USA - NATIONWIDE: An Introduction to International Trade: Customs

The Second Trump Trade Doctrine: Tariffs, Courts, and Compliance Challenges

Early into President Trump’s second administration and the international trade landscape has changed dramatically. As expected, the President has aggressively used tariffs to generate revenue, shape foreign policy, and enhance national security.

On April 2, 2025, as part of President Trump’s “Liberation Day,” reciprocal tariffs were imposed on all U.S. imports. The International Emergency Economic Powers Act (IEEPA) affords the President with the authority to regulate international trade, financial transactions, and other economic activities during national emergencies. In this instance, President Trump declared a national emergency on trade practices that contribute to large and persistent annual U.S. good deficits. Under the IEEPA, the President imposed an additional ad valorem rate of duty of 10% on all articles imported into the U.S. These tariffs went into effect on April 5, 2025. Furthermore, some imports are subject to higher country-specific rates which were set to go into effect on April 9, 2025 (see https://www.federalregister.gov/d/2025-06063). However, on April 9, President Trump paused the higher country-specific rates for 90 days. During the pause, those trading partners are subject to an additional ad valorem rate of 10%, like all other countries (see https://www.federalregister.gov/d/2025-06462).

Initially, the temporary pause on tariffs did not apply to imports from China and Hong Kong. As a result, President Trump had raised the reciprocal tariff on Chinese imports from 84% to 125%, in addition to existing tariffs on Chinese products. In response, on April 12, 2025, China increased its retaliatory tariff from 84% to 125%, warning that if U.S. tariff hikes continued, it would cease countermeasures as U.S. exports to China had become unmarketable. However, as of May 12, 2025, trade negotiations led to the inclusion of China and Hong Kong in the tariff pause. As part of the agreement, the U.S. reduced tariffs on Chinese imports from 125% to 10%, while China lowered its retaliatory tariff from 125% to 10%. Additionally, China announced it would suspend all non-tariff countermeasures taken against the U.S. since April 2, 2025.

Moreover, certain products are excluded from the reciprocal tariffs. These include:

• imports from Canada or Mexico;
• intangibles, donations, business records, informational materials, travel baggage;
• steel and aluminum articles subject to Section 232 duties;
• automobiles and automobile parts subject to Section 232 duties;
• copper, pharmaceuticals, semiconductors, lumber articles, certain critical minerals, energy and energy products;
• all articles from a trading partner subject to Column 2 duty rates (Cuba, North Korea, Russia, and Belarus); and
• all articles that may become subject to Section 232 duties.

The reciprocal tariffs have received pushback including several court challenges to the president’s IEEPA authority, the reintroduction of legislation to curb unilateral tariff power, and a Senate joint resolution to block some of the Canada IEEPA tariffs.

Under Trump’s IEEPA authority, he also imposed tariffs on goods from Canada, China, and Mexico to curb the flow of drugs and illegal migration into the U.S. See https://www.federalregister.gov/d/2025-02407; https://www.federalregister.gov/d/2025-02406; https://www.federalregister.gov/d/2025-02293.

A 20% tariff on all products from China went into effect March 4, 2025, doubling the 10% originally imposed (see https://www.federalregister.gov/d/2025-03677). Unlike the Section 301 tariffs imposed during Trump’s first term which applied only to specific goods depending on their tariff classification, the IEEPA tariffs apply to all Chinese goods. Shortly after U.S. tariffs took effect, China unveiled a series of retaliatory measures against the U.S. including additional tariffs targeting U.S. energy, agriculture, and industrial goods.

A 10% tariff was issued on energy resources from Canada, a 25% tariff on all other products from Canada, and a 25% tariff on all products from Mexico. However, on March 7, 2025, these tariffs were paused for products that qualify for preferential tariff treatment under US-Mexico-Canada Agreement (USMCA). See https://www.federalregister.gov/d/2025-03991; https://www.federalregister.gov/d/2025-03990.

In addition to the IEEPA tariffs, President Trump reinstated the full 25% tariff on steel imports and increased tariffs on aluminum imports to 25% under Section 232 of the Trade Expansion Act of 1962 to protect U.S. national security (see https://www.federalregister.gov/d/2025-02833; https://www.federalregister.gov/d/2025-02832). With the tariffs, all alternative agreements and general approved exclusions were terminated. Additional reforms included applying strict “melted and poured” standards, expanding tariffs to include key downstream products, and cracking down on tariff misclassification and duty evasion schemes.

