Policy Backgrounders

China Tariffs Decision: Implications for the Supreme Court?

October 02, 2025

A recent decision of the U.S. Court of Appeals for the Federal Circuit relating to tariffs on China imposed during the first Trump Administration may offer potential hints as to how courts will address both the “Liberation Day” tariffs now on review at the Supreme Court and any further country-specific tariffs imposed under Section 301 of the Trade Act of 1974. The decision addresses questions regarding the extent of the President’s authority, regulatory requirements, and “major questions” requiring Congress’ clear delegation – all issues likely to come before the Supreme Court in tariff litigation.

• Plaintiffs argued that the US Trade Representative (USTR) did not have authority to impose escalatory tariffs on China; both the trial and appellate courts broadly disagreed. 
• USTR does have authority to “modify” tariffs within the meaning of the Trade Act for cases in its discretionary power, because Congress granted that power explicitly.
• However, the Federal Circuit was also clear to note that the President’s authority over tariffs is not absolute and that protections and regulatory procedures of the Administrative Procedure Act (APA) apply in tariffs cases. It also distinguished its recent V.O.S. decision on the “Liberation Day” tariffs in a way that offers the Supreme Court an avenue to overturn those tariffs while upholding other areas in which Congress has clearly given the President power to impose tariffs.

Background to the Case

The new decision from the Federal Circuit in HMTX Industries, et al. v. USTR, US CBP, et al. concerns tariffs on China imposed in the first Trump Administration. The somewhat complicated background here is important to understand why the court’s decision.

In 2017, the President ordered an investigation under Section 301 of the Trade Act of 1974 regarding actions of China that could be “unreasonable or discriminatory and that may be harming American intellectual property rights, innovation, or technology development.” During a Section 301 investigation, the US Trade Representative (USTR) must conduct a formal investigation, consult with the foreign country being investigated, and publish proposed action and findings allowing for broad public comment.

After a seven-month investigation, in April 2018 USTR requested comments on proposed tariffs and, following the comment period, imposed tariffs of 25% on about $34 billion on Chinese goods on “List 1” and an additional $16 billion of Chinese goods on “List 2.”

China retaliated on certain US goods (including agricultural products) after the tariffs were imposed. Following this, the President directed USTR to identify $200 billion worth of Chinese goods for counter-retaliatory tariffs, and USTR used separate authority under Section 307 of the Trade Act to impose a 10% tariff and then to identify $200 billion worth of Chinese goods which would receive a 25% tariff. The goods USTR identified became “List 3.” A separate “List 4A,” covered goods with a value of about $120 billion for which USTR imposed a tariff of 10%, later reduced to 7.5%. While considering whether to “modify” tariffs under Section 307, USTR must consult with domestic industry and also offer an opportunity for other interested parties (for instance, retailers and final users of imported goods) to present their views.

Following a second round of comments, the President imposed the tariffs on the List 3 goods, using authority under both Section 307(a)(1)(B) and Section 307(a)(1)(C). That first subsection refers to a “burden or restriction on United States commerce . . . that [is or] are the subject of such action has increased or decreased [.]” The second subsection refers to action taken under the Trade Act that “is no longer appropriate”; it applies only to USTR’s discretionary authority relating to “unreasonable or discriminatory” actions of foreign countries rather than to mandatory authority that USTR must take in certain circumstances.

Limits on USTR’s Power to “Modify” Tariffs

Most basically, therefore, the litigation – which involved cases from 3600 plaintiffs, mostly US importers of Chinese goods – concerns whether USTR has the authority to modify the additional escalatory (and, in one case, lower) tariffs imposed in response to the Chinese retaliation to the original tariffs. The trial court, the Court of International Trade, agreed that it did because Chinese “retaliatory conduct caused an increased burden on US commerce” within the meaning of the statue.

However, the trial court also stated that USTR failed to respond to comments as “the contested final actions did not respond to significant issues raised in the comments . . . or explain the relationship between issues raised in the comments and the President’s direction” (in other words, USTR has not responded sufficiently to comments it received.” So the court gave a limited remand to USTR on this point; then, in further proceedings, declared it was satisfied with USTR’s view that Trade Act gives the agency “little discretion to diverge from the President’s direction” in imposing tariffs.

The Federal Circuit Decision

The Federal Circuit broadly affirmed the trial court and reaffirmed USTR’s broad authority under Section 307 of the Trade Act. In a long section of the decision on statutory construction, the appellate court did not directly address USTR’s authority under Section 307(a)(1)(B) but instead concluded that Section 307(a)(1)(C) provides an independent justification for USTR’s discretionary authority. The plaintiffs therefore lost the appeal.

