Tariff Legal Looming: Court Challenges Trump’s Emergency Powers

A recent ruling by a federal appeals court has declared portions of President Donald Trump’s trade policies illegal, potentially triggering refunds of up to $150 billion in tariffs paid by American businesses. The U.S. Court of Appeals for the Federal Circuit ruled that Trump misused the 1977 International Emergency Economic Powers Act (IEEPA) by declaring national emergencies to justify imposing tariffs on goods from nearly every country. The ruling does not invalidate all tariffs but highlights the administration’s legal vulnerability in using emergency powers to bypass Congress for broad trade duties [1].

The decision affects reciprocal tariffs imposed on over 90 countries and additional tariffs targeting imports from Canada, Mexico, and China related to the fentanyl crisis. These levies accounted for the majority of tariff outlays for many importers, according to logistics executives. The ruling also raises questions about the legality of trade deals negotiated by the administration, though these agreements remain in a preliminary stage and not formalized treaties [2].

Treasury Secretary Scott Bessent has expressed confidence that the Supreme Court will uphold Trump’s use of the IEEPA, while the administration has outlined contingency plans should it lose. A stay is currently in effect until October 14, during which the Trump administration is expected to appeal the decision. Meanwhile, businesses remain cautious. Many have already frontloaded imports to avoid tariffs, and logistics professionals are advising companies to continue operating as if the tariffs remain in place.

Should the Supreme Court affirm the lower court ruling, refunds would likely apply to duties paid since April, when the tariffs were imposed. The process for refunds could occur in two ways: either through automated refunds by U.S. Customs or through a manual process requiring brokers to submit claims. The latter scenario could dramatically increase the workload for customs teams, as importers push to recover their payments. For small businesses using third-party brokers, delays could be substantial, as refunds would first go to the intermediary before being passed along to the actual importer [1].

The administration has collected over $142 billion in tariff revenue this fiscal year, with monthly collections exceeding $30 billion. While refunding these sums would not immediately alter the broader economic framework, it could contribute to the federal deficit and strain government operations. The process is also complicated by the sheer scale of the Harmonized Tariff Schedule of the United States (HTSUS), which includes over 11,000 eight-digit product codes, with only 5% exempt from reciprocal tariffs.

Tariff volatility has become a key feature of the current trade environment. Multiple Section 232 investigations—covering sectors such as steel, aluminum, and pharmaceuticals—have already led to new levies, with more investigations ongoing. If the IEEPA tariffs are struck down, the Trump administration is expected to pivot to other legal mechanisms, such as the Trade Act of 1974 or the 1962 Section 232 provisions. These methods, however, are slower and more limited in scope.

The legal battle has also sparked internal debates among legal scholars and industry experts. While some argue that the ruling could embolden foreign governments to resist future U.S. trade demands, others suggest that the administration will likely find alternative ways to enforce its trade agenda. The uncertainty has already led to increased questioning by businesses, though most continue to operate under the assumption that tariffs will remain in place for the foreseeable future [3].

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[1] What Trump court loss means for billions in tariffs paid to government (https://www.cnbc.com/2025/09/02/what-trump-court-loss-means-for-billions-in-tariffs-paid-to-government.html)

[2] As Trump's tariffs struggle in the courts, there's a simple solution (https://www.msnbc.com/rachel-maddow-show/maddowblog/trumps-tariffs-struggle-courts-s-simple-solution-consider-rcna228603)

[3] A federal appeals court ruled against Trump's tariffs. Here's what happens next (https://www.cbsnews.com/news/trump-tariffs-federal-appeals-court-rules-illegal-what-happens-next/)