This decision is defective on both its substantive reasoning and its procedural handling.
NA Today, the United States Court of Appeals for the Federal Circuit issued a stay that blocks the enforcement of the Court of International Trade’s ruling concerning Donald Trump’s broad Section 122 tariffs, which place a 10% levy on the majority of imports from around the globe. The Court of International Trade had previously denied a similar stay request, but that denial has now been reversed. The stay remains in effect until the appellate process reaches a conclusion. The dispute comprises two consolidated lawsuits: one brought by the Liberty Justice Center, the same public-interest organization that partnered on the earlier case that led to the Supreme Court overturning Trump’s IEEPA tariffs, on behalf of two small business importers; and another brought by twenty-four state governments led by Oregon. The ruling issued today does not address the case on its merits, and the panel that issued it is unlikely to be the same group that will later decide the merits. Nevertheless, the decision raises significant concerns.
One of the criteria for granting a stay of an injunction is the likelihood of success on the merits. Section 122 of the Trade Act of 1974 authorizes the president to impose tariffs of up to 15% for up to 150 days in response to “fundamental international payments problems” that produce a “large and serious United States balance-of-payments deficit” or to “an imminent and significant depreciation of the dollar,” or to create a need to cooperate with other nations to address an international balance-of-payments disequilibrium. The Court of International Trade concluded that there is no balance-of-payments deficit of the kind required by the statute. The Federal Circuit’s ruling today states that, while it does not provide its own interpretation of Section 122 at this early stage, it is persuaded by the federal government’s argument that the CIT majority’s interpretation—that “balance-of-payments deficit” is limited to deficits measured by liquidity, official settlements, or the basic balance—may be incorrect. The panel offers little analysis in support of this position and largely ignores substantial evidence indicating that a balance-of-payments deficit should be read to refer to conditions that can arise only under a fixed exchange-rate regime in place before 1973 (I summarized that evidence in the amicus brief I filed on behalf of myself and the Cato Institute).
The ruling also misses a crucial point: accepting the government’s interpretation would grant the president near-unrestricted authority to impose Section 122 tariffs at will. That, in turn, upon the CIT’s own observations, triggers serious constitutional nondelegation concerns (which I detailed extensively in Part III of the amicus brief). The Federal Circuit panel dismisses those worries, asserting that there are already guardrails in Section 122 that satisfy the nondelegation requirement and thus there is no need to specify exact measurement methods for the balance-of-payments deficit in order for the statute to withstand challenge. The problem with this view is that there are no meaningful guardrails if a balance-of-payments deficit is deemed to exist virtually all the time. As argued in our brief, the 15% tariff cap is insufficient, and the 150-day limit could be easily circumvented under the government’s interpreted framework.
Beyond the nondelegation issue, the panel also entirely overlooked the major questions doctrine. The plaintiffs argued, and this is explained in greater detail in Part II of the amicus brief, that this doctrine weighs heavily against the government’s position. Another factor in deciding whether a stay is warranted is the possibility of irreparable harm. As I have noted previously, importers who must pay unlawfully imposed tariffs suffer a range of harms that cannot be fully remedied by post hoc refunds—such as lost sales, broken supplier relationships, diminished investment, and more. Last year, when the Federal Circuit granted a stay of the IEEPA tariffs, the resulting prolonged collection of illegal taxes caused widespread and severe harm of this nature. The Court of International Trade appears to have learned from that error in this instance, but the Federal Circuit panel has not.
The Federal Circuit’s ruling contends that these effects can be disregarded because they do not necessarily arise from the stay itself but rather from the undisputed risk that plaintiffs may owe the tariffs eventually. That line of reasoning is hard to credit. If tariffs are being collected with every transaction right now, they will almost certainly raise prices, cause further lost sales, and disrupt supplier relationships to a greater degree than a mere possibility of future liability—especially given the strength of the case against the tariffs. Moreover, the IEEPA refund mechanism provides a cautionary tale: nearly four months after the Supreme Court’s decision, only about $20.6 billion of the $166 billion in unlawfully collected IEEPA tariffs has been distributed, while the government has sought to withhold much of the remainder. This history underscores why the Federal Circuit should be wary of trusting assurances from the Trump Administration that any harms would be promptly remedied by refunds if the case were decided against the government.
Today’s ruling does not necessarily foretell the ultimate disposition on the merits. The court’s substantive analysis is superficial and tentative, and several essential points receive little to no consideration. Moreover, the merits question is likely to be reviewed by a different set of judges. Stay motions in the Federal Circuit are decided by a special motions panel, whose members’ identities are not publicly disclosed. Consequently, the merits issue may be reviewed by an entirely different panel, or, alternatively, it could be heard en banc by all 11 active Federal Circuit judges (as occurred in the IEEPA case). As I have observed previously, the injunction stayed by today’s ruling would not have fully blocked the collection of Section 122 tariffs—for technical reasons, it would apply only to tariffs paid by the state of Washington and the two private importers represented by the LJC. Even so, this decision makes it unlikely that Section 122 tariff collection will be halted or meaningfully limited until the appellate process runs its course, which could take several more months or longer if the case reaches the Supreme Court.
Despite its narrow scope, this decision is troubling and problematic. The court misread several core issues, particularly in its failure to recognize the sweeping nature of the government’s claim to tariff authority. It is my hope that the panel that eventually reviews the case on its merits will avoid repeating these errors.
