Rebecca R. from Bellevue, WA asks: Hello Mitch, I’m interested in hearing your perspective on the court cases regarding tariffs. I’m not necessarily interested in the details of the court cases per se, I’m just curious if this could be the end of the tariff saga or if the story just takes on another form from here. Thanks for your response.
Mitch’s Response:
Thank you for writing, Rebecca. This story is pretty central to the future of tariff policy, in my view, so I think it’s an important question to address. To answer your question, I’ll first provide an overview of the rulings and get into the weeds on how the issue is moving through the courts, and then I’ll provide some insights on what I think this means for investors.
The big decision in question came through last week when the U.S. Court of International Trade ruled that broad-based tariffs imposed under the International Emergency Economic Powers Act (IEEPA) exceeded executive authority. The court stated that the IEEPA does not give the president unrestricted power to impose tariffs based on a declared national emergency, when there is no accompanying extraordinary threat as defined by the statute. Given we now know that many tariff rates were calculated based on the size of trade deficits, the court said this did not qualify as a national emergency. I think this is correct.1
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This ruling, in effect, nullified most of the “Liberation Day” tariffs, underscoring that constraints included in the IEEPA prevent it from being used as a blank check for tariff policy.
In response, the Trump administration filed an emergency appeal. The U.S. Court of Appeals for the Federal Circuit issued an administrative stay, temporarily halting the lower court’s ruling and allowing tariffs to remain in place as the appeals process unfolds. The appeals court set an expedited schedule for briefs, signaling an intent to resolve the matter swiftly.
For the time being, these legal developments leave tariff policy in a state of limbo. While the original court ruling represents a significant challenge to the use of emergency powers for trade policy, the stay and the pending appeals mean no immediate changes for businesses or markets. The legal battle could stretch for months, or even longer, depending on how far the appeals process goes. Uncertainty abounds, which is what markets and companies don’t want.
For now, the tariffs remain in force during the appeal, and alternative legal justifications under different statutes—such as Section 301 or Section 122 of the Trade Act—may still provide a path for reinstating or reshaping them.
It’s a mixed bag for investors. On one hand, the courts are inserting some friction into tariff policy, which I think will ultimately help markets and businesses avoid the worst-case scenario. On the other hand, businesses will now have to wait again during a stretch of uncertainty as courts—and perhaps the Supreme Court—make the final decision on tariff policy. The market still does not have the clarity it needs, and for that, I expect ongoing volatility.
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