Under Section 232, President Trump also imposed a 25% tariff on specified automobiles and certain vehicles parts. See https://www.federalregister.gov/d/2025-05930. Products subject to the tariff include passenger vehicles and light trucks, engine and engine parts, transmissions and powertrain parts, and electrical components. The tariffs on automobiles went into effect April 3, 2025, and the tariff on automobile parts went into effect on May 3, 2025. For automobiles that qualify for USMCA preferential tariff treatment, the tariff will apply exclusively to the non-U.S. content of the automobile. For USMCA-qualified automobile parts, the 25% tariff will only apply to the value of the non-U.S. content. See https://www.federalregister.gov/documents/2025/05/20/2025-08917/procedures-for-submissions-by-importers-of-automobiles-qualifying-for-preferential-tariff-treatment

Furthermore, on April 15, 2025, President Trump launched an investigation into national security risks posed by U.S. reliance on imported processed critical minerals and their derivative products. See https://www.federalregister.gov/d/2025-06836. If the Secretary of Commerce finds that these imports do impair national security, President Trump may impose new tariffs under Section 232, replacing the current reciprocal tariffs under IEEPA authority.

On May 28, 2025, the United States Court of International Trade (CIT) struck down the President’s use of the International Emergency Economic Powers Act (IEEPA) to impose tariffs. See https://www.cit.uscourts.gov/sites/cit/files/25-66.pdf

The decision marks the first judicial rejection of a tariff measure enacted during the Trump administration and the first court decision to directly challenge President Trump’s trade policies.

The CIT’s ruling underscores the constitutional limits on presidential power under the IEEPA. The court emphasized that IEEPA does not provide unrestricted authority to regulate imports through tariffs. The court held that the phrase “regulate...importation” does not justify the imposition of tariffs without clear statutory boundaries.

The decision specifically applies to tariffs imposed by President Trump under the IEEPA, which include:

• IEEPA Fentanyl Tariffs on Chinese Products, first implemented in February 2025 and increased to 20% in March 2025, including the removal of the de minimis exemption for low-value goods.
• IEEPA Fentanyl/Border Tariffs on Mexican and Canadian Products, set at 25%, with minimal exceptions (energy products/potash and USMCA qualifying goods).
• IEEPA Reciprocal Tariffs, applying a 10% tariff on goods from all countries except Canada and Mexico. Country-specific rates were paused until July 9 (extends to August 12^th). The China reciprocal tariff was as high as 125% but is now currently 10%.

The CIT ordered the U.S. Government to revoke the IEEPA tariffs within ten days (by June 7, 2025) but the government immediately appealed to the U.S. Court of Appeals for the Federal Circuit (CAFC) and requested a stay of enforcement. If granted, the tariffs will remain in effect until a final court decision. If denied, the government may seek a stay from the CAFC, potentially escalating the case to the Supreme Court. The appeal leaves the outcome uncertain, but the CIT’s order mandates tariff removal unless a stay is issued.

The second Trump administration has prioritized low-value shipments. Under Section 321 of the Tariff Act of 1930, imports under USD800 typically enter the U.S. duty-free, but as of April 2, 2025, goods from China and Hong Kong are excluded. President Trump cited concerns that Chinese shippers conceal illicit substances using this exemption. However, on May 28, 2025, the Court of International Trade overturned the ban. Since the case is on appeal, the status of the exemption remains uncertain.

In response to this concern, Customs and Border Protection (CBP) has proposed a rule that would add additional reporting requirements, allowing CBP to target high-risk shipments more efficiently. This new process would require the submission of advanced data and a modification to the current “release from manifest process,” where goods may enter the U.S. by presenting the bill of landing or a manifest listing each bill of landing. See https://www.federalregister.gov/d/2025-00551.

In addition to tariff and duty changes, CBP has increased fraud investigations. The False Claims Act (FCA) provides that any person who knowingly submits false claims to the government may be liable for three times the government’s damages plus a penalty fee. Liability under the FCA typically involves undervaluing imported goods, misclassification of the type of imported goods, and misrepresentation of the country of origin of the imported goods.

These tariffs and CBP’s strict enforcement have and will continue to significantly impact U.S. businesses’ profit margins and operational efficiency. Companies should design and implement tariff mitigation and compliance strategies as soon as possible. Some strategies to consider include:

• diversifying supply chain to reduce dependency on a single market;
• using technology, such as advanced data analytics tools and supply chain management software, to help uncover vulnerabilities that may result from tariff changes;
• optimizing logistics and distribution by consolidating shipments to reduce transportation costs, leveraging local distribution centers, and collaborating with logistics providers to streamline operations and ensure compliance; and
• keeping teams updated on new regulations and best practices to reduce errors and non-compliance risks.

Despite the CIT overturning the IEEPA tariffs, the government’s appeal keeps their future uncertain. Staying informed on legal challenges and policy shifts will be key for strategic planning.