Recent developments in the US legal system have challenged the extent of presidential authority over tariffs. On 29 August 2025, the US Court of Appeals for the Federal Circuit ruled 7-4 that several tariff measures announced by former President Donald Trump were illegal. The court held that the President does not have wide-ranging authority to impose tariffs under the International Emergency Economic Powers Act (IEEPA) of 1977. This ruling upheld a previous decision from a Manhattan Trade Court and restricts the use of emergency powers to impose tariffs without Congressional approval.
Background of the International Emergency Economic Powers Act (IEEPA)
The IEEPA was enacted in 1977 under President Jimmy Carter. It replaced the earlier Trading with the Enemy Act of 1917. This law grants the US President authority to declare a national emergency to address threats from outside the country. It covers threats to national security, foreign policy, or the economy. Historically, presidents used IEEPA to impose sanctions on foreign states during crises, such as Carter’s sanctions on Iran in 1979 and George W. Bush’s actions after the 9/11 attacks.
Trump’s Use of Emergency Powers for Tariffs
President Trump repeatedly declared national emergencies to justify tariffs. He claimed the US faced emergencies due to trade deficits and unfair foreign trade practices. On his first day in office, he declared a national emergency at the southern border. Recently, he imposed 25% tariffs on Mexico and Canada to pressure them on migration and drug trafficking. In April, he announced Liberation Day tariffs—10% baseline tariffs on all countries and additional reciprocal tariffs targeting nations with large trade deficits with the US.
Legal Challenges to Trump’s Tariff Announcements
Several small businesses and Democratic-led states challenged Trump’s tariff orders, claiming financial harm. Recently, the US Court of International Trade ruled that the IEEPA does not permit unlimited tariffs. The court found that tariffs aimed at addressing trade deficits or pressuring countries on unrelated issues like drug trafficking exceeded presidential authority. The fentanyl-related tariffs were invalidated for not directly addressing the declared emergency. The Federal Circuit’s recent ruling reaffirmed these findings.
Scope and Impact of the Court Rulings
The rulings do not affect tariffs imposed under other laws. These include tariffs on steel, aluminium, automobiles, and copper under Section 232 of the Trade Expansion Act of 1962, which are based on national security risks. Other unaffected tariffs include those on solar energy under the 1974 Trade Act and Section 301 tariffs targeting China for unfair trade practices. The court’s decisions focus specifically on the misuse of emergency powers under IEEPA for broad tariff impositions.
Significance for US Trade Policy
This legal precedent limits the executive branch’s ability to unilaterally impose tariffs using emergency declarations. It emphasises the need for Congressional oversight in trade policy decisions. The ruling may affect future administrations’ use of emergency powers in economic matters. It also marks the constitutional balance between the executive and legislative branches in managing trade and foreign policy.
Questions for UPSC:
- Point out the constitutional limitations on the use of emergency powers by the executive in the context of trade policies.
- Critically analyse the role of the International Emergency Economic Powers Act (IEEPA) in shaping US foreign policy with suitable examples.
- Estimate the impact of unilateral tariff impositions on international trade relations and global economic stability.
- What is the principle of separation of powers? How does judicial review uphold this principle in the context of executive trade actions?
