Policy Backgrounders

Litigation Update: Future of 'Liberation Day' Tariffs

June 12, 2025

Court of Appeals for the Federal Circuit kept in place the current hold on enforcement of an earlier ruling from the Court of International Trade. This means the Administration can continue to enforce the “Liberation Day” tariffs (now at 10%) as well as other tariffs on China, Mexico, and Canada, at least until the appellate court’s hearing on July 31.

• The Court of Appeals for the Federal Circuit did not rule on the merits of the case as the lower court did but simply agreed that the tariffs could remain in place until the full court could hold a hearing on the merits.
• The appeals court agreed, in essence, that the harms to the Administration from upholding the lower court’s order without a full hearing on the merits outweighed the plaintiffs’ interests in having the tariffs enjoined.
• The appeals court set an expedited schedule and will hold a hearing en banc on July 31. It also welcomed amicus curiae briefs in advance of the hearing on the questions presented on the tariffs and the manner of their imposition.
• The current 90-day pause on the higher “Liberation Day” tariffs ends July 9. Both because of the litigation schedule and because negotiations are continuing with many important trading partners, the appellate court’s action likely increases the chances the pause will continue for some period after July 9 rather than snapping back to higher rates on that day.

Background: IEEPA and the Lower Court

In the underlying litigation, twelve states and five private sector importers brought suit alleging that the imposition of certain tariffs exceeds the President’s powers under the International Economic Emergency Powers Act of 1977 (IEEPA), which gives the President authority to take certain steps to restrict commerce upon the declaration of a national emergency. The President used IEEPA authority in February to declare a national emergency with respect to fentanyl and used this authority to impose tariffs on China, Mexico, and Canada (in the case of Canada, regulating the tariffs by imposing a lower tariff on Canadian energy imports). Similarly, on April 2, the President declared a national emergency with respect to large US trade deficits in goods and imposed the “Liberation Day” tariffs, both a universal 10% tariff on all imports and country-specific tariffs (later suspended on April 9 for 90 days).

In particular, plaintiffs argued that 49 years of US trade deficits in goods could not be seen as an “emergency” within the meaning of the relevant Acts, and the President could only have authority to impose these types of tariffs using non-emergency powers. A three-judge panel of the Court of International Trade agreed, writing in its decision that Congress’ grant of power to the President in IEEPA did not include power to “impose unlimited tariffs on goods from nearly every country in the world.” In addition, the court enjoined the tariffs imposed under the national emergency related to fentanyl that affect China, Mexico, and Canada (20% for China and 25% for covered goods from Canada and Mexico). The court’s decision notes that the tariffs did not comply with the Act’s requirement that actions regulating commerce “deal with an unusual and extraordinary threat” but were rather intended to “create leverage” against foreign governments. As such, the decision gets to the heart of much of the Administration’s tariff strategy.

The Federal Circuit’s Ruling

The Administration appealed the decision. Appeals from the Court of International Trade go to the Federal Circuit and from there to the Supreme Court. One day after the lower court ruling, the entire Court of Appeals for the Federal Circuit put the first ruling on hold and outlined a briefing schedule through June 9. Now, the Federal Circuit has extended its hold until it can hold a hearing on the merits on July 31.

The appeals court stated that because “[b]oth sides have made substantial arguments on the merits” of the case and considering the traditional factors governing stays of decisions, it “concludes that these cases present issues of exceptional importance warranting expedited en banc consideration of the merits [.]”

A hearing en banc includes all qualified sitting justices of an appellate court. It is typically used when cases of high importance are presented to a circuit and can form a stronger record of judicial consideration of the merits if a case is appealed to the Supreme Court. Given the significant issues at stake in the litigation, both which respect to the economy and the precedent its ruling will set on the limits of the President’s authority to impose tariffs under IEEPA (on which no court had ruled before this litigation), it is not surprising that the court decided to grant the stay. The expedited hearing schedule (considerably faster than typical litigation) shows the importance of the issue to the economy as a whole and the need for a relatively quick resolution: does the President have the power to impose these tariffs or not?

In addition, the court granted all motions to file amicus curiae (“friend of the court”) briefs regarding the stay. The court wants to benefit from the broadest possible record of interested parties, to have a deeper consideration of the record given that the issue is likely to be appealed to the Supreme Court no matter which side prevails at the appellate level. Despite the pause from the appellate court, many legal observers continue to expect that the decision will ultimately be upheld, which would narrow the scope of the President’s powers under IEEPA.

Sectoral Tariffs

The lower court’s decision did not invalidate the sectoral tariffs on steel, aluminum, and autos and auto parts that had been imposed using different authority, Section 232 of the Trade Expansion Act of 1962. Those tariffs were imposed on the basis of an investigation conducted under the law rather than using emergency authority. Should the plaintiffs prevail at the appellate level – and given the risks to the Administration’s overall tariff policy – it is likely this could accelerate the imposition of tariffs (for instance on semiconductors and related products; pharmaceuticals, precursor chemicals, and related products: and critical minerals) for which the Administration has begun investigations under Section 232 of the Trade Expansion Act of 1962. Those investigations could lead to the imposition of tariffs on the products, justified on national security grounds, and would likely be on firmer legal ground (though plaintiffs could still sue alleging the tariffs exceed a reasonable national security justification). However, it may also be relevant that higher steel and aluminum tariffs are being eliminated on the United Kingdom because of the agreement the US and UK recently reached – a sign that in at least some cases, the Administration may be willing to forego sectoral tariffs as a part of a new trade agreement.

What Happens After July 9?

A number of countries affected by the tariffs are actively negotiating with the Administration, seeking to reach deals that would prevent imposition of the higher “Liberation Day” tariffs. Both because of the litigation schedule extending past July 9 and because negotiations are continuing with many important trading partners, including China, the EU, Japan, and others, the Federal Circuit’s latest action could increase the chances the pause will continue for at least some period after July 9 rather than snapping back to higher rates which might then have to be lowered again if the Federal Circuit rules against the Administration. This view applies particularly if the Administration is concerned about the potential effects on markets and on US supply chains of further sharp changes in tariff rates. However, the President’s statements on June 11 that he did not believe he would have the “necessity” of extending the deadline and would also be determining new tariff rates for affected countries in the next two weeks with a “take it or leave it” deal also raises questions about the Administration’s future policies.