis Exemption Removed for China/Hong Kong: The significant de minimis exceptions for low-value shipments from China and Hong Kong have been removed, meaning all imports from these areas are now liable to duties regardless of value.
Financial experts continue to express concern over the significant economic damage from these continuing tariffs. Predictions show declines in U.S. real GDP growth and continuing economic contraction. Consumers face higher prices, especially in clothing, textiles, and automobiles. The average loss for each household for 2024 is estimated at $950 due to tariffs already in place.
What’s Next for Businesses and World Trade?
The reinstatement of the questioned tariffs illustrates the uncertain and changing state of the US trade policy. Businesses involved with international trade now have to deal with uncertain and changing processes. The following points are essential to consider for those businesses:
- Keep Track of Legal Developments: Monitor the timely status of the appeals process. The ultimate result of these tariffs will be different depending on the Supreme Court decision.
- Adapt Supply Chains: The uncertainty states that it is important to have strong and diverse supply chains to mitigate potential changes in tariffs.
- Reevaluate Pricing Strategies: Businesses should continuously assess and change their pricing strategies. This is by understanding the impact of the current tariff and, potentially, the return of the tariff.
- Involved with Advocates: Industry associations and businesses may want to consider advocating for governments to implement transparent, continued, and predictable tariffs.
Although the U.S. trade court’s ruling was halted in the interim, it reminds of legal limits on presidential power. The ongoing legal battles will limit market access all over the globe and affect economies all over the world.
