Updated! May 28, 2025: The New Liberation Day?

Well, it seems that the US Court of International Trade has ruled that President Trump's tariffs are illegal. Or rather, using the IEEPA to enact those tariffs is illegal. In a finding that, in effect, means President Trump overstepped his presidential power, the court argues that, Constitutionally, only Congress has the power to enact tariffs and that there is no emergency that would allow the IEEPA to be used. The court ruled in favor of a permanent injunction of all tariffs enacted under the umbrella of the IEEPA. The ruling is effective immediately but the court gives the Trump administration 10 days to alter orders to provide for the injunction.

What this means is that the 25% tariff on products of Mexico and Canada and 20% from China as punishment (not the word the administration used, but let's call a duck a duck) for not doing enough to combat the rise in drug and immigration issues is no longer viable. Additionally, the reciprocal tariffs are no longer viable either. Please be aware of a couple of very important points. All Section 301 and Section 232 tariffs are still in place and are unaffected by this order. So steel and aluminum, their derivatives as well as auto parts and products of China all still have their tariffs. Also, the Trump administration immediately filed an appeal to this decision.

Of course, the Trump administration will fight this decision since it undermines one of the key cornerstones of his campaign. Now, it is possible that the admin will go judge shopping and find a court which is friendly to the Trump agenda and easily reinstate the tariffs. This has a feeling like a protracted fight and sides will go back and forth. For now, though, until the decision is overturned by another court, the IEEPA tariffs are no longer being applied to imports.

The interesting thing is, how is the world going to react? I'm sure that Wall Street and other economic markets will rebound. Will all of the "trade deals" the administration is working on fall through? Are they paused? Will Trump threaten and cajole, as he is wont to do, and "encourage" nations to continue negotiations? We can but wait and see. However, shipping lines are already anticipating rise in shipping since the Chinese IEEPA tariffs went from 145% to 30%. Anticipating a push in shipping as importers stockpile, some companies had rumors of doubling their rates. This will almost certainly seal those increases.

As I said before, this is going to be a long fight and importers are going to try to get everything they can in as fast as they can while they can without these extra tariffs. I seriously doubt that this decision will stand. There are too many friendly Trump judges. And when it falls, there will be an appeal to that decision and it will go on for a bit and we'll have a bit of an ebb and flow to trade that will create an interesting dynamic in the world. Forwarders get ready, it's about to get interesting...

UPDATE:

Well, it didn't last long. On Thursday 5/29 an appeals court granted a stay in the injunction from the Court of International Trade on Trump's tariffs. It seems that tariffs are back where they were on 5/27, at least until June 5 when the judge will hear legal arguments from both sides. It happened faster than I expected but it was expected.

Additionally, it also appears the Trump's legal teams are pursuing other sections of the Trade Code in order to justify the tariffs outside of congressional action. If the injunction is upheld and the Trump team does not overturn the ruling and tariffs are cancelled, they will certainly will apply to higher courts, even the Supreme Court. Additionally, while waiting for court appeals the Trump team is also looking for additional sections which can enable tariffs to remain in place during legal arguments. Section 122 will allow for minimal tariffs, by Trump standards (maximum of 15%), with immediate effect but after 150 days must be approved by congress. For longer term solutions and higher tariffs he can also use Section 232 and 301, but those action take longer to process, with up to 6 months of information gathering and reporting in order to properly enact tariffs from those sections.

Interestingly enough, Peter Navarro, Trump's trade counselor, has said he could also use the Smoot Hawley Act to levy tariffs on countries which "descriminate against America." The irony here is that the Smoot Hawley Act is a fantastic example of how tariffs, in order to make up for a trade deficit, can be dangerous. The ultimate failure of the Smoot Hawley tariffs have served to be a cautionary tale from 1930 onwards... until the Trump presidency.

Ultimately, we'll just have to keep watching, waiting and reacting to the ongoing story. It's not going to be over any time soon so we'll just have to remain agile in our approaches and aid our clients with information and advice as best we can.