Trump’s liberation day tariffs lose their freedom as they are deemed illegal by the US Court of Appeals
In the case of V.O.S. Selections, Inc. v. Trump, the United States Court of Appeals for the Federal Circuit confirmed the decision by the Court of International Trade (CIT) regarding the legality of the “Reciprocal Tariffs” and the “Trafficking Tariffs”, which were imposed on the rest of the world by a series of Executive Orders of President Donald Trump.
According to this court, the US Constitution grants Congress the power to “lay and collect Taxes, Duties, Imposts and Excises” and to “regulate Commerce with foreign Nations.” Tariffs are a tax, and the Framers of the Constitution expressly contemplated the exclusive grant of taxing power to the legislative branch. In pursuance of this power, for many years, Congress has carefully constructed tariff schedules that provide for, in great detail, the tariffs to be imposed on particular goods.
Since taking office, President Trump has declared several national emergencies. In response to these declared emergencies, the President has departed from the established tariff schedules and imposed varying tariffs of unlimited duration on imports of nearly all goods from nearly every country with which the United States conducts trade. The core issue before the court was whether the International Emergency Economic Powers Act (IEEPA) authorised the President to impose these tariffs. As one of the recipients of these damaging tariffs, we are interested in what this court found.
Key Arguments and Findings of the Court
The court endorsed the CIT’s finding that the tariffs exceeded the President’s authority under IEEPA for the following reasons:
Statutory Interpretation: The court found that the text of IEEPA does not explicitly grant the President the power to impose tariffs or duties. While the law authorises the President to “regulate… importation” in a declared national emergency, the court noted that Congress has historically used specific terms like “tariffs” or “duties” in other statutes when delegating such power.
Major Questions Doctrine: The court held that the major questions doctrine applies to this case, requiring “clear congressional authorisation” for the President’s actions. The invocation of IEEPA to impose tariffs on nearly every country in the world was found to be “undoubtedly a significant departure from these previous invocations”. This ‘lack of historical precedent,’ coupled with the breadth of authority that the Government claimed was seen as a “telling indication” that the Government’s reading of this statute is incorrect.
Rejection of Government’s “Ratification” Argument: The government argued that when Congress enacted IEEPA, it was aware that a prior court allowed a limited, temporary tariff under IEEPA’s predecessor statute. Therefore, the government had argued that in this way, Congress had implicitly ratified the interpretation that “regulate… importation” includes tariff power. The court rejected this argument, stating that the decision in question expressly contrasted the limited, temporary nature of the tariffs it upheld with the “unlimited” and “unbounded” authority the President was asserting in this case. The court explained that the present tariffs, which are not limited in scope, amount, or duration, go beyond what even that case would allow.
The court removed the CIT’s permanent, universal injunction (interdict) against the tariffs. It remanded the case back to the CIT, instructing it to reconsider the injunction’s scope and propriety in light of the factors for granting a permanent injunction and the Supreme Court’s guidance on universal injunctions.
But this decision was not unanimous, as it was opposed by 4 of the 11 judges in the matter. While the dissenting judgment is not binding, it nevertheless has value. This judgment is not insignificant as it will most likely be used by President Trump’s certain appeal to the US Supreme Court. So, what did these judges say in dissent?
In their dissent, these judges disagreed with the majority’s conclusion that the tariffs were unlawful. The dissent’s arguments centred on a broader interpretation of IEEPA, the inapplicability of the Major Questions Doctrine, and the President’s historical authority in foreign affairs.
Broad Statutory Authority: The dissent argued that the plain meaning of “regulate… importation” in IEEPA includes the authority to impose tariffs as a means of control. It noted that tariffs are a common tool for regulating imports and are a less extreme measure than the outright prohibition of imports that IEEPA explicitly authorises. The dissent argued that there is no textual basis in IEEPA for the limits on duration, amount, or scope that the majority imposed.
Major Questions Doctrine: The dissent argued that the Major Questions Doctrine does not apply because the power to impose tariffs is not a “transformative” or “unheralded” use of presidential power in the context of foreign affairs and national security. It pointed out that the President has historically been given broad authority in this realm. It also argued that Congress made an “eyes-open” choice to grant broad powers.
The Trafficking Tariffs: The dissent disagreed with the CIT’s conclusion that the trafficking tariffs were unlawful because they did not have a “direct link” to the problem of illicit drugs. It upheld the use of assets as a “bargaining chip” to deal with a foreign-policy threat. The dissent argued that the tariffs were a valid use of leverage to compel foreign governments to address the drug-trafficking crisis.
Displacement and Nondelegation: The dissent rejected the CIT’s finding that IEEPA was displaced by the Trade Act of 1974 for the reciprocal tariffs, arguing that the statutes were not contradictory. It also affirmed that IEEPA is not an unconstitutional delegation of legislative authority.
So, what are the takeaways for South Africa?
To be clear, the tariffs have been declared illegal as they exceed the authority delegated to the President by IEEPA’s text. However, the court requires a suitable order, as the order to permanently interdict them was deemed inappropriate because it was granted without a proper inquiry. Therefore, for now, the tariffs will continue to be imposed until an appropriate remedy is found by the CIT.
But the legal battle over the validity of a president’s emergency powers to impose tariffs is far from over. Trump, as he is wont to do, will appeal to the US Supreme Court, in which he has a conservative majority that has mostly granted his wishes.
Yet it may mean that countries such as South Africa, currently negotiating with the United States on the tariffs, may have some leverage. It certainly would embolden a WTO challenge in cases such as Brazil’s case against these tariffs. But Trump does not care about that and will likely be unmoved.