Global Trade on Trial: How One Ruling Redefines Reciprocal Tariffs

By: Atty. Mark Anthony P. Tamayo on September 4,2025

On Friday, August 29, 2025, the United States of America (U.S.) Court of Appeals for the Federal Circuit significantly limited a key element of President Donald Trump’s trade policy. In a landmark 7-4 ruling, the court affirmed a lower court’s May 2025 decision, finding he exceeded his statutory authority by using emergency economic powers to levy widespread import duties on goods from numerous countries.

The court’s central finding was that the International Emergency Economic Powers Act (IEEPA), the 1977 law invoked to justify the tariffs, does not explicitly grant the president the power to impose tariffs (or taxes). The U.S. Constitution, in Article I, Section 8, explicitly gives to Congress the power to “lay and collect Taxes, Duties, Imposts and Excises”. While Congress has delegated some of this authority to the executive branch over the past century, this delegation has never been considered unlimited.

The IEEPA was passed after the Watergate scandal to restrict the US president’s power during  peacetime emergencies. In the past, presidents have invoked the IEEPA to counter “unusual and extraordinary threats” to national security, foreign policy, or the economy. These applications were typically for targeted actions, such as imposing sanctions, freezing assets, or restricting technology exports. For decades, the law was not used to impose broad tariffs on goods entering the country.

The Trump administration departed from this long-standing precedent by invoking IEEPA to justify two major sets of tariffs. The first set was based on a declared national emergency over the U.S.’s persistent trade deficits, which the administration claimed constituted an “extraordinary threat” to the U.S. economy. The second set, imposed on China, Mexico, and Canada, was justified by a declared national emergency related to drug flows and illegal immigration, with the President asserting that these countries were not doing enough to curb the flow of illegal fentanyl.

The Core Arguments

The legal conflict over the tariffs imposed under the IEEPA centers on a fundamental constitutional principle and the historical evolution of presidential authority over trade.

The plaintiffs’ main argument is that the text of IEEPA does not explicitly grant the president the power to impose tariffs. They contended that the administration’s power to “regulate” imports as encompassing the power to “tax” is an overreach of authority. They emphasized that the power to “regulate” has long been viewed and understood as legally “distinct from the power to ‘tax'”. Furthermore, the plaintiffs challenged the very nature of a “national emergency”, asserting that a long-term and persistent trade deficit is a “normal, ongoing problem” rather than a “rare and brief” emergency that would justify invoking the IEEPA.

On the other hand, the administration’s defense rests on the argument that the term “regulate” within the IEEPA is intentionally broad, encompassing the authority to impose tariffs as a valid measure for controlling international commerce. They assert that these tariffs are a necessary tool to address the economic challenges posed by a trade deficit. 

The Court’s Ruling and Its Implications

The majority decision explicitly rejected the administration’s argument. The decision emphasized a plain reading of the statute’s text and its historical context, noting that the IEEPA neither mentions tariffs nor contains procedural safeguards that would limit the President’s power to impose tariffs. This absence of unequivocal language made it unlikely that Congress intended to grant the President unlimited authority. In essence, the majority decision applied the standard principles of statutory construction, interpreting the statute based on its plain meaning, legislative intent, and overall purpose.

Conversely, the four dissenting judges reasoned that the IEEPA is not an unconstitutional delegation of legislative authority. They cited instances where Congress had granted presidents limited tariff authority, aligning with a more functionalist view that prioritizes the practical and operational aspects of presidential power in foreign and economic policy.

Overall, the court’s decision affects two specific sets of tariffs. First,the “Liberation Day tariffs” (also known as “reciprocal tariffs”) imposed in April 2025, which included reciprocal levies of up to 50% on countries with a trade deficit with the US (including the Philippines) and a 10% baseline tariff on nearly all other trading partners. Second, tariffs imposed on China, Mexico, and Canada in February 2025, which were justified as a response to national emergencies related to illegal immigration and drug trafficking.

Notably, the decision does not affect other tariffs, particularly those on steel and aluminum. These were imposed under a different legal framework – the determination of a threat to national security by the US Commerce Department—and therefore, were not part of these specific legal challenges.

Unless overturned, the decision could require the U.S. Treasury to refund billions in tariffs to importers, causing significant uncertainty for businesses and potentially affecting ongoing and future trade negotiations with other nations. The court ruled against the administration but granted a temporary stay, allowing the tariffs to remain in effect until October 14, 2025. This gives the administration time to appeal the decision to the U.S. Supreme Court.

The decision, while temporary, has a direct and significant impact on the Philippines’ recent bilateral trade with the US. The ruling challenges the legal basis of tariffs recently imposed on Filipino exports to the US, which could lead to their invalidation and potential refunds of collected duties. While this could be a positive outcome for Philippine exporters, the ongoing legal uncertainty underscores the volatile nature of US trade policy and its direct impact on trading partners. The final outcome hinges on the impending US Supreme Court appeal.

(Mark Anthony P. Tamayo is a CPA-Lawyer and a Partner of Mata-Perez, Tamayo & Francisco Law Offices (MTF Counsel). He is a recipient of the 2016 Asia Tax Practice Leader award and is consistently voted as one of the recognized indirect tax leaders in the Philippines by the International Tax Review.)

This article is for general information only and is not a substitute for professional advice where the facts and circumstances warrant.  If you have any questions or comments regarding this article, you may email the author at info@mtfcounsel.com or visit the MTF website at www.mtfcounsel.com

The article was published at the More to Follow Column at The Manila Times on September 4,2025.  Please see this link The trial on global trade | The Manila Times.