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Trade distortion and protectionism

Courting Chaos: Trump’s wide menu of legal options in the tariff war


Published 03 June 2025

Now that courts have ruled against the Trump administration on IEEPA, its use of Section 232 is even more likely. If IEEPA is not to be used for tariffs against trade partners, the White House will resort to alternative methods. The courts and Congress tend to be highly deferential to executive claims of national security.

On 2 April, President Donald Trump promised "Liberation Day." He stood in the Rose Garden in Washington, D.C., and announced a sweeping series of individualized tariff rates aimed at countries around the globe. These new "reciprocal" tariffs, he declared, would free the US from unfair trade practices of foreign partners, starting with the imposition of at least 10% on all imports on 5 April. To avoid paying tariffs of at least 10% and up to 50%, the Trump administration said foreign governments would be eager to engage in a series of trade negotiations with the White House.

Trump’s trade and tariff policy centerpiece has not exactly gone as planned. First, international markets swooned, with global stock markets experiencing sudden sharp downturns. Second, the bond market also fell steeply, as buyers demanded higher premiums. On 10 April, just about a week after "Liberation Day," Trump announced a 90-day pause on further tariff escalation, while leaving in place the baseline 10% tariffs.

Trump’s "reciprocal" tariffs were imposed using a specific piece of domestic legislation, the 1974 International Economic Emergency Powers Act (IEEPA).1 Trump claimed that unsustainable trade deficits in goods with foreign partners caused an economic emergency.

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IEEPA was also the justification for other actions taken from the start of Trump’s term.2 He claimed that foreign imports of fentanyl from China, Canada, and Mexico were also an economic emergency.3 While the tariffs imposed on Canada and Mexico were largely suspended after negotiations, the US maintained a 20% tariff under IEEPA on all Chinese goods imported into the United States.

Several American firms and US states filed lawsuits against the use of IEEPA. Two different courts, the federal Court of International Trade (CIT) and the US District Court for the District of Columbia (USDC-DC), both ruled last week against the Executive branch.4 The CIT, a specialized court system designed to handle trade complaints, said on 28 May that neither trade balances nor fentanyl imports constituted an emergency under the statute. In addition, IEEPA did not clearly authorize the use of tariffs as a remedy, particularly as the US constitution delegates tariff and revenue collection authority to Congress, not the President. It therefore declared the use of tariffs under IEEPA to be invalid. Until Trump, IEEPA had never been used to impose tariffs.

The following day, the Court of Appeals for the Federal Circuit (CAFC) agreed to a stay in the case, allowing tariffs to continue to be collected pending the results of the appeal.5 The legal battles over the use of IEEPA will likely escalate to the Supreme Court. The timeline for resolution is currently not known, but could be weeks or even months away.

Changes to "reciprocal" and fentanyl tariffs under IEEPA have not, however, annulled all the new tariffs Trump has imposed since returning to the White House in January. His administration has also rolled out Section 232 sector-specific tariffs for national security reasons. These are currently in place against steel, aluminium, and items made with these metals, as well as against autos and auto parts.

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Steel and aluminium tariffs are applied globally at 25%, although in the wake of the negative court rulings, Trump has threatened to double these rates starting on 4 June.6 Global auto and auto tariffs are currently set at 25%.

There are at least seven additional Section 232 investigations pending, including against pharmaceuticals, semiconductors, copper, lumber, heavy vehicles, critical minerals, and space products. These cases could be concluded at any time, with tariffs likely as a remedy.

Now that courts have ruled against the administration on IEEPA, the use of Section 232 is even more likely. If IEEPA is not to be used for the imposition of tariffs against trade partners, the White House will resort to alternative methods to achieve its objectives. This may include launching more Section 232 cases, expanding covered products under existing investigations, or changing tariff rates assessed under Section 232. The courts and Congress tend to be highly deferential to an executive branch claim of national security, which means that these Section 232 cases will be more likely to survive any future scrutiny of White House use of tariffs by the judicial and legislative branches.

Still, it is hard to turn all traded goods into a national security argument. Children’s toys, for example, are unlikely to ever be bundled into a Section 232 case. But there are other tools available to the President, including the use of Section 301 alleging unfair trade practices against foreign partners. Section 301 was used in the first Trump term against China and could be expanded now or put into place against other countries.

Trump also has recourse to other trade tools. The CIT judges, for instance, suggested the possible use of Section 122 as a replacement. Section 122 deals with balance of payments issues and allows the immediate imposition of tariffs of up to 15% for 150 days.7 The original policy document issued by Trump at the start of his term already asked his government agencies to identify all existing legal pathways to manage trade tensions.8

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It is also possible for Congress to get involved. IEEPA was struck down because the issues were not seen by CIT as national economic emergencies and opined that the executive branch was not authorized to use tariffs. But Congress could potentially declare both to be legal, paving the way for Trump to return to his preferred tool.

In short, Trump’s obsession with trade deficits in goods and his use of tariffs are unlikely to end anytime soon regardless of what may or may not happen in court over IEEPA.

All these changes have created additional headaches for US foreign trade partners. Some had already begun talks with the Trump administration since February over trade and tariff issues. The 2 April announcement of global tariffs spurred more negotiations, especially for governments with proposed "reciprocal" tariff rates above 40%.

Despite an apparently eager stream of foreign visitors to Washington, only one deal and one truce have been announced thus far. The first, a small agreement with the United Kingdom, was released on 8 May.9 The US and China announced a temporary truce, winding back the use of “reciprocal” tariffs to 10% and opening a new 90-day window for negotiations from 12 May.10

If the CIT decision remains in place, of course, incentives for foreign partners to work with the Trump administration on a range of perceived bilateral trade issues could be rapidly diminished. For many partners, the risks of getting exports to the US caught by expanded national-security sectoral arrangements or broader unfair-trade assessments could be modest.

Many of the governments given the highest levels of "reciprocal" tariff assessments either export items like textiles and clothing that are not likely to be the subject of future trade actions from Trump’s team. Or their exports are too small in volume, overall, to justify the work needed to bring a Section 301 case at the domestic level.

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Others, however, that may have been tagged with "reciprocal" rates in the mid-20% range may find the opposite to be true. If the Trump team shifts to greater use of national security arguments against high-tech or other key sector exports or opens a comprehensive look into unfair trade practices, the net outcome could be worse than what was outlined on 2 April. These governments could suddenly have to shift into high gear to get pre-emptive adjustments made to future trade restrictions.

Hanging over all trade partners is the risk that the CIT decision is overturned, allowing IEEPA tariffs to continue. The 90-day pause is set to end on 9 July. It may be the case that these much higher tariffs get applied as originally outlined on that date. If the court system does allow Trump to use IEEPA, he might opt to widen or deepen tariff commitments for trade partners in the future.

Thus, the latest series of whiplash decisions on trade policy out of Washington shows little signs of getting resolved anytime soon. While trade partners may wish they could simply duck out of the way until they have greater clarity, this option is probably not in the cards either. Governments and firms will have to prepare for prolonged economic uncertainty.


Dr. Elms is Head of Trade Policy at the Hinrich Foundation in Singapore. Prior to joining the Foundation, she was the Executive Director and Founder of the Asian Trade Centre (ATC). She was also President of the Asia Business Trade Association (ABTA) and the Board Director of the Asian Trade Centre Foundation (ATCF).

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