The Looming Legal Risk Facing Trump’s Tariffs

Inside the room with the judges who will decide their future.

Happy Liberation Day! Again. Kind of.

The first “Liberation Day,” of course, was on April 2, when President Trump appeared in the Rose Garden and announced a 10% baseline tariff on nearly every American trading partner and varying “reciprocal tariffs” pegged roughly to the U.S.’ trade deficit with each country.

The 10% tariffs went into effect on April 5. The reciprocal tariffs were supposed to start on April 9, but that morning, Trump announced they would instead be pushed to July 8. Then, one day before that, the deadline was postponed to August 1, which is today. Last night, he signed an executive order saying the reciprocal tariffs will kick in on August 8, four months after they were originally supposed to start.

The order included a new list of tariff rates for each country, which represent a dramatic hike relative to existing U.S. trade policy but generally a slight decrease relative to the original April 2 announcement. Rates for some countries, including those in the European Union (15%), reflect trade deals Trump has struck in the intervening months. Others, like Canada’s (35%), are much more extreme. Two countries — China and Mexico — are being given (yet another) reprieve, until August 12 and October 29, respectively, as trade negotiations continue.

“The president has essentially reordered global trade,” a White House official told reporters Thursday night, boasting that Trump, with a flick of a pen, had ended America’s decades-long experiment with free trade and moved the country towards an era of protectionism.

Most reporting on Trump’s new tariff rates basically takes him at his word that reordering global trade is even something a president is allowed to do, although a simple reading of the Constitution (“The Congress shall have Power To lay and collect Taxes, Duties, Imposts and Excises”) should, at the very least, make you stop and wonder.

Ultimately, though, it’s not up to me or you whether Trump can impose his sweeping tariffs. There are 20 people who will get to make that decision. Nine of them are very well known: the justices of the U.S. Supreme Court. The final say, as always, will rest will them.

I spent part of yesterday with the other 11, the much lower-profile judges of the U.S. Court of Appeals for the Federal Circuit, who will get the first crack at sorting through the president’s tariff powers. As Trump was busy finalizing his new import taxes at the White House on Thursday, these judges were only a few hundred feet away, gathered for a hearing to consider the legality of his beloved trade policy.

Spoiler alert: From inside the room, it didn’t seem to me like they were planning to rule in his favor.

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The federal judicial system is split into three levels: district courts, which feed into appellate courts, which feed into the Supreme Court.

There are 13 appellate courts, 12 of which are geographic (the First Circuit covers the Northeast, the Ninth Circuit covers the West Coast, and so on). Washington, D.C. already has one of these courts — the D.C. Circuit — and maybe you thought that’s what I was referring to when I mentioned the Federal Circuit. In fact, they’re very different.

The D.C. Circuit is the most prestigious of the circuit courts; sometimes called “the second-highest court in the land,” it is known as a stepping stone to the Supreme Court. (Four of the current nine justices previously served on the D.C. Circuit.) The Federal Circuit, on the other hand, is the least well-known of the bunch. It’s also headquartered in Washington, D.C., but it’s the only circuit court with a jurisdiction that isn’t geographic in nature.

The courts that feed into the Federal Circuit are more idiosyncratic, covering a mix of subject areas like employment suits by federal workers and benefit claims from veterans. It also handles patent and trademark disputes: recent opinions considered the ownership of a shade of green and whether the companies Kist and Sunkist can both sell soft drinks.

These are not judges accustomed to the limelight. But the Federal Circuit also has jurisdiction over the U.S. Court of International Trade (CIT), which is where a group of Democratic-led states and a collective of businesses brought suits challenging Trump’s “Liberation Day” tariffs. The CIT ruled against the tariffs in May; the Trump administration filed an appeal with the Federal Circuit, which heard arguments in the case on Thursday. (The Federal Circuit has paused the CIT’s ruling while litigation continues, which is why the tariffs are still able to go into effect for now.)

Around 100 people attended the hearing, including myself and only a handful of other reporters; the courtroom wasn’t even full, but a security guard told me it had been around a decade since she’d seen so many people. The audience was mostly lawyers, or law students, or law clerks from other courts. I met a former Justice Department official who said he prosecuted the Exxon Valdez oil spill in the ’80s. Someone else in line told me he was currently unemployed and had “nothing better to do.”

