Updates with details of court hearing and confirmation of 1 August effective date for new tariffs.
Federal appeals court judges pressed a senior Justice Department official Thursday on why decades of US trade deficits were suddenly an emergency that justified President Donald Trump's imposing sweeping import tariffs that have marked his first seven months in office.
The US Court of Appeals for the Federal Circuit in Washington held a two hour hearing on Thursday in a case that could, later this year, throw out most tariffs Trump has imposed since taking office in January and upend trade agreements his administration has negotiated with foreign trade partners.
The legal case, brought forward by a group of businesses and many US states, hinges on whether Congress explicitly delegated its constitutional authority to regulate foreign trade to the White House through the International Emergency Economic Powers Act (IEEPA), a law enacted in 1977. A president's authority to declare an economic emergency is rarely challenged by Congress or in courts. But previous presidents only used that authority to impose sanctions on foreign companies and individuals.
Trump used IEEPA to impose tariffs on imports from Canada, Mexico and China — based on the threat of drug trafficking — and on imports from nearly every country, citing the alleged "economic emergency" of trade imbalances.
The US Court of International Trade in May found Trump's use of the law to impose tariffs was unlawful and ordered the IEEPA tariffs rescinded and customs duties collected refunded, but the administration asked the US Court of Appeals for the Federal Circuit to overturn the ruling.
The appeals court panel of ten judges on Thursday pressed the administration's representative, assistant attorney general Brett Shumate, to explain why Trump chose to invoke IEEPA to impose tariffs. Some members of the panel also asked Shumate why Trump's administration declared trade deficits to be an emergency even though the US has run large trade deficits for decades.
"I think it's undisputed that IEEPA would clearly provide the president with the authority to prohibit all imports," Shumate said. Trade deficits have "reached a tipping point" and threatened US manufacturing capacity, justifying the declaration of an economic emergency, he said.
Federal courts have no role in curbing presidential authority to declare an economic emergency and impose tariffs, Shumate said. "The president himself is bound by law," Shumate said. "Congress itself can review the declaration of an emergency and terminate that."
But some members of the panel questioned whether Congress could in practice easily curb Trump's emergency declarations. At the time IEEPA was passed in 1977 a resolution adopted by a simple majority in one of the chambers of Congress would have been sufficient to terminate a president's declaration of economic emergency. Changes to the law since then require a veto-proof majority to overturn a president's decision.
"You just heard an argument... that our federal courts are powerless, that the president can do whatever he wants, whenever he wants, for as long as he wants, so long as he declares an emergency," said Neal Katyal, who was representing a group of businesses opposed to tariffs before the appeals court. "It makes a breathtaking claim to power that no president has assumed in 200 years."
The parties challenging Trump's tariffs have received supportive briefs from the US Chamber of Commerce and a group of 30 former Republican federal and state officials.
Some of the judges asked Katyal and Oregon solicitor general Ben Gutman, who was speaking before the court on behalf of the coalition of states, if they agreed with Trump's specific justification for tariffs, such as the hollowing of US manufacturing capacity or threats to supply chains for crucial products.
The plaintiffs' lawsuit focused on Trump's claim that "persistent trade deficits" presented an "unusual and extraordinary threat" because "everything else that's discussed there is either mentioned as a cause or an effect," Gutman said. "It's the trade deficits that are what the president was claiming as the justification for the action."
The appeals court can take weeks to reach a decision following Thursday's hearing. No matter the outcome, one of the parties likely will ask the Supreme Court to weigh in on the case.
The US Court of Appeals for the DC Circuit also will hold a hearing on 30 September in a separate case challenging Trump's tariff authority, brought forward by US toy companies Learning Resources and hand2hand.
The state of tariffs
Nearly every US trade partner has faced a 10pc tariff since 5 April and higher rates on imports from most destinations are scheduled to go into effect on 1 August, the White House said Thursday.
A trade deal with the UK will maintain that rate after 1 August. Trump unilaterally set tariffs on imports from Brazil to 50pc effective 6 August. The US is assessing a 30pc broad tariff on imports from China and could increase the rate to 54pc on 10 August, but that deadline is likely to be extended.
Trump on Thursday set a new deadline of 30 October for negotiating a new tariff rate with Mexico, keeping in place the current 25pc rate until then.
But his administration has signaled it would continue to exempt products covered by the US-Mexico-Canada free trade agreement from tariffs.
Energy commodities are also exempted from Trump's emergency tariffs.
Trump has taken a different legal route to impose tariffs on imports of steel, aluminum, cars and auto parts. The appeals court case is not challenging the administration's sectoral tariffs.
