The legality of President Donald Trump’s "Liberation Day" tariffs faced its first legal challenge in federal court this week, a hearing that could determine the fate of these and potentially other tariffs imposed since Trump’s return to office. The case, V.O.S. Selections v. Trump, is being heard by a three-judge panel on the U.S. Court of International Trade, offering an early glimpse into whether the courts will strike down these trade measures.
While the panel’s decision remains uncertain, initial signs suggest a greater likelihood that the tariffs will be deemed unlawful. All three judges appeared skeptical of the Trump administration’s argument that the judiciary lacks the authority to review the tariffs’ legality. However, Jeffrey Schwab, the lawyer representing the businesses challenging the tariffs, also faced rigorous questioning, indicating the complexity of the legal issues at play.
A central focus of the judges’ inquiries was the 1975 case, United States v. Yoshida International, a federal appeals court decision that upheld a 10 percent tariff imposed by President Richard Nixon on nearly all foreign goods. This precedent holds significant weight as it remains binding on the trade court and must be considered in their decision-making process. However, it’s not binding on the Supreme Court, which could ultimately have the final say on the matter.
The core of the legal dispute revolves around four key words in the International Emergency Economic Powers Act of 1977 (IEEPA), the statute Trump cited as justification for the tariffs. The IEEPA allows the president to "regulate" transactions involving foreign goods to address an "unusual and extraordinary threat with respect to which a national emergency has been declared." While Yoshida interpreted "regulate" broadly enough to encompass tariffs, the meaning of "unusual and extraordinary threat" remains largely undefined by legal precedent.
Trump’s executive order justifying the tariffs cited "large and persistent annual U.S. goods trade deficits" as the rationale, arguing that the United States’ trade imbalance with other nations constitutes a national emergency. However, the long-standing nature of this trade deficit raises questions about whether it qualifies as either "unusual" or "extraordinary."
Schwab struggled to provide a clear and universally applicable rule for determining which "threats" meet the "unusual" or "extraordinary" criteria. When pressed by Judge Gary Katzmann to identify a case supporting the argument that a trade deficit doesn’t meet this threshold, Schwab was unable to provide a specific example.
Conversely, the judges expressed strong disapproval of the Trump administration’s argument that the definition of an "unusual or extraordinary threat" is a "political question" beyond the purview of the courts. Judge Jane Restani countered that accepting this argument would grant the president unlimited power to impose tariffs, even in scenarios like a peanut butter shortage.
Overall, the judges indicated unease with the broad authority claimed by the Trump administration in this case. However, they also acknowledged the lack of clear legal guidance on whether Trump can legally claim the power to issue such sweeping tariffs.
Schwab faced early challenges, particularly regarding the Yoshida decision’s impact on his arguments. Restani emphasized that Yoshida’s interpretation of "regulate" as including the power to impose tariffs presented a significant obstacle.
Despite these challenges, the judges explored ways to distinguish the Nixon tariffs upheld in Yoshida from the Trump tariffs currently under review.
Restani argued that the Nixon tariffs were implemented in a "very different situation" involving a "new" and "extraordinary" circumstance. She explained that Nixon’s tariffs were a temporary measure to protect U.S. goods from fluctuating exchange rates after he ended the convertibility of U.S. dollars into gold.
Restani and Katzmann also highlighted a footnote in Yoshida referencing the Trade Act of 1974, which was enacted after the Nixon shock. This footnote suggests that any future attempt to impose similar tariffs must comply with the newer statute, potentially limiting the power Nixon exercised in 1971.
Reif similarly argued that a separate federal statute addresses trade practices like "dumping," where exporters sell goods below their normal value. He questioned whether the president could bypass the procedures outlined in the anti-dumping statute by simply declaring an emergency and imposing trade barriers under the IEEPA.
However, none of the judges or lawyers could articulate a definitive rule for determining which presidential actions qualify as "unusual" or "extraordinary." Hamilton’s argument that the courts cannot decide this question was met with skepticism, with Katzmann arguing that the IEEPA’s "unusual and extraordinary" provision would be meaningless if courts couldn’t enforce it.
Schwab faced criticism from Restani for arguing that the Trump tariffs are so clearly illegal that a broader legal rule isn’t necessary. Restani dismissed this approach, referencing Justice Potter Stewart’s "I know it when I see it" standard for pornography, which is considered too vague.
The judges expressed serious concerns about the Trump administration’s justification for the tariffs. However, they still need to figure out how to navigate the uncertain legal landscape surrounding this case.
While much of the argument centered on the four key words in the IEEPA, it’s unclear whether a narrow ruling against these tariffs will have a lasting impact. Trump could potentially attempt to reimpose the tariffs under the 1974 Trade Act, which allows the government to "impose duties or other import restrictions" after the U.S. Trade Representative makes specific findings.
Legal doctrines such as "major questions" and "nondelegation" could lead to a more permanent reduction of presidential authority. These doctrines allow courts to strike down executive branch actions, even if they appear to be authorized by statute.
Restani explored the nondelegation theory, which requires Congress to provide an "intelligible principle" to guide the president or federal agencies in exercising delegated authority. While this test is generally deferential to Congress, Restani questioned whether the IEEPA provided sufficient guidance, suggesting that after-the-fact congressional review isn’t a substitute for clear standards.
The major questions doctrine states that Congress must "speak clearly" when granting the executive branch authority over matters of "vast economic and political significance." Given the potential economic impact of Trump’s tariffs, this doctrine suggests that the IEEPA should be interpreted narrowly, not to permit these tariffs.
Hamilton argued that the major questions doctrine applies only to actions by federal agencies subordinate to the president, not to presidential actions themselves. However, the judges appeared unsympathetic to this argument.
The judges seemed interested in exploring the nondelegation and major questions factors, and they repeatedly pushed back against the idea that ruling on the tariffs was beyond their power. That suggests the trade court will likely rule against the tariffs. That outcome is far from certain, however, and the trade court is highly unlikely to have the final word on this question. But the legal case for the tariffs appeared weak before Tuesday’s hearing, and nothing that happened on Tuesday changes that.
