Two key Trump administration tariff measures were ruled unlawful by the U.S. Court of Appeals for the Federal Circuit in V.O.S. Selections, et al. v. Trump (Fed. Cir. Case No. 25-1812) on August 29, 2025. This marks the first time the Federal Circuit has sustained a serious challenge to any of President Trump’s signature tariffs. Specifically, the Federal Circuit’s ruling relates to:
By a vote of seven to four, the Federal Circuit—which heard the case en banc—affirmed the U.S. Court of International Trade (CIT)’s ruling, No. 25-66 (May 28, 2025), that the reciprocal and trafficking tariffs exceed the president’s power to “regulate imports” under the International Emergency Economic Powers Act (IEEPA).
However, the Federal Circuit vacated the CIT’s permanent universal injunction ordering the government to cease collecting these tariffs and remanded the case to the CIT to determine whether such an injunction was consistent with the recent U.S. Supreme Court decision in Trump v. CASA, Inc., No. 24A884 (June 27, 2025), limiting universal injunctions.
The Federal Circuit stayed its mandate (the action that renders the decision final and enforceable) until at least October 14 and, if such a petition is filed, until the Supreme Court either declines to hear the case or issues a ruling affirming the Federal Circuit.
As such, the decision will not have any immediate effect on the collection of tariffs. However, importers who are paying the tariffs may need to take steps to preserve their entitlement to refunds if the Federal Circuit’s decision becomes final.
The Federal Circuit’s decision does not cover tariffs imposed by the president pursuant to other statutes, including the China tariffs imposed under Section 301 of the Trade Act of 1974 (Section 301) or the steel, aluminum, copper, and automobile tariffs imposed under Section 232 of the Trade Expansion Act of 1962 (Section 232). It also does not reach more recent IEEPA tariff actions by President Trump, such as the 25% additional tariff on India tied to that country’s purchases of Russian oil, or the 40% additional tariff on Brazil tied to that country’s prosecution of its former president, Jair Bolsonaro.[1]
Federal Circuit’s Rationale
The Federal Circuit cited two primary reasons to reject the position that the president could utilize IEEPA to impose the tariffs at issue: (1) IEEPA’s text and legislative history do not explicitly grant the president authority to impose tariffs or other taxes for the purpose of raising revenue; and (2) under the major questions doctrine, which allows courts to review whether Congress intended the executive branch to assert vast regulatory powers, an unambiguous congressional delegation of the taxing power is necessary to authorize the president to apply tariffs of such magnitude and unlimited duration.
A concurring opinion by four of the seven judges in the majority went further, finding that IEEPA does not authorize the president to impose any tariffs, not just those at issue—a position that would have implicitly invalidated more recent IEEPA tariffs imposed by the president.
The lengthy dissent, however, viewed such use of IEEPA as properly within the president’s powers to regulate importation, finding the challenged tariffs met IEEPA’s statutory requirements of a declared national emergency, a predominantly foreign cause for the declared emergency, and presidential action intended to address the emergency.
Reciprocal Tariffs
President Trump initially announced the reciprocal tariffs on April 2, 2025.[2] The initial tariffs consisted of a 10% duty imposed on nearly all U.S. trade partners as of April 5, which was to be raised for many of those trade partners to country-specific rates ranging from 11% to 50% on April 9.
Those country-specific increases were quickly paused, bringing the rate back down to 10%, in response to a global market crash, except for China’s 34% separate rate.[3] Instead, China’s rate was quickly increased to 84% and then 125% in response to Chinese retaliatory tariffs, before being reduced back to 10% pending trade negotiations with China.[4]
The reciprocal tariffs were most recently revised on July 31, when President Trump announced a new schedule of separate rates, ranging from 15% to 41%.[5]
Canada and Mexico are currently exempt from the reciprocal tariffs due to the imposition of a trafficking tariff on these countries. Should the trafficking tariff be lifted, however, Canada and Mexico will be subject to a 12% reciprocal tariff on all imports that do not qualify for duty-free treatment under the United States-Mexico-Canada Agreement (USMCA).