It was a relatively small courtroom, much more intimate than the grandiose Supreme Court. The judges have an obscure remit, but they are well-steeped in it; the lawyers — former Obama solicitor general Neal Katyal for the businesses, Oregon Solicitor General Ben Gutman for the states, and Assistant Attorney General Brett Shumate for the Trump administration — were stepping into their terrain, and the judges let them know it.

At one point, Chief Judge Kimberly Moore corrected Gutman on the tariff rate for coffee; at another, Judge Jimmie Reyna questioned Shumate on whether he was familiar with the Generalized System of Preferences, a longtime feature of U.S. tariff law. “I’m sorry, I’m not,” the Trump administration lawyer admitted. Reyna later produced a list of every law that delegated tariff powers and proceeded to read through it.

Both sides received tough questioning, but Shumate drew much more stinging lines of inquiry. The hearing featured 11 judges¹, eight Democratic appointees and three Republican appointees; perhaps reflecting that partisan makeup, they seemed at times to almost to be competing for the opportunity to hit Shumate with a zinger. (Eventually, Moore began directing the order of the questioning, saying it was clear that she needed to “do some refereeing.”) Shumate would barely get a sentence out before another judge cut him off, unsatisfied by his responses.

He made it about 40 seconds through his opening statement before Reyna, an Obama appointee, interrupted. “For decades, IEEPA has been one of the most powerful tools that any president can use to protect our national security, our foreign policy and our economy,” Shumate said, referring to the International Emergency Economic Powers Act, the law that underpins Trump’s “Liberation Day” tariffs.

“But IEEPA has rarely been used since then,” Reyna interjected to point out.

“No, Your Honor,” Shumate responded, noting that the law had been invoked dozens of times, although he conceded that it had not been previously been used for tariffs.

“That’s what we’re concerned with here,” Reyna responded.

IEEPA (pronounced “eye-ee-pa,” or at least it was on Thursday) is a law that dates back to 1977. It gives the president a list of powers that are triggered when he declares a national emergency, including to “regulate…importation or exportation.” The statute never uses the word “tariff” (as several judges reminded Shumate) or explicitly says that imposing them counts as regulating imports.

Shumate argued that the 20th-century Congress did intend to grant broad tariff powers to the president with this vague language, by pointing to a companion statue of IEEEPA, the Trading with the Enemies Act (TWEA) of 1917. (TWEA is a wartime statute. IEEPA was written to give some of the same powers to the president in peacetime.) TWEA uses the same exact language as IEEPA about regulating imports; Richard Nixon, Shumate pointed out, viewed those word as license to impose tariffs. In a 1975 case, United States v. Yoshida International, a federal court upheld Nixon’s interpretation.

So, open and shut, right? Regulating imports = free rein to impose tariffs?

Not quite. In Shumate’s first 20 minutes at the lectern, two separate judge used almost the same phrasing — “That’s your problem” and “Your problem is…” — to tell him why Yoshida wasn’t the saving grace he hoped.

“The action that President Nixon took that was approved in Yoshida was much narrower than the action that’s involved here,” the first, Judge Timothy Dyk, a Clinton appointee, said. (Nixon had imposed 10% tariffs to last for five months, as opposed to Trump’s tariffs, which range as high as 40% and are set to last as long as he so choses.)

Judge Todd Hughes, an Obama appointee, brought up the second sticking point: the Yoshida ruling said that the “regulate…importation or exportation” language did sanction presidential tariff powers, but it also said that those powers were not “unlimited.”

“The mere incantation of ‘national emergency’ cannot, of course, sound the death-knell of the Constitution,” the 1975 court wrote, adding: “The declaration of a national emergency is not a talisman enabling the President to rewrite the tariff schedules, as it was not in this case.”

If Shumate was citing Yoshida to argue that IEEPA greenlights tariffs, he also had to grapple with the fact that the same ruling warns against tariffs without limits. The court in Yoshida “specifically said, we don’t think regulate here means unbounded authority, and it seems to me, you’re asking for unbounded authority,” Hughes said.

Shumate responded that the president was not asking for unbounded authority: the limits in IEEPA, he noted, are that its powers only be invoked by the president to “deal with” an “unusual and extraordinary threat.” But, he noted, if one accepts that regulating imports includes imposing tariffs, IEEPA doesn’t lay out any limits in its text of how high or how permanent those tariffs can be, even if the Yoshida court suggested such limits should exist. Shumate also argued that courts aren’t empowered to review whether a president has correctly judged an emergency to be “unusual and extraordinary.”

