Trade Court invalidates global reciprocal tariffs and trafficking tariffs, shaping negotiation dynamics

On May 28, a U.S. federal trade court issued a decision with a monumental impact on global economies.

In a landmark decision, the U.S. Court of International Trade (“CIT”) decisively struck down the Worldwide and Retaliatory tariffs (also known as the “Liberation Day tariffs” or “reciprocal tariffs”) and the Trafficking Tariffs against Canada, China, and Mexico (also known as “IEEPA-fentanyl tariffs”) that were imposed by the Trump administration under the International Emergency Economic Powers Act (“IEEPA”). Other tariffs, such as those under Section 232 and Section 301, are unaffected by this ruling.

This unanimous decision by a three-judge panel declared the IEEPA tariffs unlawful, citing overreach in the executive authority sanctioned by Congress. The CIT’s ruling orders a cessation of IEEPA tariff collections by June 7. However, the Trump administration immediately appealed the decision to the U.S. Court of Appeals for the Federal Circuit (“CAFC”) and requested that the court stay (pause) the CIT’s order until a final decision on the appeal is reached. As of 4 pm on May 29, the CAFC granted a stay of the CIT’s order, allowing the Trump administration to continue collecting the IEEPA tariffs until the CAFC further resolves these issues. The CAFC is expected to act quickly on this appeal.

This litigation ushers in a period of adjustment and opportunity.

Background

In early 2025, the Trump administration declared a series of national emergencies related to trade imbalances, illicit drug trafficking, and immigration. The Trump administration then relied on authority from IEEPA to address the emergencies that it declared.

However, the CIT overturned the Worldwide and Retaliatory tariffs, finding that an unlimited delegation of Congress’s tariff authority to the President would be unconstitutional and that Congress’s delegation under IEEPA for the President to “regulate. . . importation” does not authorize the President to impose unlimited tariffs.

The CIT overturned the Trafficking Tariffs against Canada, China, and Mexico on the grounds that these tariffs did not “deal with” their stated objective. In other words, the Trafficking Tariffs did not directly address the trafficking of drugs across U.S. borders.

The CIT’s decision also discussed standing, separations of powers, and the major questions doctrine.

Implications for Importers and Downstream Purchasers

This ruling has significant consequences for importers:

• Policy and Legal Uncertainty: Given the administration’s appeal to CAFC, the fate of the IEEPA tariffs remains unclear. Businesses must remain vigilant, as trade policies will continue to evolve.
  
  Separately on May 29, in a different case before the District Court for the District of Columbia (“DDC”), the DDC ruled that IEEPA categorically does not include the power for the President to impose tariffs. Questions remain as to whether the DDC had the jurisdiction to hear the tariff case and how appeals courts will resolve the split between the CIT’s and the DDC’s interpretation of IEEPA tariff authority.
  
• Tariff Refunds: Companies affected by the IEEPA tariffs should identify transactions subject to the currently invalidated tariffs and assess eligibility for refunds. Monitor for updates from government agencies, such as the Customs and Border Protection, and consult trade counsel for additional information as it becomes available.
• Supply Chain Reassessment: The removal of these tariffs may affect sourcing and pricing strategies. Companies should evaluate their supply chains and in light of the changed tariff landscape.

If you have any questions regarding this alert, please contact Mark Ludwikowski (mludwikowski@clarkhill.com; 202-640-6680), Kevin Williams (kwilliams@clarkhill.com; 312-985-5907), Aristeo Lopez (alopez@clarkhill.com; 202-552-2366), Kelsey Christensen (kchristensen@clarkhill.com; 202-230-9889), Sally Alghazali (salghazali@clarkhill.com; 202-572-8676), or other members of Clark Hill’s international trade business unit.

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