A recent ruling by the Court of International Trade (CIT) has halted most of the tariff hikes imposed under the Trump administration through the International Emergency Economic Powers Act (IEEPA). The ruling is a significant development in the ongoing battle over U.S. trade policy, blocking 6.7 percentage points of the tariff increases implemented since early 2025, but it still leaves open several legal and political pathways for reinstating or reshaping these tariffs.
A Major Setback – But Not the Final Word
In a unanimous decision, a three-judge panel of the CIT issued a summary judgment that blocks a significant portion of the tariff increases enacted under IEEPA. Specifically, the court struck down:
- A 10% baseline tariff (worth 3.6pp on the effective average rate)
- A 20pp additional tariff on Chinese imports (2.7pp effective)
- A 25% tariff on non-USMCA imports from Canada and Mexico (0.4pp effective)
However, the court’s ruling does not impact sectoral tariffs imposed under other authorities like Section 301 and Section 232. Notably, this decision does not affect tariffs on steel, aluminum, and autos—items already subject to separate tariff regimes.
This outcome is a setback for the Trump administration’s aggressive use of tariffs but may not substantially alter trade dynamics if alternate tariff authorities are used.
Legal Reasoning Behind the Ruling
The court challenged the use of IEEPA as the legal foundation for the tariffs, particularly criticizing the reliance on an “unusual and extraordinary threat” as justification. The panel rejected the notion that foreign trade deficits and unfair trade practices constitute a national emergency, especially under circumstances where these issues have persisted for years.
The ruling also noted that other statutory mechanisms like Section 122 of the Trade Act of 1974 could be more appropriate for temporary tariff measures, allowing up to 15% tariffs for 150 days in cases of balance-of-payments issues. It also highlighted that Section 301 should be used to address unfair trade practices through proper procedural channels.
10-Day Window & Appeal Strategy
Although the ruling immediately halts further tariff collection, it does not provide for refunds of tariffs already paid. The Trump administration has already filed an appeal to the U.S. Court of Appeals for the Federal Circuit. However, court watchers expect that a final resolution from the Supreme Court is unlikely in the short term.
Meanwhile, the court gave the administration 10 days to halt tariff collections, which sets the clock ticking for a legal and political response.
How the Trump Administration Could Reinstate Tariffs
Despite the ruling, the administration retains several legal tools to reimpose similar tariffs. These include:
1. Section 122 of the Trade Act of 1974
Allows the president to impose up to 15% tariffs for up to 150 days to counter a balance of payments deficit. This option does not require a formal investigation, and although temporary, it could be renewed with Congressional approval.
2. Section 301 Investigations
The U.S. Trade Representative can initiate new Section 301 investigations to address unfair trade practices. This path takes longer but allows for a broad and potentially permanent tariff regime once findings are established.
3. Section 232 (National Security Tariffs)
Already in use for sectors like steel and autos, Section 232 could be expanded to other sectors, including pharmaceuticals and electronics. However, this would likely invite legal scrutiny and political opposition, as it stretches the original intent of the law.
4. Section 338 of the Trade Act of 1930
An underutilized authority that allows tariffs of up to 50% on imports from countries discriminating against the U.S. Though rarely invoked, this option could become a tool in the administration’s arsenal.
Market & Policy Implications
Even with the court’s ruling, it’s unlikely that tariff policy will see a dramatic shift in the short term. The administration could announce a new tariff structure under Sec. 122 or accelerate new Sec. 301 investigations.
Tariff policy remains a critical element of Trump’s economic strategy, especially with trade deficits and currency depreciation continuing to be core concerns. If reinstated through alternate legal avenues, the new tariffs may target key sectors more surgically or return with slightly adjusted legal justifications.
Investors should be prepared for a prolonged period of uncertainty around U.S. trade policy, especially with election season looming.
Fiscal Impacts Remain Significant
While this legal setback may complicate tariff collection, it is unlikely to derail the broader fiscal goals of the administration. The now-blocked tariffs were expected to raise nearly $200 billion annually, roughly equal to the impact of the current fiscal package on deficit reduction.
Given the Trump administration’s commitment to tariffs as a revenue stream and policy lever, it is highly likely they will pivot quickly to legal mechanisms that allow the resumption of these duties.
Looking Ahead
This court ruling represents a notable check on presidential power in trade policy, but it is far from a conclusive defeat for the administration. With multiple legal authorities still available, expect to see:
- Rapid action on temporary tariffs under Section 122
- Strategic use of Section 301 to build long-term trade pressure
- Continued emphasis on tariff-based negotiation tactics
As legal battles continue to unfold, the evolution of U.S. trade policy remains a key geopolitical and economic storyline for 2025.
IBAFIN 
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