A federal appeals court in Washington, DC has ruled that US President Donald Trump has overstepped presidential powers with many of his tariff policies. Here’s what businesses need to know about the legal curveball.
Key takeaways
- US appeals court rules IEEPA doesn’t grant tariff power to the president.
- Court voided Trump's “reciprocal” and trafficking tariffs as unconstitutional, but duties remain in place for now.
- US Supreme Court review expected before 14 October 2025.
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Trump’s tariff policy has encountered a major roadblock. On 29 August 2025, the US Court of Appeals for the Federal Circuit ruled that the “reciprocal” tariffs and the tariffs related to fentanyl trafficking are illegal, a decision that guts the legal foundation of the president’s trade policy.
In the 7-4 ruling, the court rejected Trump’s argument that he can issue tariffs under the International Emergency Economic Powers Act 1977 (IEEPA). According to the Federal Circuit, the IEEPA “bestows significant authority on the president to undertake a number of actions in response to a declared national emergency, but none of these actions explicitly include the power to impose tariffs, duties, or the like, or the power to tax.”
In other words, the president does not have the authority to impose tariffs under the IEEPA.
For now, the tariffs stay in place, however. The court delayed enforcement of its decision until 14 October 2025 to give the Trump administration time to seek US Supreme Court review. That means that importers are still paying, and corporate legal compliance teams are still scrambling.
Which tariffs are on the chopping block?
Two major sets of tariffs are now in legal jeopardy. Trump’s reciprocal tariffs, imposed on most countries around the world, as well as other tariffs slapped on China, Mexico and Canada.
Tariffs typically need to be approved by Congress, but Trump claimed he had the right to impose tariffs under IEEPA. The legislation grants the president authority to regulate or prohibit international transactions during a national emergency.
The court ruled that “[i]t seems unlikely that Congress intended, in enacting IEEPA, to depart from its past practice and grant the President unlimited authority to impose tariffs.”
What did the ruling say?
The 127-page ruling zeroed in on the text of the IEEPA, which authorises the president to “regulate” imports during a national emergency, but it never mentions tariffs. Congress, the court noted, has historically delegated tariff powers explicitly.
According to the Federal Circuit decision, Trump’s tariffs are “unbounded in scope, amount and duration.” The judges stressed that Article I of the US Constitution gives Congress – not the president – the power to “lay and collect Taxes, Duties, Imposts and Excises,” and requires that “Bills for raising Revenue shall originate in the House of Representatives.”
The decision upheld a May decision by the US Court of International Trade, which concluded that the tariffs “exceed any authority granted to the president.” It also vacated the universal injunction that the lower court granted and remanded for further proceedings on whether injunctive relief is appropriate.
The appeals court heard oral arguments about the case on 31 July 2025, during which judges expressed scepticism about the administration’s arguments. The IEEPA “doesn’t even say ‘tariffs,’” one of the judges noted. “Doesn’t even mention them.”
What happens now?
The Trump administration is likely to seek US Supreme Court review. The justices could take up the case at their 29 September 2025 conference.
Of the current Supreme Court justices, six are Republican appointees, including three selected by Trump himself.
In his response on social media, Trump reminded his 10.6 million followers that “ALL TARIFFS ARE STILL IN EFFECT,” warning that striking them down “would be a total disaster for the Country.” The White House appears confident that the decision would be overturned by the Supreme Court.
The US Supreme Court has not ruled on presidential tariff powers under the IEEPA, but the 1975 Yoshida International v US case offers relevant precedent. It involved US President Richard Nixon’s 10% temporary tariff on imports to address a trade deficit, challenged under the Trading with the Enemy Act 1917.
Initially, the US Customs Court (the predecessor to US Court of International Trade) ruled Nixon lacked authority under that statute. In response, Congress passed the Trade Act 1974, granting limited tariff powers to the president. However, the Court of Customs and Patent Appeals reversed the lower court’s decision, affirming Nixon’s authority. It emphasised that the tariff was a temporary emergency measure, not an unrestricted power to set tariffs.
This case highlights judicial recognition of constrained presidential tariff authority during economic emergencies, which may inform interpretations of IEEPA.
What does the ruling mean for businesses?
With tariffs remaining in place until at least 14 October 2025, compliance teams face a challenging interim period. The priority is maintaining current duty payment processes while preparing for potential changes.
Importantly, this decision does not affect tariffs imposed under other statutes, such as Section 232 of the Trade Expansion Act 1962, which covers steel, aluminium, and copper. The administration is working on several Section 232 investigations and if the Supreme Court upholds the decision, additional sectors could come into scope.
The dissent and concurrence from the judgement highlight deep divisions over presidential trade powers. In dissent, four judges argued the majority sidestepped a threshold question: whether the president satisfied IEEPA’s statutory preconditions for declaring an economic emergency. They warned that ignoring these limits risks granting unchecked authority. By contrast, a separate concurrence by four judges went further, asserting that IEEPA does not authorise tariffs at all. That opinion framed tariff-making as a core legislative function that Congress cannot delegate without clear boundaries, raising constitutional concerns under the non-delegation doctrine.
In-house teams should continue to monitor the case's progress and develop contingency plans for both scenarios, depending on whether the US Supreme Court strikes down or upholds the tariffs.
Most importantly, businesses should avoid making major structural changes based on speculation about the high court’s decision. The justices could rule either way, and businesses that pivot too early may find themselves at a disadvantage regardless of the outcome.