Court Rules IEEPA Tariffs Unlawful, but Stays Relief Pending Remand to Trade Court
A late Friday, August 29 ruling from the United States Court of Appeals for the Federal Circuit has declared most of President Donald J. Trump's global tariffs to be illegal, finding that he exceeded his authority in imposing them. This decision, which affirms a lower court's finding, creates profound legal and commercial uncertainty for businesses engaged in international trade. While the court ruled against the Trump Administration, it simultaneously vacated a lower court's universal injunction, allowing the challenged tariffs to remain in effect as the case proceeds.
The ruling is a significant check on the executive's use of emergency powers in trade policy, and it introduces a new legal standard for what constitutes a permissible tariff under the International Emergency Economic Powers Act (IEEPA), the law cited as authority for the levies.
The court's decision applies to two distinct sets of tariffs:
The "Trafficking Tariffs": These tariffs were imposed in response to a declared national emergency concerning illicit drug and human trafficking across U.S. borders.The ruling specifically impacts the 25% ad valorem duties on nearly all articles imported from Canada and Mexico, as well as the 10% ad valorem duties on goods from China, which were later increased to 20%.
The "Reciprocal Tariffs": These tariffs were put in place to address persistent U.S. goods trade deficits and were set at a baseline of 10% on imports from nearly every country with which the United States has a significant trade relationship.
It is critical to note what the ruling does not affect. The decision does not include the 25% tariffs on autos, auto parts, steel, or aluminum that were imposed under a separate statute, Section 232 of the Trade Expansion Act. Nor does it impact the Section 301 tariffs. The legal and commercial standing of these tariffs remains unchanged by this ruling.
The court's core legal finding rests on a textualist interpretation of IEEPA, concluding that the power to "regulate" imports does not confer the authority to impose broad, economy-wide tariffs. The majority opinion carefully distinguishes the present tariffs from a 1975 precedent, Yoshida International v. United States, which upheld a temporary surcharge under IEEPA's predecessor, by characterizing the current tariffs as "unbounded in scope, amount, and duration". This distinction introduces a new, unwritten legal framework that will shape future tariff-based trade policy.
Furthermore, the Federal Circuit's application of the major questions doctrine, a constitutional canon that requires clear congressional authorization for actions of "vast economic and political significance," is notable. By applying this doctrine to a presidential act in the realm of foreign affairs, the judiciary is asserting a new level of scrutiny over executive trade policy. This development fundamentally changes the risk-mitigation calculus for businesses, suggesting that courts will be more willing to intervene in what was previously considered a political matter.
The case has been remanded to the Court of International Trade to re-evaluate the scope of its injunction. This step prolongs the period of uncertainty, as the tariffs will remain in place and affected parties will continue to bear the cost while the legal process unfolds. The case is widely expected to reach the Supreme Court, where a final and definitive decision will be made on the legal limits of presidential trade authority.
In-Depth Analysis of Ruling
Parties and Case Procedural History
The consolidated cases heard by the Federal Circuit, V.O.S. Selections, Inc. v. Trump and State of Oregon v. Trump, originated in the United States Court of International Trade (CIT). The plaintiffs in the case represent a diverse group with a direct economic interest in the outcome. On the private side, the lawsuit was led by five small businesses: V.O.S. Selections, Inc., Plastic Services and Products, LLC, MicroKits, LLC, FishUSA, Inc., and Terry Precision Cycling, LLC.
Their legal challenge targeted the imposition of reciprocal tariffs which directly impacted their business operations as importers and product handlers. On the public side, the lawsuit was brought by the State of Oregon and eleven other states, including Arizona, Colorado, Connecticut, Delaware, Illinois, Maine, Minnesota, Nevada, New Mexico, New York, and Vermont. These state plaintiffs challenged both the reciprocal tariffs and the trafficking tariffs, asserting harm to their economies and citizens.
The defendants in the consolidated cases were President Donald J. Trump, sued in his official capacity, as well as various U.S. government officials and agencies responsible for implementing the tariffs. These included the Executive Office of the President, U.S. Customs and Border Protection (CBP), the Office of the United States Trade Representative (USTR), and the Department of Homeland Security (DHS).
The procedural history of the case is critical to understanding the present state of the tariffs. In May 2025, a three-judge panel at the Court of International Trade granted summary judgment to the plaintiffs, concluding that both the reciprocal and trafficking tariffs exceeded the President's authority under the International Emergency Economic Powers Act (IEEPA). The CIT subsequently issued a permanent injunction blocking the government from imposing these tariffs. The government immediately appealed the decision and successfully moved to stay the injunction, which is why the tariffs remain in effect during the appellate process. The Federal Circuit consolidated the appeals and expedited the case for an en banc review, signaling the exceptional importance and urgency of the matter.
