Introduction
This Labor Day, American trade compliance professionals are reflecting on the U.S. Court of Appeals for the Federal Circuit’s decision limiting the President’s tariff powers. The court ruled that the International Emergency Economic Powers Act (IEEPA) cannot be used to impose tariffs on imports, raising questions about the future of so-called “reciprocal tariffs” in U.S. trade policy.
In this article, we analyze how foreign legal systems grant executive powers to impose duties, trace the evolution of WTO law to assess U.S. requirements for import tariffs, and consider whether the Federal Circuit’s decision represents a turning point—or whether the foundations of the new U.S. trade policy remain unchanged.
Delegated Power and International Constraints:
Understanding U.S. Tariff Authority
Despite the philosophy of checks and balances, most countries delegate the authority to adjust import tariffs to the executive branch. The Organisation for Economic Co-operation and Development (OECD) has long recognized that tariffs serve as tools of economic management rather than mere revenue sources.
In the United Kingdom, this model was reinforced after Brexit: Parliament set the framework in the Taxation (Cross-border Trade) Act 2018, but HM Treasury and HMRC exercise the authority to vary tariffs by secondary legislation, allowing rapid adjustments to economic conditions.
In the United States, Congress provided similar flexibility through Section 604 of the Trade Act of 1974, which lets the President modify the Harmonized Tariff Schedule (HTS). But here the President is bound by WTO commitments: tariff ceilings agreed in the Uruguay Round limit how far duties can rise without breaching U.S. obligations.
To expand executive flexibility, Congress enacted additional statutes. Section 232 of the Trade Expansion Act of 1962 allows tariffs when imports threaten national security, while Section 301 of the Trade Act of 1974 permits retaliation against unfair foreign practices. Both require prior investigations, balancing agility with accountability.
The IEEPA Experiment and Its Limits
Because those investigations take time, administrations have looked for faster tools. One was Section 203 of the IEEPA, which, under presidential interpretation, could authorize tariffs without investigation. But on August 29, 2025, the Federal Circuit ruled this approach unlawful: IEEPA does not authorize duties, and granting the President unchecked taxing power would violate separation of powers.
By contrast, Section 232 tariffs have repeatedly survived judicial review. Courts have upheld the President’s ability to impose and later modify them as part of a continuing course of action, and the Supreme Court has twice declined to intervene. In effect, Section 232 has emerged as the judicially confirmed cornerstone of U.S. trade authority.
Is the New U.S. Automotive Trade Policy Under Legal Scrutiny?
The Federal Circuit’s IEEPA ruling has led some to question whether the broader trade policy agenda is at risk. It is not. The decision invalidates IEEPA tariffs on generic goods, but it does not touch Section 232 or Section 301.
For the automotive industry, this distinction matters. Imports of vehicles, auto parts, and core inputs such as steel, aluminum, and copper all fall under Section 232 tariffs. These measures have been challenged in court many times, and each time their legality has been upheld. The result is clear: the new automotive trade policy is not under scrutiny.
Implementing the New U.S. Automotive Trade Policy: No Time to Lose
For companies, the challenge is not legal uncertainty but operational readiness. The Federal Circuit’s ruling may reduce reciprocal tariffs on generic imports, but it leaves intact the architecture of the automotive trade regime. Section 232 tariffs remain in force, and they are being integrated into a wider framework of trade agreements.
USMCA already requires strict rules of origin, including content and labor value thresholds. Similar patterns are emerging in discussions with the EU, Japan, and South Korea. Automakers and suppliers must prepare to adapt sourcing strategies, recalibrate compliance systems, and verify origin across increasingly complex supply chains.
The bottom line: the Federal Circuit’s ruling does not change the automotive industry’s reality. The policy framework is secure, the courts have confirmed its legality, and new obligations are on the horizon. Companies cannot afford to lose focus. Implementation demands begin now.
Tariff Shifts – A TCEPro contribution to the Automotive Industry, in collaboration with AIAG. Last Updated: September, 01, 2025.