U.S. Court of International Trade Rules on Legality of Tariffs

On May 28, 2025, the United States Court of International Trade (CIT), a U.S. federal court with special expertise in customs and international trade laws, released the anticipated first ruling on the lawfulness of tariffs issued by President Trump. In a unanimous decision, the three-judge panel of the CIT determined that President Trump lacked the authority to issue the set of tariffs imposed on Canada, Mexico and China to influence the alleged flow of drugs and crime from those countries, as well as the universal and retaliatory tariffs imposed as part of President Trump’s “Liberation Day” policy.

Under the CIT’s ruling, those tariff orders would be void and their enforcement permanently enjoined. However, the ruling was quickly stayed by the Court of Appeals for the Federal Circuit until further notice. As of this writing, the challenged tariffs remain in place. Other tariffs, including those related to steel and aluminum imports from Canada, were not challenged in the CIT and similarly remain in place.

This bulletin describes important developments in the state of the tariffs and the likely next steps following the CIT’s ruling.

Background

Since returning to office, President Trump has issued a series of executive orders imposing tariffs on imports to the U.S. Two categories of tariffs were at issue before the CIT: (i) tariffs on Canada, Mexico and China in response to an alleged failure of these countries to curb the flow of drugs and crime into the U.S. (the “Trafficking Tariffs”); and (ii) “universal” tariffs that imposed a baseline surcharge on the rest of the world, with additional “retaliatory” tariffs that varied by country depending on their trade relationship with the U.S. (the “Worldwide and Retaliatory Tariffs”).

Article I, Section 8 of the U.S. Constitution assigns the power to “lay and collect Taxes, Duties, Imposts and Excises” to Congress. As President Trump imposed the tariffs by executive order, their lawfulness depends on whether a congressional statute grants him the necessary authority. The tariff orders primarily invoke the President’s power under the International Emergency Economic Powers Act (IEEPA). Enacted in 1977, the IEEPA authorizes the President to take actions that “deal with an unusual and extraordinary threat” where a national emergency has been declared in relation to the threat. Those actions include “regulat[ing]…importation”.

In a growing number of lawsuits, private and state plaintiffs have challenged the lawfulness of the tariffs, seeking declarations that they exceed the President’s power under the IEEPA and injunctive relief restraining their enforcement.

The CIT’s Ruling

In proceedings brought by private businesses and state plaintiffs, the CIT ruled against the tariffs and in favour of the challengers.

It began by noting two important principles for determining whether the IEEPA authorized the tariffs. First, because the U.S. Constitution grants Congress the power to impose taxes, a statute that granted the President an unbounded and unlimited tariff power would be unconstitutional. Second, the IEEPA was enacted as part of an attempt to limit the President’s emergency authorities in non-wartime scenarios compared to what had been available under prior legislation. While the IEEPA continues to authorize some presidential emergency powers in peacetime, those powers are subject to important constraints.

Regarding the Trafficking Tariffs, the CIT held that these tariffs were not consistent with the IEEPA requirement that they “deal with an unusual and extraordinary threat” that constituted a national emergency. While the government had argued that the validity of the President’s emergency declaration was a nonjusticiable political question, the CIT held that it needed to decide only whether the tariffs were enacted to “deal with” the threat, not whether the threat existed. It proceeded to conclude that the Trafficking Tariffs did not meet this standard because rather than obtaining their stated objectives themselves, the tariffs created leverage to deal with those objectives. If “deal with” can mean “impose a burden until someone else deals with”, the CIT reasoned, then presidential emergency powers would expand beyond what Congress had intended with the IEEPA.

Regarding the Worldwide and Retaliatory Tariffs, the CIT held that the IEEPA’s authorization for the President to regulate importation did not include imposing tariffs to correct balance-of-payment deficits. According to the CIT, Congress shifted that power under other non-emergency legislation. As the executive orders had justified the Worldwide and Retaliatory Tariffs as a remedy for balance-of-payment deficits with other countries, they exceeded the President’s IEEPA powers.

In the result, the CIT granted summary judgment for the challengers, held both sets of tariffs void and permanently enjoined the government from enforcing the tariffs.

The Appeal and Stay

The government swiftly responded to the CIT’s ruling with an immediate appeal to the United States Court of Appeals for the Federal Circuit. It also sought a stay of the CIT’s order pending appeal and an administrative stay to allow it to continue enforcing the tariffs in the meantime. On May 29, 2025, the Court of Appeals stayed the CIT’s order until further notice. Developments in this proceeding are likely to be rapid, as are the complexities that arise for entities attempting to understand their obligations.

For more information, please contact the author or any other member of our Litigation & Dispute Resolution or International Trade groups.