The Tariffs at Issue
The ruling did not apply to all tariffs imposed during the second Trump Administration, which is a crucial distinction for affected businesses. The legal challenge centered on two primary groups of tariffs, both of which were based on the legal authority granted by IEEPA.
The first group, referred to as the Trafficking Tariffs, were imposed in February 2025 in response to what the President declared as a national emergency concerning the flow of illicit drugs and criminal gangs at the southern border with Mexico. This emergency was later expanded to include threats originating from Canada and China. The executive orders imposing these duties explicitly faulted Mexico and Canada for failing to sufficiently address the influx of illicit drugs, and China for its role in the synthetic opioid supply chain. The tariffs were set as ad valorem duties: 25% on nearly all articles from Canada and Mexico, and an initial 10% on all articles from China, later increased to 20% by a subsequent Executive Order.
The second group, the Reciprocal Tariffs, were introduced in April 2025 under Executive Order 14257.The legal basis for these tariffs was a declared national emergency related to a lack of reciprocity in U.S. trade relationships, disparate tariff rates, and economic policies of foreign partners that contribute to large and persistent U.S. goods trade deficits. These tariffs imposed a baseline of 10% ad valorem duties on imports from nearly every country with which the U.S. has a significant trade relationship. Subsequent executive orders amended the rates, with additional duties for specific countries and periods of suspension for many.
The legal challenge in this case is a precision strike on the use of IEEPA for these two groups of tariffs. It is critically important to understand that the ruling did not affect other significant tariffs imposed by the administration, most notably those on steel, aluminum, autos, and auto parts. These tariffs were levied under a different legal authority, Section 232 of the Trade Expansion Act, and their legality was not at issue in the V.O.S. Selections or State of Oregon litigation.
The following table provides a clear overview of the key tariff classifications and their current legal status.
The ruling affects specific tariffs and countries, and it is crucial for businesses to understand precisely where their exposure lies. The tariffs under scrutiny are the Reciprocal Tariffs (applicable to nearly all countries with a trade relationship with the U.S.) and the Trafficking Tariffs (specifically on Canada, Mexico, and China). This includes the 25% ad valorem duties on Canadian and Mexican goods and the 10% (later 20%) duties on Chinese goods.
While the reciprocal tariffs were suspended for most countries, they took effect again in August 2025. The ruling is a highly specific legal decision targeting the President's use of a particular statute. It is not a broad ideological strike against all executive tariffs. A key distinction for clients is that other significant tariffs remain completely unaffected. The 25% tariffs on autos, auto parts, steel, and aluminum, which were imposed under Section 232 of the Trade Expansion Act, have a different legal basis and were not part of this litigation. For a company importing steel from China, the legal landscape is fundamentally different from a company importing consumer electronics from China. This is a critical factor in any risk assessment, as it shows that a single administration's trade policy may rely on multiple, distinct legal foundations, each with its own level of judicial vulnerability.
The Paradox of "Illegal" Tariffs That Remain in Place
The most immediate and vexing consequence of the court's ruling is that the tariffs, despite being declared "invalid as contrary to law," are still being levied and collected. This is a direct result of the Federal Circuit's decision to vacate the universal injunction issued by the CIT. The appeals court's reasoning was based on a recent Supreme Court precedent, Trump v. CASA, Inc., which cautioned against the use of "universal injunctions" that extend relief to parties not involved in the lawsuit.
This situation has created a prolonged period of legal uncertainty. Businesses that import goods affected by these tariffs must continue to pay the duties, which have a combined economic impact of trillions of dollars. The tariffs affect supply chain decisions, pricing models, and capital investments. The legal foundation for these costs has been removed, but the financial burden remains. Companies cannot make strategic decisions about their long-term supply chains without a final resolution.
What's Next: The Remand and the Path to the Supreme Court
The case has been remanded to the Court of International Trade with instructions for the lower court to reconsider the propriety and scope of its injunction. This means the CIT will have to decide whether to issue a new, more limited injunction that applies only to the plaintiffs in the case, or whether a refund of duties is a sufficient remedy. The parties will likely be able to raise new arguments in light of the CASA precedent.
The legal journey is far from over. As the court notes in its opinion, the case is of "exceptional importance" and will "almost certainly end up before the US Supreme Court". The conflicting legal philosophies expressed in the majority and dissenting opinions, along with the novel application of the major questions doctrine to a presidential act in foreign affairs, all but guarantee that the high court will weigh in. The Supreme Court could either affirm the Federal Circuit's ruling, setting a clear legal limit on the executive's use of IEEPA, or it could reverse the decision, upholding the tariffs and reaffirming broad presidential discretion in matters of trade.
The ultimate decision will have profound implications for the balance of power and will shape the landscape of U.S. trade policy for years to come, either by forcing future administrations to seek more specific legislative authority or by granting them nearly unlimited power to use trade as an instrument of national policy.
