(Not So) Fun Fact: Over the weekend, the leaders of China, India, and Russia met at the Shanghai Cooperation Organization (SCO) 2025 summit and called for the creation of joint bonds, an alternative international payment network, and a new SCO development bank as part of an effort to move away from the U.S.-dominated financial system.

The Court Case Against IEEPA Abuse

What’s Happening: On August 29, the U.S. Court of Appeals for the Federal Circuit ruled against President Trump’s use of the International Emergency Economic Powers Act (IEEPA) to impose tariffs in a 7–4 decision. This case specifically applies to IEEPA tariffs imposed on “Liberation Day” via executive order and the tariffs imposed on Mexico, Canada, and China to address the flow of illicit drugs into the United States. It follows up on a previous ruling by the U.S. Court of International Trade stating that these tariffs exceeded presidential authority. President Trump expressed his dissatisfaction during a Tuesday press conference and told reporters that he would go to the Supreme Court to ask for an expedited ruling. The administration filed a petition on Wednesday, with the Court potentially hearing the case in early November. As of now, current tariff policy will remain in effect until October 14, and it remains unclear whether companies will receive tariff refunds.

Why It Matters: If upheld, this court decision will erase approximately $380 billion in annual tariff costs, according to the Shipment’s calculations, representing nearly 90 percent of all tariffs imposed by the Trump Administration. The administration has collected close to $160 billion in tariff revenue between January and August, the majority of which came from newly introduced IEEPA tariffs, and may be sent back to those who paid. This court ruling marks one of the most consequential decisions for executive authority over trade in the modern era and – as the Shipment noted back in May – will undoubtedly go to the Supreme Court, setting a new precedent for trade law. While the case applies to “Liberation Day” tariffs and fentanyl trafficking tariffs, it may not strike down IEEPA tariffs on India or Brazil, which have been targeted due to Russian oil imports and internal politics, respectively.

The U.S. Court of Appeals ruling relied heavily on the argument that IEEPA does not explicitly use the words tariff, duties, taxes, customs, or any other language that directly grants the executive branch the authority to impose wide-sweeping tariffs. The majority opinion held that if Congress meant to delegate such authority to the president, it would have done so more explicitly in the text, as it has done for other tariff authorities. Notably, the case actually outlines each tariff authority the executive branch has been delegated, such as Sections 201, 232, 301, 122, and 338 (more info of these authorities here). Aside from accepted precedent in the use of these authorities, these sections also have hard, textual limitations in their use, and allow explicitly for the president’s implementation of tariffs. IEEPA does not pass the precedent, limitations, or explicit language test. Additionally, the administration’s continued touting of the revenue raised by tariffs – not a specifically mentioned goal in the legislative text – further bolstered the case against Trump’s use of IEEPA, as the power of the purse resides in Congress alone (see: the U.S. Constitution).

Looking Ahead: It is still too early to tell whether the Supreme Court will uphold President Trump’s IEEPA tariff authority. A majority of its justices are originalists that typically interpret the Constitution within the context of the time it was written rather than apply a more fluid interpretation to fit the modern era. A more originalist perspective would suggest Congress holds the reins on tariff policy, meaning the Court may rule against the Trump Administration’s use of the IEEPA on the grounds that it overstepped the legislative branch’s taxing authority. On the other hand, the Court has in the recent past ruled in favor of affirming the power of the executive branch in other areas and has reaffirmed various executive privileges. It is not completely out of the question that defenses of executive power on the basis of national security, foreign policy, or some combination of these arguments could stretch the interpretation of IEEPA to allow for tariffs in certain circumstances. Just as it was too early for tariff enthusiasts to celebrate “zero” inflation, it is too early to firmly say the Supreme Court will strike down IEEPA tariffs.

Assuming IEEPA tariffs are struck down and this authority can no longer be used to impose tariffs at will, the Trump Administration will still have numerous options. President Trump could urge Congress to take back the reins of trade policy and cement current tariff rates in a legislative package of some kind. This option is unlikely to succeed as there is congressional opposition to tariffs that make it a difficult sell, especially with midterms around the corner. Alternatively, Section 338 of the Tariff Act of 1930 allows the president to impose tariffs of up to 50 percent on any country that discriminates against U.S. goods, although there is no tested implementation process, making it ripe for further legal challenges. Section 122 of the Trade Act of 1974 remains available to impose tariffs of up to 15 percent for 150 days and is specifically designed to address a trade deficit. And perhaps another option is also plausible, one that uses Section 232 national security tariffs. The administration could simply expand the scope of Section 232s through the new “inclusion process” that allows tariffs to hit derivative products, which are products made, at least in part, from the targeted import. This was most recently used in mid-August with the addition of more than 400 steel and aluminum derivatives based on their metal content. In this scenario, a Section 232 could act as an anchor tariff with further offshoots branching off to hit derivative products, impacting hundreds of additional imports with hundreds of billions of dollars in value. This approach, combined with the occasional Section 301 tariff, could easily replace the IEEPA avenue going forward, with the only downside to the administration being a longer wait time.