Russia, Belarus, Cuba, and North Korea are also exempt on the theory that these countries are already subject to high tariffs and engage in zero or very little trade with the United States.
Trafficking Tariffs
President Trump initially announced the trafficking tariffs on February 1, 2025, set at 25% for Canada and Mexico and 10% for China.[6] He has since modified them several times, including to:
- Exempt products of Canada and Mexico that are entitled to duty-free treatment under the USMCA[7]
- Raise the tariff for Chinese products from 10% to 20%[8]
- Raise the tariff for Canadian products (not entitled to USMCA duty-free treatment) from 25% to 35%
Next Steps
It is highly likely that the Trump administration will ask the Supreme Court to hear the case and that, therefore, the reciprocal and trafficking tariffs will remain in place at least until the Supreme Court addresses the government’s petition for certiorari. If the Federal Circuit’s decision stands, either because the Supreme Court passes on the case or affirms, the case will be remanded to the CIT to reconsider the scope of any injunction on the government. And whatever decision the CIT makes on remand will itself be subject to appeal to the Federal Circuit (and potentially again to the Supreme Court).
The CIT’s decision also noted that the president has a couple of alternatives to pursue his tariff strategy, such as Section 232 and Section 301, which President Trump has already used to apply tariff measures, and Section 122 of the Trade Act of 1974, which provides the president limited powers to address balance-of-payments deficits by imposing up to 15% tariffs on countries with which the United States has large trade deficits for up to 150 days.
The upshot is that, domestically, nothing is likely to change for months—and possibly years. Even if the reciprocal and trafficking tariffs are struck down, the scope of any resulting injunction may be limited, and the Trump administration may turn to other statutes. In the meantime, it remains to be seen whether the Federal Circuit’s decision will have a more immediate impact on how countries approach trade negotiations with the United States.
In the meantime, businesses should continue to actively monitor executive orders and related U.S. Customs and Border Protection guidance, ensure correct Harmonized Tariff Schedule classification and valuation of their imports, update relevant compliance and accounting processes, and consider tariff mitigation strategies. Businesses that have already paid and/or face duties due to the reciprocal and trafficking tariffs should also consider whether any measures are necessary to preserve their ability to obtain refunds if the Federal Circuit’s decision stands, such as follow-on lawsuits or customs protests.
Endnotes
[1] Prior attempts to invalidate Section 232 failed in the Federal Circuit. The lead case challenging Section 301 is currently pending a decision by that court. It remains to be seen whether importers harmed by the India or Brazil IEEPA tariffs will challenge those actions in court.
[2] Executive Order No. 14257, 90 Fed. Reg. 15,041 (Apr. 2, 2025).
[3] Executive Order No. 14266, 90 Fed. Reg 15,625 (Apr. 9, 2025).
[4] Executive Order No. 14259, 90 Fed. Reg. 15,509 (Apr. 8, 2025); Executive Order No. 14266, 90 Fed. Reg. 15,626 (Apr. 9, 2025); Executive Order No. 14298, 90 Fed. Reg. 21,831 (May 12, 2025).
[5] Executive Order No. 14326, 90 Fed. Reg. 37,963 (July 31, 2025).
[6] Executive Order No. 14194, 90 Fed. Reg. 9,117, (Feb. 1. 2025) (Mexico); Executive Order No. 14193, 90 Fed. Reg. 9,113 (Feb. 1, 2025) (Canada); Executive Order No. 14195, 90 Fed. Reg. 9,121 (Feb. 1, 2025) (China).
[7] Executive Order No. 14231, 90 Fed. Reg. 11,785 (Mar. 6, 2025) (Canada); Executive Order No. 14232, 90 Fed. Reg. 11,787 (Mar. 6, 2025) (Mexico).
[8] Executive Order No. 14228, 90 Fed. Reg. 11,463 (Mar. 3, 2025).
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