by: Ian Sheldon, Professor and Andersons Chair of Agricultural Marketing, Trade, and Policy, Agricultural, Environmental, and Development Economics, Ohio State University
Current Legal Status
The United States Court of Appeals for the Federal Circuit recently began deliberations over a ruling by the U.S. Court of International Trade (CIT) against President Trump’s so-called “Liberation Day” tariffs (V.O.S. Selections, Inc. v. United States, CIT, May 29, 2025). The case, brought by a group of private firms, and 12 U.S. states, challenged whether the President could impose across-the-board tariffs by invoking the International Emergency Economic Powers Act (IEEPA) of 1977, CIT holding that, “…the court does not read IEEPA to confer such unbounded authority, and sets aside the challenged tariffs imposed thereunder…” (V.O.S. Selections, Inc. v. United States, p.4)
The administration is invoking IEEPA on the grounds that it authorizes the president to regulate trade via embargoes and sanctions if a national emergency is declared in response to a significant threat to the United States. In order to understand CIT’s ruling that the U.S trade deficit does not constitute a national emergency, it is necessary to lay out why it ruled that IEEPA does not provided unlimited authority to the executive branch with respect to setting tariffs.
Legislative Background to IEEPA
The legislative history surrounding IEEPA is rooted in the U.S. balance-of-payments crisis of the late-1960s, which culminated in the collapse of the Bretton-Woods fixed exchange rate system. On August 15, 1971, President Nixon cancelled convertibility of the U.S. dollar to gold, as well as declaring a national emergency. Invoking the Trading with the Enemy Act (TWEA) of 1917, the president also introduced a 10 percent tariff on all U.S. imports. The United States Customs Court (CT), the predecessor to CIT, held that TWEA precluded the president from applying the supplemental duties (Yoshida Int’l, Inc. v. United States, CT, July 8,1974). This ruling was subsequently overturned by the United States Court of Customs and Patent Appeals (CCPA), the court holding that the president’s application of the duties were “…within the power constitutionally delegated to him…” (United States v. Yoshida Int’l, Inc., CCPA, November 6, 1975).
Shortly after this ruling, Congress reformed the president’s emergency powers in two ways: first, the powers conferred on the president under TWEA were confined to wartime only; and second, IEPPA was enacted to limit the scope of presidential power when regulating trade at a time of national emergency, as well as imposing procedural limitations including application of the National Emergencies Act of 1976.
Trade Law Prior to IEEPA
Prior to IEEPA coming into being, Congress passed the 1974 Trade Act, containing Section 122 dealing with remedies for balance-of-payments deficits. Section 122 limits the president’s authority to respond to balance-of-payments problems, and that large balance-of-payments deficits do not necessitate the use of emergency powers. Specifically, Section 122 sets a 15 percent cap on tariffs with a maximum duration of 150 days. Therefore, in ruling against across-the-board tariffs, CIT argued that their imposition “responds to an imbalance in trade – a type of balance-of-payments deficit – and thus falls under the narrower, non-emergency authorities in Section 122” (V.O.S. Selections, Inc. v. United States, p.34). The Court concluded that “…The President’s assertion of tariff-making authority in the instant case, unbounded as it is by any limitation in duration and scope, exceeds any tariff authority delegated to the president under IEEPA. The Worldwide and Retaliatory tariffs are thus ultra vires and contrary to law…” (V.O.S., Selections, Inc. v. United States, p.36).
Interestingly, Section 122 has never previously been used, and as a consequence, the courts have not had reason to interpret its language. Some commentators have suggested that it might legitimately be used to target trade deficits, but others conclude that the term balance-of-payments does not refer to trade deficits, Section 122 (a) referring to the balance-of-payments, and Section 122 (c) which refers the balance of trade, i.e., there is a presumption that Congress intended to make the distinction.
It is also important to recognize that tariffs have never been imposed under IEEPA, although President Trump did threaten to do so in 2019 as a means of pushing Mexico into stopping illegal immigrants entering the United States. Outside of the CIT ruling, other commentators note that IEEPA is actually silent on including any tariff authority to regulate international transactions, and as a consequence, “…Congress did not hand over tariff authority, one of its explicit constitutionally defined powers (over “duties” and “imposts”), to the president in the IEEPA…” (Campbell, 2023, p.606). It might even be argued that if IEEPA actually gives the executive authority to raise tariffs, why would the president ever actually follow the required steps of statutes contained in U.S. trade law such as Sections 232 and 301?
Currently, the CIT ruling is pending appeal, but whatever the final ruling is, in all probability the question of whether or not IEEPA allows the president to apply across-the-board tariffs will eventually end up at the United States Supreme Court for adjudication.