Tariffs, Trade, and Executive Power: How the Federal Circuit May Reshape Tariff Policy

On August 29, 2025, the U.S. Court of Appeals for the Federal Circuit held that the International Emergency Economic Powers Act (“IEEPA”) does not authorize the President to unilaterally impose broad, economy-wide tariffs on U.S. trading partners.¹ The Federal Circuit issued the significant decision en banc (7-4); however, the decision is currently stayed pending Supreme Court review. The central dispute is whether President Donald Trump’s sweeping tariffs are authorized under the IEEPA, which permits the president to “regulate” importation in response to a national emergency.

On January 20, 2025, the President declared the existence of a national emergency at the U.S. southern border, citing the presence of cartels, terrorists, traffickers, and illicit narcotics.² President Trump expanded the scope of the national emergency to include threats from Canada and China, focusing on the influx of illicit opioids. To address this threat, President Trump issued tariffs through a series of executive orders—initially imposing 25% ad valorem duties on Mexican and Canadian imports, as well as 10% ad valorem duties on Chinese imports.³ In its opinion, the Federal Circuit collectively defined these as the “Trafficking Tariffs.”⁴

On April 2, 2025, President Trump additionally imposed reciprocal tariffs, which contained a baseline ad valorum duty of 10%—with significantly larger duties to be imposed on a per-country basis “shortly after.”⁵ The “Reciprocal Tariffs” were in response to “a lack of reciprocity in our bilateral trade relationship.”⁶

In response, a group of Plaintiffs—five small businesses and twelve states—separately brought suit before the Court of International Trade (“CIT”) to challenge the President’s ability to implement the Trafficking and Reciprocal Tariffs. The CIT granted Plaintiffs’ motion for summary judgment in a consolidated order, holding that the tariffs exceeded the President’s authority under the IEEPA and permanently enjoined the Government from imposing the at-issue tariffs. The Federal Circuit affirmed the CIT’s core holding but vacated and remanded the permanent injunction. On September 9, 2025, the Supreme Court granted the Government’s petition for review. Oral argument is scheduled for November 5, 2025.

The Constitution grants Congress—not the President—the power to “lay and collect Taxes, Duties, Imposts and Excises” and to “regulate Commerce with foreign Nations.”⁷ At the time of the nation’s founding, setting the tariff schedule was a core congressional function.⁸ By the late nineteenth century, Congress began to delegate limited authority to “activate or suspend” tariff rates to the executive branch.⁹

In 1917, Congress enacted the Trading with the Enemy Act (“TWEA”) to address economic threats resulting from the U.S. entry into World War I.¹⁰ TWEA empowered the President to “investigate, regulate, or prohibit[] any transactions in foreign exchange” during wartime.¹¹ This power was expanded several times, and by 1941, Congress added the phrase “importation or exportation” of foreign property to the list of transactions that the President may “investigate, regulate, or prohibit.”¹² In 1971, President Nixon attempted to expand his authority under TWEA to adjust the tariff schedule. President Nixon temporarily imposed an additional 10% ad valorem duty, which was not to exceed the amounts set in the Congressionally-approved tariff schedule.¹³ Yoshida International, a zipper importer, challenged the legality of the temporary tariff surcharge and lost on appeal—the Court ruled in favor of the Government and upheld President Nixon’s authority to impose the surcharge under TWEA.¹⁴

In response to the ruling, Congress enacted the IEEPA, which limited the executive’s economic emergency powers.¹⁵ The IEEPA authorizes the President to take certain actions in response to a declared national emergency arising from an “unusual and extraordinary threat” to U.S. national security, foreign policy, or the economy.¹⁶ Upon declaration of such an emergency, the IEEPA authorizes the President to, among other things, “regulate . . . importation.”¹⁷

The statute does not expressly include the power to impose tariffs, duties, nor the power to tax. This was critical to the Court’s decision: numerous statutes use clear and precise terms to delegate tariff power to the executive.¹⁸ The Court held that the Government’s interpretation of the IEEPA ran afoul of the major questions doctrine. This doctrine applies when the authority asserted by the Government entails vast “economic and political significance.”¹⁹ When implicated, the Government must identify “clear congressional authorization” for the asserted power.²⁰ Given the lack of express authorization from Congress, coupled with the implications of the major questions doctrine, the Court held that the President could not impose the Trafficking or Reciprocal tariffs pursuant to the IEEPA.

Four judges dissented from the majority opinion, arguing that the IEEPA’s grant of authority—allowing presidents to regulate importation—included the power to impose tariffs, citing several instances demonstrating that taxation may function as regulation.²¹ Further, the dissent sharply criticized the majority’s use of the major questions doctrine, finding the doctrine poorly suited to address matters of foreign policy and national security, where courts often invoke broad deference to the executive.²²

The cornerstone of President Trump’s foreign policy—the administration’s vast imposition of sweeping tariffs—is now under threat following the decision by the Federal Circuit. This ruling carries significant implications for all firms engaged in international trade, with potential consequences for cost structures, global supply chains, and compliance obligations. The Supreme Court granted the Government’s petition for review and will hear oral arguments on November 5, 2025. The dissent—forceful in its analysis—presents arguments that may resonate with certain Justices, particularly its emphasis on judicial deference to the executive in matters implicating foreign policy. Still, the IEEPA’s textual silence on tariff authority, combined with the unprecedented executive authority involved raises serious constitutional questions. As a result, the case presents a close question for the Supreme Court.