Trade Court Declares Trump’s Tariffs Invalid

New York—A ruling from the U.S. Court of International Trade (CIT) moves to block President Donald Trump from imposing steep tariffs on Canada, Mexico, China, and the 50-plus other countries included on the list of “reciprocal” tariffs announced in early April.

However, the ruling is not expected to change anything in the short term.

The Trump administration already has appealed the decision to the U.S. Court of Appeals for the Federal Circuit, and the appeals court is expected to suspend CIT’s ruling while the appeal works its way through the courts.
 
On Wednesday, a three-judge panel found that the International Economic Emergency Powers Act (IEEPA), the 1977 law Trump invoked to impose certain tariffs, does not give the president “unbounded authority” to “impose unlimited tariffs on goods from nearly every country in the world.”

Early in the year, Trump used the law to invoke levies on goods from Canada and Mexico in return for what his administration said was their role in allowing fentanyl to enter into the United States, and on China for failing to stop the flow of synthetic opioids into the U.S.

The trade court referred to these tariffs collectively as the “trafficking tariffs.”   

In early April, the president invoked the IEEPA again when he announced a 10 percent duty on goods from all trading partners (the “worldwide tariffs”) and unveiled a list of 57 countries whose imports will face higher rates, ranging from 11-50 percent (the “retaliatory” tariffs).

The president imposed these tariffs in response to a national emergency related to what he views as an imbalance in the U.S. trade relationships and tariff rates, and U.S. trading partners’ economic policies that “suppress domestic wages and consumption, as indicated by large and persistent annual U.S. goods trade deficits.”

Trump said these deficits pose an “unusual and extraordinary threat to the national security and economy of the United States.”

The announcement of the country-specific tariffs sent the jewelry industry into a tailspin, as many key countries in the supply chain were on the country-specific tariff list, including China, India, Thailand, Botswana, Vietnam, and Switzerland.

While the tariffs have since been lowered and paused, Wednesday’s ruling would block them entirely.

In a member alert sent out Thursday morning, the Jewelers Vigilance Committee noted that while CIT’s ruling is a “positive” step toward the elimination of the IEEPA tariffs, all tariffs imposed under this authority remain in effect.

In an email to National Jeweler, the organization’s President, CEO, and General Counsel Sara Yood explained that the appellate court is expected to stay the CIT ruling declaring the tariffs invalid, which means they will remain in effect until all appeals are finished.

So, while the tariffs are technically invalid at this moment in time, it is not expected that the government will change the entire tariff structure with an appeal underway, she added.

In the alert, JVC told members that they still need to declare all imports under the applicable tariff provisions and pay duties. 

JVC said there will be a way for companies to claim refunds on tariffs paid if they are declared invalid.

There is nothing specific members need to do right now to preserve their rights to a refund, though JVC does recommend keeping “thorough” records of imports and duties paid.

The alert also notes that the court’s decision does not affect any of the Section 301 tariffs imposed on goods from China during the first Trump administration, and also does not impact the Section 232 tariffs imposed on other industries, including steel and aluminum.

Wednesday’s ruling came as the result of two cases brought before the court, one filed by a dozen states, led by Oregon, and the other brought by five small businesses, including lead plaintiff V.O.S. Selections Inc., a family-run wine importer, and Terry Precision Cycling LLC, a Burlington, Vermont-based company that specializes in bikes and biking gear for women.

The full text of the ruling is available here.

While the back-and-forth over the president’s tariffs continues, there are many in the jewelry industry who are hopeful that diamonds and colored gemstones will gain an exemption because they cannot be produced in the U.S.

On Wednesday, Jewelers of America President and CEO David Bonaparte said, “Because there are no commercial diamonds found in the U.S., tariffs on diamonds do not protect or potentially grow jobs in the U.S.

“As [U.S. Secretary of Commerce] Howard Lutnick said, the administration will not tax cocoa and mangos because they are not from the U.S. … Diamonds are cocoas and mangos. We agree with the administration and do not want to create a scenario where diamond prices are increased for U.S. consumers.”

De Beers Group CEO Al Cook expressed a similar sentiment in an interview on CNBC this week, telling anchor Manisha Gupta, “Natural diamonds are not found in the United States, and they never will be. 

“There are no U.S. diamond mining jobs to protect. So, we believe that the United States will exempt diamonds from tariffs.”