Explained | The Emergency Law Donald Trump used to impose tariffs

Washington: A federal appeals court ruled Friday that many of President Donald Trump's global tariffs were issued illegally, striking a blow to his economic agenda.

The ruling from US Court of Appeals for the Federal Circuit upheld a lower court's finding in May that the tariffs "exceed any authority granted" by a decades-old law that gives the president sweeping economic powers during a national emergency. That 1977 law, known as the International Emergency Economic Powers Act, had been invoked by the White House to justify many of the import taxes.

Trump used the law in April to impose tariffs on dozens of countries, including some of America's closest allies. He was able to issue the tariffs by declaring a national emergency over the "large and persistent" trade deficit that the United States runs with the rest of the world. The president said that trade deficit -- the gap between what America exports and imports -- reflected unfair trade relationships that have hollowed out U.S. manufacturing.

He also used the law in February to hit Mexico, Canada and China with levies because they had "failed" to do more to stop the flow of migrants and illegal fentanyl into the United States.

Still, the court did not order the tariffs paused and instead said it would allow them to stay in place until Oct. 14, giving the government time to appeal the case to the Supreme Court.

What is IEEPA?

The International Emergency Economic Powers Act gives the president broad powers to regulate various financial transactions upon declaring a national emergency. Under the law, presidents can take a wide variety of economic actions "to deal with any unusual and extraordinary threat, which has its source in whole or substantial part outside the United States, to the national security, foreign policy or economy" of the country.

Presidents have frequently used the law to impose sanctions, justify export controls, and restrict certain transactions and outbound investment, said Kelly Ann Shaw, a partner at Hogan Lovells and a former economic adviser to the Trump administration.

But legal experts have questioned presidents' ability to use IEEPA to impose tariffs and said that the Trump administration's use of the law could lead to court challenges. No president has previously used IEEPA to put tariffs on imported goods, according to a recent Congressional Research Service report.

Instead, presidents have imposed tariffs in response to national security threats using Section 232 of a 1962 trade law. That legal provision differs from IEEPA in part because it requires an investigation and report that has to be issued within 270 days. The provision also focuses on certain imports that "threaten to impair" U.S. national security.

Congress initially passed IEEPA in an attempt to restrict the emergency economic powers granted to the president under the Trading with the Enemy Act, a 1917 law that gave the president expansive authority to regulate international transactions during wartime. President Richard Nixon used the precursor statute to briefly impose a 10% universal tariff in 1971.

Some scholars have questioned whether IEEPA grants the president "unchecked executive authority in the economic realm," according to the Congressional Research Service report. Others argue that IEEPA is an effective foreign policy tool that allows the president to rapidly carry out the will of Congress.

How has Trump used the law before?

During his first term, Trump threatened to impose tariffs on Mexico using his authorities under IEEPA. In May 2019, he said he would use the law to impose a 5 per cent tariff on all goods imported from Mexico, gradually increasing the tariff to 25 per cent unless Mexico took effective actions to alleviate "the illegal migration crisis."

In June 2019, Trump backed down from the threat after the United States reached an agreement with Mexico to stem the flow of migrants to the southwestern border.

Trump did use the authority, though, to impose sanctions against other countries. Trump used IEEPA to penalize Venezuela's state-owned oil company in an effort to impair the government of President Nicolás Maduro by cutting off its main source of cash. He also used the law to impose sanctions on Iran in retaliation for what the administration said were aggressive acts by Tehran.

In June 2020, Trump also invoked the law to authorize sanctions on top officials at the International Criminal Court after the court opened an investigation into potential war crimes by U.S. troops in Afghanistan. President Joe Biden later revoked that executive order.

How have other presidents invoked IEEPA?

Presidents have used the law to address a variety of national security issues. In April 2015, President Barack Obama used IEEPA to authorize sanctions against foreign-based hackers targeting the United States. In September 2001, in the wake of the 9/11 terrorist attacks, President George W. Bush used IEEPA to impede the financial support network for terrorist organizations by authorizing the United States to block the assets of foreign individuals who commit acts of terrorism.

As of Jan. 15, presidents had declared 69 national emergencies invoking IEEPA, according to the Congressional Research Service report. Historically, these national emergencies have often lasted nearly a decade. Thirty-nine of the national emergencies were still in effect, according to the report.