Immediate Impacts, Risks, and Uncertain Future of President Trump’s Unprecedented Worldwide Tariffs

Client Alert  |  April 8, 2025

Reciprocal Tariffs and Mitigation Strategies for Global Supply Chains

On April 2, 2025, President Trump issued Executive Order 14257 (the “Order”) imposing “reciprocal tariffs” on virtually all U.S. trading partners, invoking the broad presidential authority to regulate foreign commerce under the International Emergency Economic Powers Act of 1977 (IEEPA), and raising U.S. tariff rates to levels not seen in over a century.  President Trump’s announced tariffs represent an unprecedented shift in U.S. trade policy and have already generated challenges to his unilateral exercise of tariff authority under IEEPA in the courts and on Capitol Hill.  Amid the shock to global markets and policymakers—as well as longer-term anxieties about global trade and inflation—uncertainty remains about just how long the tariffs may remain in place.  Although certain tariffs took effect on April 5, 2025, with others to follow on April 9, 2025, these measures could be altered at any time through presidential action (the Order allows the president to increase or decrease duties as the president determines is required by the economic and national security interests of the United States), judicial orders, or a bipartisan congressional response.  In this client alert, we discuss (based on current circumstances) the scope, substance, and implications of these unprecedented tariffs, including under what authority President Trump has imposed them, how key U.S. trading partners have responded, how they are being challenged, and what companies affected by the tariffs should know moving forward. 

President Trump’s April 2 Order

As required under IEEPA, the president issued an Order on April 2 declaring a national emergency arising from conditions in the global trading system that have resulted in large and persistent annual U.S. deficits in the cross-border trade of goods, which the Order notes have “grown by over 40 percent in the past 5 years alone, reaching $1.2 trillion in 2024.”  Citing a host of causes for such trade deficits in the domestic policies of foreign trading partners—including tariffs imposed on goods originating from the United States, licensing restrictions and technical barriers, inadequate intellectual property protections, government subsidies, discriminatory requirements perceived to disadvantage U.S. companies, low labor and environmental standards, currency manipulation, and corruption, among other factors—President Trump announced a “universal” 10 percent additional ad valorem duty on all imports from all trading partners (except Canada and Mexico, which are subject to separate tariff measures already in place) that in effect sets a baseline, plus what is described as a “reciprocal” ad valorem duty for certain trading partners listed in Annex I to the Order, which establishes higher duty rates of between 11 and 50 percent for 83 specified countries.[1]

The additional duties applicable to goods imported from some of the United States’ most significant trading partners are set forth in the table below.  In general, the rates below are in addition to other duties imposed under U.S. law, except where the Order sets forth particular exemptions.

Country

Selected Countries’ Reciprocal Duty Rates

Cambodia

49%

Vietnam

46%

Sri Lanka

44%

Bangladesh

37%

Thailand

36%

China

34%

Taiwan

32%

Indonesia

32%

Switzerland

31%

South Africa

30%

Pakistan

29%

India

26%

South Korea

25%

Japan

24%

Malaysia

24%

European Union

20%

Israel

17%

Philippines

17%

United Kingdom

10%

Brazil

10%

Singapore

10%

Chile

10%

Australia

10%

Turkey

10%

Colombia

10%

.

These tariffs represent President Trump’s latest, dramatic break with longstanding U.S. trade policies.  The recently announced universal and reciprocal tariffs together raise the United States’ average effective tariff rate on imported goods to above 20 percent, the highest rate since the Taft administration in 1909.  The last period of sustained tariff rate increases was during the early 1930s, when President Herbert Hoover signed the Smoot-Hawley Tariff Act to raise tariffs on over 20,000 types of imported goods, which, together with retaliatory measures imposed by other nations, deepened and prolonged the Great Depression. 

Scope and Effective Dates of Universal Tariff and Reciprocal Tariffs

The Order provides that all articles imported into the customs territory of the United States shall be subject to an additional ad valorem rate of duty of 10 percent.  This universal baseline tariff took effect on 12:01 a.m. eastern daylight time on April 5, 2025, and applies to all countries exporting to the United States, except Canada and Mexico.

In addition to the universal baseline tariff, the Order imposes individualized increased duty rates on trading partners enumerated in Annex I to the Order.  The individualized tariff rates will take effect on 12:01 a.m. eastern daylight time on April 9, 2025, and will replace the baseline tariff where they apply.