The Federal Circuit noted that the definition of “modify” in the Trade Act is broad with respect to USTR. Its earlier Solar Energy case shows that “there was an explicit upward limit to the President’s power to ‘modify’ an action under Section 204 of the Trade Act that is not present in USTR’s power” under Section 307. The court wrote that “Congress gave USTR the power to modify its own agency actions, not the statute authorizing those actions.”

Impact on the Supreme Court Tariffs Case?

But the court also included some important caveats that shed light on important issues not only in this case but also in the broader case on tariffs the Supreme Court will take up in November.

First, USTR’s discretion is not absolute: as the Federal Circuit wrote, citing the 2010 case of Gilda Indus., Inc. v. U.S., “[a]lthough ‘this court affords substantial deference to decisions of [USTR] implicating the discretionary authority of the President . . . , the judiciary is the final authority on issues of statutory construction.” In other words, the Executive Branch cannot simply state what a statute means; the judiciary has the final word, a limit on executive power.

Second, the court “reject[ed] the notion that President’s power to decide that the Administrative Procedure Act (APA) – including the court’s powers to review Executive Branch decisions – means the APA does not apply. The Government argued that the increased tariffs “were the outcome of the President’s discretionary decisions . . . and thus not reviewable.” The court simply noted that Congress gave expanded power in Section 307 to “USTR – not the President,” providing greater scope that a court can review decisions relating to tariff levels to determine whether the agency took sufficient account of public comments, as the APA requires. The court further denied that the question of escalatory tariffs falls within the foreign affairs exception to APA on the ground that this is “entirely post hoc and inconsistent with the manner in which [USTR] conducted the modification process.” The court added that [i]n any case, we decline to apply the exemption whenever a rule relates to ongoing trade negotiations, especially where, as here, the controlling statute explicitly requires the public to have an opportunity to comment.” This is an important reaffirmation of the public’s rights under the APA and a restriction on any attempts to reduce public comment in forthcoming Section 301 cases.

Third, the Federal Circuit rejected the plaintiff-appellants theory that the imposition of tariffs on over $300 billion of Chinese goods violated the “major questions” doctrine of West Virginia v. EPA that Congress must speak clearly when delegating authority to Congress on major questions (including those with significant impact on the economy). But in doing so, it took pains to distinguish this case from the V.O.S. case on the “Liberation Day” and fentanyl-related tariffs that the Supreme Court will hear in November. The Federal Circuit emphasized that the major questions doctrine does apply in that case on emergency powers because the President has “never previously claimed powers of th[at] magnitude,” while Congress delegated power here.

This offers a potential way for the Supreme Court to affirm the Federal Circuit on the “Liberation Day” tariffs without worrying that decision would undermine the President’s tariff authority under other statutes. In pointed language, the Federal Circuit wrote that “[t]he Lists 3 and 4A tariffs may, at best, be a new use of USTR’s regulatory authority, but they do not involve a transformation of USTR’s regulatory authority. USTR has modified its own unchallenged and statutorily permissible original action in this case, not the underlying Trade Act of 1974.” This seems at least an implicit statement that the court believes the President in the Liberation Day tariffs sought to modify the International Emergency Economic Powers Act of 1977 (IEEPA) on which those tariffs are based.

Yet these are hints, not specific direction. Left unsaid, of course, is the practical degree to which the President controls USTR despite Congress’ delegation of authority specific to it. Other recent changes in administrative law – such as stating that no Executive Branch official may hold a legal opinion different from the President or Attorney General – may mean that the distinction the court draws will not make much of a difference in practice. Still, by distinguishing V.O.S., the earlier tariffs case on the President’s powers under IEEPA, the Federal Circuit is also showing that a Supreme Court decision against the Liberation Day (and/or the fentanyl-related tariffs) would curtail the powers of the Executive Branch only in one area rather than ending Congress’ broad grant of tariff policy.

Towards November

The Court’s principal purpose in HTMX Industries was to resolve a longstanding question about the extent of USTR’s authority. Particularly if the Administration moves towards greater use of Section 301 authority either on its own initiative or in response to a decision of the Supreme Court against the “Liberation Day” tariffs, it will be a guide to how the Federal Circuit regards the limits of USTR’s and the President’s powers here. Even though the plaintiffs in these cases lost, by reaffirming courts’ powers and the duties of Federal agencies to follow the APA in these cases and consider business and other stakeholder comments in making decisions on tariffs, the decision could provide important protections for business in future tariff litigation.