Understanding and Navigating the Changing Terrain of Tariffs and Court Decisions

Navigating the status of the U.S. Administration (“Administration”) tariffs remains a difficult task. 

Regardless of the differing explanations, China is expected to loosen restrictions on exports of certain magnets and critical minerals, which are essential components of everything from cars to computers and defense equipment. Yet, granting new licenses might only be in effect for the next six months, and tied to future tariff discussions.

The United States in turn is expected to relax new limits that it placed on its own exports of technology and products to China, including on aircraft engines, while retreating from threats to cancel visas for Chinese students in the United States. Whether this loosening of export controls will extend to more sensitive semiconductor and AI technology remains to be seen.

This leaves the level and extent of respective tariffs between the two countries—with the U.S. tariffs on China once at 145% to now 30% (10% baseline duty plus 20% tax tied to fentanyl trafficking) remaining in place, as Chinese exports to the U.S. are slumping.

The legal backdrop remains murky. On 28 May 2025, the U.S. Court of Appeals for the Federal Circuit issued an administrative stay of a decision from the U.S. Court of International Trade (Slip Opinion 25-66, 28 May 2025). The International Trade Court held that the International Emergency Economic Powers Act of 1977 (the “IEEPA”) did not delegate to the President powers “to impose unlimited tariffs on goods on nearly every country in the world.” The Court ruled that many of the Administration’s tariffs were invalid, and that the President may only use his emergency powers “to deal with an unusual and extraordinary threat with respect to which a national emergency has been declared.”

Yet, an “administrative stay” is not on the merits. The Federal Circuit Court of Appeals ordered expedited briefing for the parties to file responsive and consolidated replies on 5 June and 9 June, respectively. Meanwhile, the Administration announced on 30 May that it was doubling its tariffs on steel and aluminum from 25% to 50%, effective 4 June 2025.

On 10 June, the Federal Circuit issued an unusual en banc per curiam order (unanimous by the full Court) granting the Administration’s motion for a stay of the International Trade Court’s decision pending appeal. The stay keeps the IEEPA tariffs in place until a decision on the merits of the appeal. The Court also concluded that “these cases present issues of exceptional importance warranting expedited en banc consideration of the merits in the first instance.” The Federal Circuit ordered an expedited briefing schedule by 12 June to allow the Court to hold oral argument on 31 July. Given the ordered review by the full Court in the first instance and expedited schedule, the Federal Circuit's decision could come as early as late August or early September 2025.

Of course, the losing side will likely appeal to the U.S. Supreme Court, in an ultimate challenge of the Separation of Powers doctrine as between the U.S. Executive Branch and Legislative Branch over the authority to impose tariffs. The impact on those caught in the crossfire, and whether duties paid by importers in the interim will be refunded if the International Trade Court’s decision is upheld, remain unclear.

Separately, a second federal court ruled against the Administration’s emergency tariffs, saying the IEEPA does not authorize tariffs set forth in four Executive Orders earlier this year. D.C. District Court Judge Rudolph Contreras stated that the IEEPA did not enable the President to “unilaterally impose, revoke, pause, reinstate, and adjust tariffs to reorder the global economy.”  In so finding, the D.C. District Court granted a request for a preliminary injunction on the collection of the tariffs, calling them “unlawful,” but stayed his order for 14 days “so the parties may seek review” in the DC Circuit Court of Appeals. On 2 June 2025, the Administration filed an appeal of this lower court ruling, saying the Court lacked jurisdiction and that only the International Trade Court had jurisdiction in the matter. On 5 June, the Plaintiffs requested an expedited briefing schedule, but on 9 June instead requested the DC Circuit Court of Appeals align merits briefing with the briefing schedule to be issued in the Federal Circuit case. Challenges to the IEEPA tariffs have also been filed in other federal district courts in California, Florida, and Montana.

Whether and to what extent the Courts of Appeal will reverse these lower court decisions enjoining enforcement of the Administration’s tariffs remains highly uncertain. The differing rulings for now create uncertainty around collection of the 30% tariff on China, a 25% tariff on certain goods from Mexico and Canada, and 10% universal tariffs on most of the rest of the world, outside the UK.

Meanwhile, the Administration is actively pursuing alternative justifications and administrative and legislative avenues for continuing its use of tariffs.

One strategy is to use Section 122 of the Trade Act of 1974, which could permit the Administration to upwardly adjust the 10% universal tariffs to 15% for 150 days to address trade imbalances with other countries; the Administration would need to seek Congressional approval to extend such tariffs thereafter. This strategy would avoid the need to conduct a formal investigation.

The second strategy that can be used in combination with Section 122 is to use that Act’s Section 301, which represents the more traditional route of imposing tariffs, fees, or duties. There, the U.S. Trade Representative (“USTR”) can launch investigations for unfair trade practices without limit as to amount or duration, but it ordinarily requires notice-and-comment procedures with findings and formal action, which takes more time. The first Trump Administration had used Section 301 to impose tariffs of up to 25% on many Chinese imports in 2018-19.

Finally, the Administration is likely to rely on national security grounds under Section 232 of the Trade Expansion Act of 1962 to hike tariffs on steel, aluminum, and certain other products, which can total over $12.0 billion. Legal efforts to overturn these tariffs have been unsuccessful to date, and the present judicial decisions do not involve steel and aluminum tariffs.

Yet, these tariffs can have a disproportionate impact on some industries, as the U.S. imports almost half its aluminum from abroad. Despite rising use of composites, for example, aluminum makes up around 80% of an air frames’ weight. Steel is used for making pipes and tubes that can withstand high pressure and temperature, affecting both civil and military aircraft and engines. Doubling tariffs for large exporters like Canada, with countervailing measures planned in the EU and elsewhere, could vastly affect pricing to customers and consumers.

Against this backdrop, ongoing trade negotiations with the U.S., racing toward a 9 July 2025 deadline, are being heavily affected with uncertainty over authority, leverage, amounts, and priorities.

To the extent possible, some parties in the most affected industries might be well-advised to accelerate contracts and deliveries. Resolving or putting in provisions to deal with this changing landscape could be important, particularly if appeals from the unanimous decision of the U.S. Court of International Trade are unsuccessful. The Administration will then be forced to suspend many tariffs while devising—perhaps with Congress—alternative justifications and procedures for implementing new tariffs. The Administration is rapidly planning fallback authority for new tariffs. Recent comments by the U.S. Commerce Secretary are foreboding: “Tariffs are not going away.”

Contractual and other disputes are certain to arise regarding manufacturer and supplier attempts to both identify tariff impacts and attempt to pass them along, citing a variety of different contractual provisions. Clyde & Co is supporting clients across our global practice in understanding and navigating these complex issues, with our ears to the ground, to help clients identify risks and opportunities in this fast-moving environment.

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