Implications of the Federal Circuit's Tariff Ruling

Breaking down Friday's Federal Circuit Court ruling against the Trump Administration's "IEEPA" tariffs:

The Big Picture: The Supreme Court will decide these tariffs' fate during the upcoming session. If it rules against the Administration, businesses may be entitled to refunds, but the President is likely to use other options to deploy tariffs, setting up a challenging scenario for companies. If not, the tariffs are here to stay.

When will the Supreme Court resolve this?

First, the tariffs remain in effect while the government considers filing an appeal. If the Court decides to hear the case, the tariffs will likely remain in place pending a decision, which could come during the session--late 2025/early 2026--or at the end of the session--June 2026.

How will the Supreme Court rule?

Outside of clean rulings to either strike down or uphold the tariffs, the Court could:

Limit the tariffs: For example, requiring the tariffs to expire once conditions are met, i.e., the underlying problems cited in the national emergency declaration--fentanyl imports and the trade deficit--are resolved/reduced.

Strike down some tariffs while keeping others. There are two categories under review here: 1) "trafficking" tariffs on imports from Mexico, Canada, and China in response to fentanyl imports, and 2) the "reciprocal" tariffs on imports from nearly 60 countries/partners in response to the trade deficit. The Court could rule that tariffs are an appropriate response to one but not the other.

What happens if the tariffs are struck down?

The Administration could quickly deploy 15% tariffs for 150 days or tariffs up to 50% indefinitely while launching investigations that take months under Section 301 to eventually impose tariffs on a country-by-country basis. There is no ceiling on Section 301 tariff rates, and they last a minimum of four years and can be extended. Sector-specific tariffs under Sections 232 or 201 could also be deployed following investigations.

A class-action lawsuit could be filed to allow businesses to seek refunds for costs under the IEEPA tariffs.

Trade framework agreements with the EU, Japan, Korea, Malaysia, Philippines, and Indonesia could be upended.

Key legal question: Will SCOTUS rule that IEEPA allows tariffs? We don't know, but it's noteworthy that the Federal Circuit was split on this. Only four of the seven who ruled against argued that IEEPA does not authorize tariffs. Three of the seven did not agree with that POV, while four wrote a dissent arguing that IEEPA does allow tariffs.

Note: this case does not affect the sectoral tariffs (“Section 232”) on steel/aluminum, autos, and copper or investigations on critical minerals, semiconductors, pharmaceuticals, lumber, drones, polysilicon, wind, and aircraft.