Trump's Tariffs Face Legal Challenge from 13 States

On Wednesday, US President Donald Trump suggested that families scale back on gifts this year due to his tariff program. He remarked that children might have fewer dolls, and those dolls might cost more. However, toy stores and other small businesses affected by these tariffs have a different perspective. Mischief Toy Store in St. Paul, Minnesota, joined a growing number of American small businesses suing the president over his emergency tariff plan. Throughout April, a groundswell of lawsuits led by 13 states further challenged Trump’s ambitious tariff program. The success or failure of these lawsuits rests on hundreds of years of judicial policy and American constitutional law.

The legal basis for Trump's tariffs is not rooted in the president's constitutional Article II power but is a delegation of authority by Congress. Article I of the US Constitution creates Congress, and Section 8 delegates the authority to “lay and collect taxes, duties, imposts and excises.” Historically, Congress used this authority through various tariff programs. However, the Smoot-Hawley Tariff of 1930 was widely perceived as contributing to the Great Depression, leading to a shift in how tariffs were implemented. In the early 1930s, President Franklin Delano Roosevelt pushed for legislation to grant his office the authority to negotiate tariffs, resulting in the Reciprocal Trade Agreement Act of 1934 (RTAA). This act allowed the president to set tariff rates as part of a reciprocal agreement with a counterpart, promoting a period of liberalized trade. However, Trump's tariffs are unilateral, not reciprocal, and rely on a different set of laws.

After the RTAA, Congress continued to delegate authority to the president through various acts, including the Trade Expansion Act of 1962, the Trade Act of 1974, and the International Emergency Economic Powers Act of 1977 (IEEPA). The IEEPA grants the president the power to respond to declared emergencies by “investigat[ing], regulat[ing], or prohibit[ing] any transactions in foreign exchange.” Trump has used this statute to declare arbitrary tariffs on virtually all of America’s trading partners, citing a “national emergency posed by the large and persistent trade deficit.” This novel application of the law has been criticized by legal scholars who believe it is illegal.

Almost immediately after Trump’s tariffs were announced, lawsuits began to trickle in. California became the first state to sue on April 16, followed a week later by a dozen other states. The legal arguments against Trump’s tariffs are twofold: (1) the IEEPA doesn’t authorize the president to implement his tariff program, and (2) it is unconstitutional for the IEEPA to delegate such broad authority to the president. The states argue that the president’s actions are ultra vires and violate separation of powers. They also point out that any action under the IEEPA must be tailored to “deal with an unusual and extraordinary threat,” and the nearly worldwide 10 percent tariff level is not connected to the stated basis of the emergency declaration. Additionally, there is a constitutional limit on Congress’s authority to delegate Article I powers to the president, known as the “nondelegation doctrine.”

Despite the constitutional uncertainty, the net of the arguments is broadly perceived as strong. This is why one prominent conservative lawyer told ABC News that plaintiffs may win in a fight against Trump. However, the administration may be able to hear these claims in the US Court of International Trade (CIT), which has exclusive jurisdiction over most tariff disputes. Appeals from this court are heard in the Federal Circuit, which is generally seen as favorable for Trump. The 12-state complaint was actually filed in this court from the outset, but California filed its complaint in the Northern District of California, which sits in the less deferential Ninth Circuit. If Trump succeeds in removing that action to cit, it will be an early victory for the administration. More importantly, the administration is attempting to invoke the “political question doctrine,” which has been used by courts to avoid difficult questions, most notably in cases involving impeachment, foreign policy, and partisan gerrymandering. The Trump administration argued exactly this in its April 29 motion for preliminary injunction and summary judgment in the states’ ag case, stating that “courts have consistently held that the President’s emergency declarations under NEA, and the adequacy of his policy choices addressing those emergencies under IEEPA, are unreviewable” and that “[t]herefore, any challenge to the fact of the emergency itself — particularly the claim that the emergency is not ‘unusual’ or ‘extraordinary’ enough, in plaintiffs’ view — is a nonjusticiable political question that this Court lacks jurisdiction to consider.”

To date, no rulings hint at which side the courts are likely to prefer. The president’s track record in court has historically been poor, with a win rate of 35% in the Supreme Court during his first term, compared to an average presidential win rate of 65.2%. As the tariff fight has matured, the outlook for crypto is uncertain. It is a peculiarity of tariffs that they apply only to goods and not services or digital products. This has left cryptocurrency assets — intangible, borderless and often routed through offshore entities — outside the reach of traditional trade barriers. As markets have shuddered at Trump’s policies, Bitcoin (BTC) finished April up 14% on the month. If Trump is allowed to pursue arbitrary trade policy and abide by Peter Navarro’s wish to turn the United States into a new hermit nation, it may prove the final validation to force cryptocurrency as the medium of international trade.