A legal setback for the United States government’s tariff strategy fulfills predictions from insiders versed in that country’s constitutional and law-making intricacies. Industry lobbyists speaking last month during a webinar sponsored by the U.S. Air-conditioning, Heating and Refrigeration Institute (AHRI) advised that the International Emergency Economic Powers Act (IEEPA) was likely a risky instrument to advance the White House agenda.
“I think the tariff area is an area where the Trump administration is getting ahead of itself,” James Lucier, principal and founding partner of Capital Alpha Partners, a strategic policy research firm based in Washington, D.C., told webinar listeners. “Instead of using tested authorities, which hold up in the courts and would be very, very reliable for establishing future tariff policies, they went to IEEPA, which has never been used to implement tariffs before.”
The U.S. Court of International Trade has now reinforced his misgivings — ruling that the president does not have authority to impose tariffs (which rests with Congress) and that they are not a proper response to the triggering emergencies identified in his executive orders. However, there’s no cost relief on imported products yet. The decision, issued May 28, is now under appeal, and IEEPA is not the sole mechanism propping up the administration’s slate of tariffs.
Notably, tariffs on steel and aluminum are authorized under the U.S. Trade Expansion Act and would not be removed even if the appeal court validates the ruling on the misuse of the IEEPA. In contrast, general 25 per cent tariffs on Canadian and Mexican imports, which are currently on hold for commodities and goods compliant with the Canada, U.S., Mexico Agreement (CUSMA) on Trade, were established through an executive order that cites IEEPA and an alleged crisis related to fentanyl infiltrating international borders. As well, IEEPA and an executive order were employed to impose reciprocal tariffs, currently set at a baseline 10 per cent, on most of the world’s trading nations except Canada and Mexico.
Lucier and his co-presenter, Scott Segal, a partner and specialist in energy, environment and natural resources law with Bracewell LLP, based in Washington D.C., speculated that other proven, but more time-consuming approaches for imposing tariffs will come into play. With legislated requirements for consultation and Congressional support, it typically takes about 270 days to implement a tariff through section 232 of the U.S. Trade Expansion Act or up to a year via section 301 of the U.S. Trade Act.
“They probably will be relying more on those tariffs that take longer to administer,” Lucier said. “Had they waited (initially) the extra months or the year it might have taken to do 301 and 232 tariffs, they’d have a rock solid tariff regime.”
“The use of IEEPA basically allows the White House, in their view, to declare a national emergency and say that a tariff is necessary to address that emergency. But IEEPA does not say that you can impose a tariff based on the emergency; it says: you may impose such economic policy as may prove necessary. It’s much more generic,” Segal explained. “We often say: Don’t ask a court a question you don’t already know the answer to because it might just end up limiting the statute you wanted to proceed under. The president may find that will occur with tariffs.”
Lucier contrasted the “pandemonium” and “improvisation” unfolding around tariffs with the administration’s more tactical approach to deregulation, while Segal likened the Department of Government Efficiency (DOGE) to an invading army that quickly undermines supports that could allow an occupied population to resist and recover. He theorized that rapid workforce and budgetary cuts have left various targeted federal agencies without the resources or stamina to persist until the courts might reverse the administration’s shutdown orders.
“Even if it later turns out to not be legal, so much change has occurred that you can’t put Humpty Dumpty back together again,” Segal mused. “I think, when we look back at DOGE, that’s going to be the story in a number of cases. There are very few agencies that would be able to hang on against an onslaught of presidential revision so some of the changes that are made have a whiff of permanence even if the president loses.”
“In a way, it’s great to have this tariff commotion as a distraction because it’s really directing attention away from a lot of the things that Trump is doing that could be meeting lots of litigation, but, so far, are not — deregulatory movements at the EPA (Environmental Protection Agency) in particular,” Lucier added. “I also think that the deregulatory movements will be durable. They (White House) are working according to a plan and they’ve got a long-term vision that anticipates they’ll be losing certain things in the courts. So they’ll just move on to other topics.”
Deregulation is one of the carrots in the White House recipe for economic growth. It’s meant to simmer in with a stick of tariffs to stew more onshore production in the United States, but there are some suggestions that the latter ingredient could be too bitter for investors to digest.
“If Trump had simply refrained from the tariffs, you’d be seeing a lot of new investment in the country now,” Lucier asserted. “On the one hand, it does encourage people to build America, to buy American, to try to produce here, but it also makes it much more expensive to produce anything in the U.S..”
