Trump's tariff authority is under threat from legal challenges, and India will pay a 50% penalty.
India-US trade dispute, 50% US tariff: The verdict has an impact on the 25% reciprocal tariffs that the United States placed on India and the extra 25% tariffs that were imposed on India's imports of Russian oil after Trump announced these tariffs under the IEEPA.
Ankush Pandey
A US appeals court declared on Friday that most of US President Donald Trump's tariffs, which were imposed using authority under the International Emergency Economic Powers Act (IEEPA), are unlawful, only days after the US imposed punitive tariffs of 50% on India. However, the tariffs will stay in effect until October 14, the court said, providing the Trump administration with a window to file an appeal with the US Supreme Court.
The Constitution grants the legislative branch the only authority to impose taxes, including tariffs, according to the US Court of Appeals. Tariffs are a fundamental Congressional authority. "It appears doubtful that Congress intended to break with its historical practice and give the President unrestricted power to impose tariffs when it passed IEEPA," it continued.
As Trump announced these tariffs under IEEPA, the verdict impacts the 25% reciprocal duties the US placed on India and the additional 25% tariffs imposed on India's imports of Russian oil. There are no legal objections to sectoral tariffs, such as the 50% charge on steel and aluminium, where Trump has invoked Section 232 of the Trade Expansion Act of 1962.
The decision was made in reaction to two lawsuits that were brought by a group of US states and small businesses following Trump's executive orders in April. The Court of International Trade had also ruled in May that the levies were illegal. While the appeal was being processed, that decision was paused.
Why Trump uses IEEPA
US Secretary of Commerce Howard Lutnick argued before the Court of International Trade to avert an unfavourable decision, highlighting the Trump administration's limited options for alternative legal measures to address growing trade deficits, especially with nations like China.
Lutnick clarified that other options, like Section 301 of the Trade Act of 1974 and Section 232 of the Trade Expansion Act of 1962, are not intended for national crises, take a long time to process, and do not allow for quick action.
"Under Section 232, the President has up to 90 days to determine whether to take action, and an additional 15 days to put such action into effect once the Department of Commerce completes an investigation and reports its findings. In a similar vein, Section 301 requires the US Trade Representative to finish an inquiry within a year, plus extra time for enforcement.
IEEPA is unique in that it permits the President to take prompt action to safeguard national interests, as long as all IEEPA requirements are met," Lutnick said the court. "National security would be at risk and the President's ability to formulate foreign policy would be severely limited without this tool," he continued.
Expect no change in US intent
IEEPA was "never the right vehicle," according to Markus Wagner, a professor of international and comparative law at the University of Wollongong in Australia. He also stated on social media that lawyers in the Trump administration were probably well aware that its usage would be deemed illegal.
However, that was probably never the intention; the Trump administration gained time by basing US policies on IEEPA. After the Court of International Trade (CIT) ruled against Trump's tariffs in May, Wagner stated, "That time isn't over yet, as it's safe to predict that the Court of International Trade (CIT) decision will a) be appealed and b) any implementation of the decision, should it stand, will be delayed as much as legally possible."
"What other nations will do—whether to enforce some of the current regulations or find ways to mitigate the damage the Trump administration has done and will likely continue to do—is the bigger question," the professor said.