“If they’re not reviewable, how are they limits?” Judge Leonard Stark, a Biden appointee, asked. (Shumate noted that Congress can overturn a president’s national emergency declaration, although Judge Dyk noted “that’s not very realistic,” considering the president can veto such an act of Congress.)

“I know it may be hard to believe that the president may have this power,” Shumate acknowledged, but if Congress didn’t include any limits in IEEPA beyond the existence of a national emergency, than he argued the court can’t add any. “The fact that those limits may not be satisfying doesn’t give the court a reason to identify or come up with extratextual limits on the president’s tariff authority,” he said. “Those are the limits in the statute.”

In their own turns at the mic, Katyal and Gutman also received pointed questions: the judges didn’t seem convinced, for example, that just because Trump’s executive order referred to trade deficits as “persistent” that they couldn’t also produce an “unusual and extraordinary” threat. (The trade deficits themselves didn’t have to be urgent for certain potential consequences of the trade deficits — like a decline in manufacturing — to fit that bar, the judges reasoned.)

Before the hearing, I saw Katyal and Shumate chatting chummily. But when Katyal got up to speak, he painted Shumate’s arguments as absurd: “We think this whole thing is bogus.” At times, it seemed like a significant number of the judges agreed.

Katyal gave them a number of routes by which to strike down the tariffs: they could rule that IEEPA doesn’t allow tariffs. Or, they could rule that IEEPA does allow tariffs, but not almost unbounded tariffs. Or, they could rule that IEEPA does allow unbounded tariffs, but that’s unconstitutional, under the Major Questions Doctrine, which the Supreme Court used to strike down President Biden’s cancellation of student loan debt (under the theory that vague grants of presidential power aren’t enough; major political and economic questions should be decided by Congress). Or they could rule that IEEPA constitutionally allows almost unbounded tariffs, but that Trump’s tariffs don’t meet the bounds it does set, namely that the president’s actions have to “deal with” an “unusual and extraordinary” emergency.

Whichever route they take, several of the judges seemed uncomfortable with the broad authority the president was asserting: the power to tariff anyone, anywhere, at whatever rate he likes, for however long he likes, by simply declaring a state of emergency.

“It seems pretty clear to me that Yoshida is telling us that, no, the president doesn’t have the authority to rewrite the Tariff Schedule,” Judge Raymond Chen, an Obama appointee. “It seems like, in this case, that’s what the president is trying to do.”

“You’re just discarding the holding of Yoshida that you don’t like,” Judge Dyk argued to Shumate, later saying that Trump was “asking for an extraordinary change to the whole approach of tariffs.”

Referring to the Latin legal phrase, Noscitur a sociis (“it is known by its friends,” meaning the context of a word can be derived by the words around it), Judge Allen Lourie noted that not only does IEEPA not mention tariffs, it also doesn’t include words like “duties” that might suggest tariffs were intended. “Tariffs seem to have no friends in that statute,” Lourie, a George H.W. Bush appointee, said.

Several of the judges accused Shumate of dodging their questions. One of them, Judge Hughes, seemed especially frustrated; after tangling with Shumate early on, he mostly didn’t even look at the Trump lawyer for the rest of the session, staring straight ahead with an exasperated expression.

It will likely take months for this case to be resolved, first by the Federal Circuit and then by the Supreme Court.

But Oregon Attorney General Dan Rayfield, who led the states’ lawsuit against the tariffs, emerged optimistic that the case would eventually tip his way, expressing confidence that the Supreme Court would ultimately apply the same Major Questions Doctrine that had felled Biden policies against Trump.

“I really do, when it comes down to it, think that when you start developing these constitutional doctrines, that they will be applied equally across the board,” Rayfield told me. “What’s good for the goose is good for the gander, as they say.”

1. This despite the fact that the court technically has 12 judges. The 12th, Reagan appointee, Pauline Newman is 98 years old, and the other judges of the Federal Circuit have repeatedly suspended her, saying she is not fit to serve. Newman is suing them, pushing back on their allegations of mental decline.

So imagine my surprise when, before the hearing started, I exited the bathroom and saw Newman herself sitting patiently in a chair outside the courtroom, with a tiny notebook labeled with the day’s case on the top. Newman seemed to be negotiating with court staff for a seat in the room (though not on the dais). She ended up sitting in the front row, staring directly at the 11 judges who had just extended her suspension three days before.