By Brooke Thomson
President and CEO

Update, May 29, 3:50 pm: A federal appellate court on Thursday temporarily stayed a ruling that effectively wiped out most of President Trump’s tariffs. The U.S. Court of Appeals for the Federal Circuit issued an order Thursday staying the trade court’s ruling while it considers motions from both sides.

President Donald Trump’s plan to impose tariffs on imports from almost every country in the world is on hold after a federal court in New York ruled that the administration does not have the authority to levy the taxes under the 1977 International Emergency Economic Powers Act (IEEPA).

What does this mean for hundreds of AIM members affected by the tariffs that have either been imposed or put on hold during the past several months? It’s impossible to tell – and that’s why the watchword for now is caution.

U.S. Court of International Trade, ruling in separate cases brought by five small businesses and a coalition of 12 states, found that federal law did not grant the administration “unbounded authority” to impose tariffs. The Manhattan-based court ordered a permanent halt to most of the tariffs and further banned their future modification. A panel of three judges gave the White House 10 days to complete the formal process of stopping the tariffs.

The administration immediately appealed the decision to the U.S. Court of Appeals for the Federal Circuit in Washington. The case is widely expected to end up before the US Supreme Court.

The court’s decision blocks the tariffs the president slapped last month on almost all U.S. trading partners and levies he imposed before that on China, Mexico and Canada.

Appearing at the trade court this month, businesses including VOS Selections, a wine and spirits importer, argued that the economic emergency law does not explicitly say the president can impose tariffs. They also disputed Mr. Trump’s rationale for invoking that law, saying the nation’s persistent trade deficit — decades in the making — does not qualify as an emergency.

On April 2, President Trump imposed so-called reciprocal tariffs of up to 50% on countries with which the United States runs a trade deficit and 10% baseline tariffs on almost everybody else. He later suspended the reciprocal tariffs for 90 days to give countries time to agree to reduce barriers to U.S. exports. But he kept the baseline tariffs in place. Claiming extraordinary power to act without congressional approval, he justified the taxes under IEEPA by declaring the United States’ longstanding trade deficits “a national emergency.”

The ruling leaves in place other tariffs, including those on foreign steel, aluminum and autos. Those levies were invoked under a different law that required a Commerce Department investigation and could not be imposed at the president’s own discretion.

The Trump Administration says the tariffs are critical to re-industrializing the country and to providing leverage for ongoing to trade negotiations with individual companies.  Aides had told the court in recent days that an adverse ruling could weaken the administration’s negotiating position and imperil ongoing talks.

But the levies also roiled financial markets, disrupted supply chains and drove a wedge through many long-standing relationships between AIM members and overseas markets.

Yesterday’s court decision in many ways raises more questions than it answers.

Will the administration use other legal routes to impose across-the-board tariffs?  The president could impose new “restricted” tariffs, the International Court noted, so long as they are “in response to ‘fundamental international payment problems’” that include substantial trade deficits under Section 122 of the Trade Act of 1974. This authorizes the President to impose tariffs of as much as 15% for up to 150 days.

Will other nations reduce the reciprocal tariffs they imposed in response to US levies? America’s trading partners reacted carefully to the decision. Don Farrell, Australia’s trade minister told The New York Times that his country would “study this ruling” while noting that “they may be subject to further legal processes.” In Britain, a government spokesman said that the court ruling was a domestic issue for the United States and noted that this was only the first stage of legal proceedings.

And, most importantly, will the Appeals Court or Supreme Court ultimately overturn the Court of International Trade?

All that uncertainty underscores the need for companies to proceed with caution. Some companies may reassess the way they run their supply chains, perhaps speeding up shipments to the United States to offset the risk that the tariffs will be reinstated on appeal. But the on-again-off-again pattern that has characterized the rollout of tariffs to this point is likely to continue through this next chapter.

In the meantime, experts urge companies to continue to foster relationships with international partners.

“Long term relationships are what matters. Continuing to work on these is actually very important,” says Nada R. Sanders, Distinguished Professor of Supply Chain Management at Northeastern University and a member of the AIM Board of Economic Advisors.

Finally, please continue to share with AIM your company’s experience with tariffs and the ways in which they are affecting your industry. Members stories have been remarkable helpful as AIM has interacted with elected officials and other policymakers on this complex issue.

AIM acknowledges the continued uncertainty surrounding the tariff issue and will keep members updated as developments warrant.