More Tariffs May Follow If CIT IEEPA Ruling Is Upheld on Appeal

For now, nothing changes on the ground for importers. They don't have to do anything to preserve rights to refunds if the Court of International Trade ruling is upheld. If the legal process goes beyond liquidation, 314 days after entry, then importers would have to file protests for refunds.

Victor Schwartz, owner of wine business V.O.S. Selections and the lead plaintiff in the CIT case, said on a call with reporters that the promise of refunds with interest isn't helpful to small importers like himself. "When I've got to come up with an extra ten [thousand], $15,000 on a container each time, where's that money coming from? I'm going to borrow it? Where exactly?"

Peter Navarro, the most protectionist among the president's trade advisers, said on Bloomberg TV that the administration is confident a higher court will overturn the CIT ruling (see 2505280067).

But even if the administration is told IEEPA was not the right law to impose global tariffs, Navarro said they can turn to Section 122, Section 338, Section 301 or Section 232 to hike tariffs.

"The court basically said we were right, just use different rules and laws," he said. "Nothing has really changed here, in that sense."

When asked why the administration didn't use Section 122, which allows for 15% tariffs to address global trade imbalances, Navarro said it's because those tariffs only last 150 days.

The tariffs could last longer if Congress approves them.

Nicole Bivens Collinson, who heads Sandler Travis' international trade and government relations practice, said in a telephone interview, "Congress would probably bless it, given the majority. Even if Congress were not to extend it, this administration would not be dissuaded from continuing them."

She suggested the tariffs could sunset for a day, and then the administration could invoke 122 again.

Alan Wolff, a senior fellow at the Peterson Institute for International Economics, said in a telephone interview: "I don’t think any federal court would be deeply amused by that sort of antic."

Section 338 allows the administration to impose up to a 50% tariff on imports from a country if it offers proof that the country is discriminating against U.S. commerce in a way that it doesn't against other countries' products or services. If the 50% tariff doesn't work, the president can ban imports outright -- and if another country benefits from the trade war, it can tariff that country, too.

Thompson Hine lawyer Dan Ujczo said in a telephone interview that he was a little surprised the administration didn't roll out an executive order with a 15% tariff based on Section 122 today, though he recognizes that the stay gives them breathing room to keep negotiating with foreign countries.

"I think we certainly think we need to prepare people for 15%" tariffs, he said. If that happens, he said, lobbying Congress will be very important.

He thinks it's quite likely that various rates -- not all at 50% -- will be threatened by the president, using Section 338, but they won't go into effect immediately, to spur negotiations. So, if the 15% tariff is to end in 150 days, maybe the higher tariffs are scheduled for 100 days out.

Peter Harrell, a former sanctions, investment restrictions and export controls adviser for the Biden administration, wrote on LinkedIn that he expects the appeal to take weeks, not months. "If the decision is upheld, importers should eventually be able to get a refund of tariffs paid to date," he wrote.

But, if the administration loses at the appellate circuit, and is still waiting for the Supreme Court, it might "dust off Section 338, a 1930-era provision that is sort of like 301, but which has fewer procedural requirements, and hasn't been used since the 1940s," Harrell wrote. "If I were a government lawyer, I'd be worried about using 338 broadly, given I just lost an IEEPA tariff case. But the Trump Administration has a higher litigation risk tolerance than I do."

National Economic Council Director Kevin Hassett said on Fox Business that there are three or four other ways to hike tariffs to compel other countries to change their abuses of the U.S.

"There are different approaches that would take a couple of months to put these in place and using procedures that have been approved in the past or approved in the last administration, but we’re not planning to pursue those right now, because we're very, very confident this ruling is incorrect," he said.

He also insisted that the loss at CIT wouldn't prevent trade deals from being reached. He said at the end of last week, he saw three deals that were "basically ready," but that the president always tries to get a little more before closing the deal -- and he always wins.

Hassett said of the countries under the tariff gun, "they're coming in with massive concessions, opening up their markets to our products and lowering their tariffs."

He said those that do that will be treated very respectfully by the U.S., and others "are going to see some form of reciprocal tariff" that's higher than those for the countries that make good offers.

"In the end, people know President Trump is 100% serious," Hassett said.

Ujczo, too, said he is telling foreign governments not to think that because Trump lost this case, they no longer need to make concessions. "I’m still telling them to make a deal," he said.

"Treat it like a business deal, do it quick and do it fast," he added. "You don’t have to give a ton."

But, he acknowledged, it's difficult to find a landing zone among major players like Japan, Korea, Mexico and Canada if the U.S. is not willing to soften its 25% tariffs on imported vehicles. Those apply to cars even if they used to enter duty-free under USMCA.

"The problem is, like autos is his thing," said Ujczo, who counts major automotive companies among his clients.

Because of that, he thinks countries like Vietnam, Malaysia or Indonesia might be more likely to be the next deals announced, since they don't export cars to the U.S.

Lawyers disagreed on how likely the ruling is to be upheld.

Barnes Richardson partner Larry Friedman said the Supreme Court seems to be "somewhat opposed to broad delegations and authority," which would lean toward a rejection of these tariffs through IEEPA.

Ujczo said there could be a split decision on appeal. "I think the trade deficit question is the strongest question for the plaintiffs, in my opinion," and that appellate courts may agree with the CIT that the president should have used Section 122 for the reciprocal tariffs.

But, with regard to the border emergencies, he said, "I don’t like the CIT’s argument on fentanyl at all," and he thinks that part of the ruling could be overturned.

He said the Supreme Court may say that since Congress can rescind the underlying emergency, it's not an overbroad delegation, but if they do say that tariffs were not fit for purpose to address the drug smuggling emergency, the remedy could be that the administration instructs CBP to inspect every package from China.

If other courts also vacate the executive orders, Ujczo expects the administration to act again to remove de minimis eligibility for Chinese goods, maybe even using IEEPA again.

In a video posted online, Coalition for a Prosperous America trade counsel Charles Benoit said protectionists like himself were wary of reciprocal tariffs, what he called "tariffs for negotiation." The protection tariffs, under Section 232, are safe, he said, even after this court case, and "that's great." He said half the tariff code would be covered once all Section 232 tariffs are in place.

Bivens Collinson said she expects the administration will launch 232s "on every industry they could possibly cover."

Ujczo doesn't expect more sectors to be announced for Section 232 investigations soon, but said if the reciprocal tariffs end, Trump will insist on the broadest application of the investigations underway -- for instance, having lumber cover cabinets and furniture, and having semiconductors cover appliances and consumer electronics, not just the chips themselves.

"You’ll see a much more aggressive 232 path," he said, "which then, in turn, potentially threatens the legal foundations for the 232s."

Benoit said what should happen now is that Congress should end most favored nation status for China, as many there have said should happen, and they should add a universal 10% tariff to the tax and spending bill that recently passed the House but has not been acted on in the Senate yet. "I've been appalled that we've got this big beautiful bill, supposedly, and it doesn't use tariffs for revenue," he said. "That's insane, I've been disgusted by that."

Ujczo said Congress legislating a global 10% tariff is unlikely, because it's too easy for opponents to call it a tax. He said it's possible that if the president loses at every level, that could give pro-trade members of Congress courage to push back on auto tariffs, or the aluminum and steel derivatives expansions.