The Order notes that the country-specific increased ad valorem rates of duty apply to articles even if they are imported pursuant to the terms of an existing U.S. trade agreement (other than the United States-Mexico-Canada Agreement (USMCA), as discussed below).  In addition, the rate of duty established by the Order is in addition to any other duties, fees, taxes, exactions, or charges applicable to the imported articles, unless the items are eligible for an exemption set forth in the Order.

Exemptions

The Order sets forth a series of exemptions that appear calculated to de-conflict the duties with some, but not all, of the prior tariff actions announced by the second Trump administration.  The exemptions include:

  1. Items that are exempt from regulation under IEEPA, such as informational materials and donations of articles, such as food, clothing, and medicine, intended to be used to relieve human suffering;
  2. Articles and derivatives of steel and aluminum that are subject to previously imposed 25 percent duties under Section 232 of the Trade Expansion Act of 1962 (“Section 232”), a statute that authorizes the president to impose duties on articles that the U.S. Department of Commerce has determined are imported into the United States in quantities or under circumstances that threaten to impair national security;
  3. Automobiles and automotive parts subject to additional 25 percent duties under a separate Section 232 action announced by President Trump on March 26, 2025;
  4. Other items enumerated in Annex II to the Order, including copper, pharmaceuticals, semiconductors, lumber articles, certain critical minerals, and energy and energy products (the Trump administration has separately announced its intent to investigate most of these items under Section 232);
  5. Articles from countries that do not have Permanent Normal Trade Relations (PNTR) with the United States, which presently includes Cuba, North Korea, Russia and Belarus (imports from these countries are subject to punitive tariffs, and may also be separately subject to restrictions under sanctions administered by the U.S. Department of the Treasury’s Office of Foreign Assets Control); and
  6. All articles that may become subject to duties pursuant to future actions under Section 232.

Treatment of Articles from Canada and Mexico

The Order is calibrated to not immediately affect goods imported from Canada or Mexico, which are the subject of previously announced tariffs imposed under IEEPA.  Specifically, on February 1, 2025, President Trump announced the imposition of an additional 25 percent ad valorem rate of duty on all articles that are products of Canada or Mexico, except for a separate 10 percent additional ad valorem rate of duty for energy resources from Canada or potash from either Canada or Mexico. Those earlier tariffs were imposed pursuant to IEEPA and were characterized by President Trump as a response to inflows of illegal drugs and migrants at the U.S. northern and southern borders.  After negotiations with Ottawa and Mexico City, the Trump administration delayed the effective date of these duties to March 4, 2025, and following negotiations with the automotive industry, the tariffs were also amended to exempt articles eligible for duty-free entry under the terms of the USMCA.

The Order does not disturb this arrangement.  However, it notes that, in the event that the president’s prior executive orders imposing the duties on imports from Canada and Mexico are terminated or suspended (for example, by a congressional resolution to terminate the national emergencies at the northern and southern borders, or a determination by President Trump that those emergencies are no longer present), then the Order would operate to impose an ad valorem rate of duty of 12 percent on goods that do not qualify for preferential treatment under the USMCA.

Treatment of Articles from China

On February 1, 2025, President Trump issued an executive order imposing an additional 10 percent ad valorem rate of duty to all articles that are products of the People Republic of China (PRC) or of Hong Kong, citing a national emergency with respect to illegal drugs entering the United States and the PRC’s alleged failure to arrest, seize or otherwise intercept chemical precursor suppliers and money launderers connected to the illegal drug trade.  President Trump subsequently increased such duties on China to 20 percent, effective March 4, 2025, citing the PRC’s continued failure to adequately respond to the emergency.  These prior IEEPA-based tariffs were also (and, as of today, remain) cumulative to tariffs that already apply to goods from China, including duties imposed under the Harmonized Tariff Schedule of the United States (HTSUS), antidumping and countervailing duty orders (ADD/CVD) entered by the U.S. Department of Commerce related to particular categories of goods, duties imposed under Section 301 of the Trade Act of 1974 (“Section 301”), and certain national security related duties imposed on particular products under Section 232.

The Order does not provide exceptions for China-origin articles subject to the previous 20 percent IEEPA-based tariffs, nor does it exempt items subject to the Section 301 tariffs targeting China (which imposed duty rates between 7.5 percent and 25 percent on most goods from China, including electronics, semiconductors, textiles, and more).  As a result, China-origin goods will be, upon the entry into force of the reciprocal rate on April 9, 2025, subject to a 54 percent tariff virtually across the board under IEEPA, with additional HTSUS, Section 301, and ADD/CVD duties potentially applicable.  The reciprocal duty applies to goods from mainland China, as well as to goods from Hong Kong and Macau.

