Tariffs on Trial: The Legal Issues Raised by New Tariffs on Canada, Mexico, and China

The tariffs on Canada, Mexico, and China

President Trump has announced a 25% tariff on imports from Canada and Mexico (except for a lower 10% tariff on Canadian energy and potash imports) and a 20% tariff on imports from China. He stated these tariffs are necessary to address “the grave threat to the United States posed by the influx of illegal aliens and illicit drugs.”^[1] In response, Canada, Mexico, and China have imposed or threatened to impose retaliatory tariffs on American exports. Meanwhile, President Trump has signaled that more across-the-board tariffs may be on the horizon—in particular, a 25% tariff on imports from the European Union.

In the face of pressure from trading partners, US businesses, and others, President Trump has made a series of adjustments to the tariffs in recent weeks, postponing them for certain goods while changing tariff rates for others. As a result, there is still considerable uncertainty about the ultimate reach and impact of these tariffs.

Legal authority invoked for the new tariffs

In imposing new country-specific tariffs on Canada, Mexico, and China, President Trump invoked the International Emergency Economic Powers Act (IEEPA). IEEPA gives the President broad authority to “investigate, . . . regulate, . . . prevent or prohibit” the “import[] or export[] of” goods in response to an “unusual and extraordinary threat” “to the national security, foreign policy, or economy of the United States.”^[2] As a first step, the president declares a national emergency under the National Emergencies Act (NEA).^[3] Then, the president may exercise discretionary authority under IEEPA.

Until now, presidents have typically invoked IEEPA to impose sanctions on foreign adversaries. The law has never been used to impose tariffs.^[4] While courts have historically been reluctant to question a president’s actions under IEEPA, it is likely that the Trump administration’s novel decision to use IEEPA to impose tariffs will face legal challenges.

Potential legal challenges

Several legal issues may arise in any challenge to the new tariffs.

Chief among them is one long-unanswered question about the scope of IEEPA: Does that statute give the president the authority to impose tariffs at all? Unlike trade-specific statutes, IEEPA does not explicitly use the words “tariff” or “tax.” It instead provides that the president may take actions to, among other things, “investigate,” “regulate,” “prevent,” or “prohibit.” On one view of that provision, the president can impose tariffs because the broad power to “regulate” encompasses the power to impose tariffs. But on another view, Congress would have explicitly named that power had it intended IEEPA to give the president such authority. In arguing the latter, litigants may invoke the major-questions doctrine—under which the Supreme Court has demanded clear congressional authorization for administrative agencies to act on issues of extraordinary economic or political significance—to challenge the president’s claimed tariff authority under IEEPA.^[5]

In addition, opponents may argue that countrywide tariffs are not rationally connected to the declared national emergency on illegal immigration and illicit drug trade. As support, they may point to the inclusion and unequal treatment of goods with no apparent relation to illegal immigration or the flow of fentanyl—for example, the lower tariffs imposed on Canadian energy imports.

Even so, there are hurdles for any litigant challenging the IEEPA tariffs. To start, litigants generally cannot sue the president directly, because he is not an “agency” whose “final” actions can be reviewed under the Administrative Procedure Act (APA).^[6] Thus, any APA challenge to the issuance of the tariffs would have to be directed against an administrative agency that implements the tariffs (e.g., Customs and Border Protection). Moreover, courts have historically been reticent to constrain the president’s broad authority under IEEPA. It is possible that, after the Supreme Court’s decision to overturn Chevron deference in Loper Bright Enterprises v. Raimondo, 603 U.S. 369 (2024), courts will more closely scrutinize executive actions in the trade arena. That said, we expect that many courts will continue to defer to the executive branch, whether in name or in practice, on questions related to national security and foreign affairs.

Other avenues the president could take

Even if a court were to strike down the president’s use of IEEPA to impose these tariffs, the president could instead try to impose them under other statutory authorities. The president has several other tools at his disposal, such as Section 232 of the Trade Expansion Act of 1962 and Section 301 of the Trade Act of 1974. Unlike IEEPA, however, those statutes are often expressly more limited in scope; Section 232, for instance, focuses only on those imports that “threaten to impair” US national security.^[7] In addition, those trade authorities require more onerous procedures to implement a tariff. So, any effort to impose tariffs under those statutes will likely be more time-consuming and ultimately apply to fewer products and countries. And, even if the Trump administration were to rely on those statutes in lieu of IEEPA—as it has for steel and aluminum tariffs^[8] —its actions may still be challenged in court.

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Jenner & Block’s Tariff Task Force brings together a multi-disciplinary team of litigators, former government prosecutors, and subject matter experts to help clients navigate this uncertain landscape. Recognized as a litigation powerhouse, we provide best-in-class litigation capabilities to challenge the legality of the tariffs, navigate contractual disputes related to supply chain issues, defend government investigations into alleged non-compliance, and provide guidance on compliance with varying regulatory requirements between countries. We also provide counseling and strategic advice on how to manage existing and future business relationships affected by the tariffs. Debbie Berman and Doug Litvack co-chair the Tariff Task Force.