As of April 8, 2025, President Trump had announced that he would raise the reciprocal rate applicable to goods of China and Hong Kong even further, by an additional 50 percent, in response to retaliatory measures announced by Beijing.

Table: Illustration of selected China-related tariffs imposed by the United States (table does not include ADD/CVD rates or other remedial duties that may apply to particular categories of goods)

Tariff Program

Rate

Average effective tariff rate on imports from China, pre-IEEPA tariffs (HTSUS, plus Section 301)

approx. 11%[2]

IEEPA tariffs related to the opioid emergency

20%

IEEPA tariffs related to the trade deficit emergency

34%

(IEEPA tariffs responding to PRC retaliatory measures)

(50%)

Cumulative, approximate average duty rate on articles from PRC, Hong Kong, and Macau
(actual rates for particular items are likely to be higher or lower than 65%, which is an approximate average)

approx. 65% (or 115%)

.

Other Limitations: Goods With At Least 20 Percent U.S.-Origin Content

The reciprocal duty applies only to the non-U.S. content of a subject article, provided that at least 20 percent of the value of the subject article originates from the United States.  Under the Order, “U.S. content” refers to the value of an article attributable to the components produced entirely, or substantially transformed in, the United States. U.S. Customs and Border Protection (CBP) is authorized to require documentation to verify the value of the U.S. content.

Articles Entered Into Foreign Trade Zones

The Order provides that subject foreign items that are admitted into a Foreign Trade Zone (FTZ) on or after April 9, 2025, must be admitted with “privileged foreign status” (PF status), as defined at 19 C.F.R. § 146.41.  PF status locks in the duty rate of an item on the basis of its condition and origin as it enters the FTZ, and this duty rate cannot be changed by subsequent processing, assembling, manufacturing, or substantial transformation in the FTZ.  Therefore, if an item enters an FTZ under PF status, undergoes substantial transformation, and is removed from the FTZ (other than for export), CBP will charge the original duty rate as determined upon admission to the zone.

Availability of De Minimis Exception

The de minimis statutory exemption has allowed many shipments valued at $800 or less to enter the United States duty-free.  The Order states that duty-free de minimis treatment (governed by the terms at 19 U.S.C. 1321(a)(2)(A)-(B)) remains available for now.  However, the Order indicates that this exemption will be removed, once the secretary of commerce notifies the president that “adequate systems are in place” to process and collect duties from such shipments.  Further, as discussed below, another executive order, also issued on April 2, 2025, eliminates de minimis treatment for shipments from China and Hong Kong, effective May 2, 2025.  That order is the first announcement of a mechanism to collect duties on this high-volume type of shipment and may indicate a path toward removing the exemption for goods from countries other than China.

Modification Authority – Up or Down

The Order specifies that the president may modify the tariffs, if the action is “not effective in resolving the emergency conditions described above” by reducing the United States’ overall trade in goods deficit or reducing non-reciprocal arrangements of U.S. trading partners.  Further, the president has warned that he will consider increasing the duty rates, or their scope, in response to retaliation by a foreign country against goods imported from the United States.  For example, as noted above, after China responded to President Trump’s Order by announcing matching 34 percent tariffs on U.S. goods, the president threatened to impose an additional 50 percent tariff on Chinese goods.  

Conversely, should a foreign country take “significant steps to remedy non-reciprocal trade arrangements and align sufficiently with the United States on economic and national security matters,” the president will consider decreasing the duties or limiting their scope.  Finally, should U.S. manufacturing capacity continue to worsen, the president may increase the duties imposed under the Order.

Executive Order Closing De Minimis Exemption for Low-Value Imports from China and Hong Kong

Also on April 2, President Trump signed Executive Order 14256, which eliminates duty-free de minimis treatment under section 321(a)(2)(C) of the Tariff Act of 1930 for low-value goods imported from the PRC or Hong Kong, effective May 2, 2025.  Under the terms of this executive order, international postal items valued at or under $800 will face a duty rate of either 30 percent of their value or $25 per item, increasing to $50 per item on June 1, 2025.  Low-value shipments of articles from the PRC or Hong Kong that enter the United States other than through the international postal network are subject to formal entry requirements and are subject to all applicable duties.  The Order directs the secretary of commerce to submit a report within 90 days recommending whether to also close the de minimis exemption for imports from Macau, to avoid circumvention of these measures. 

According to an accompanying “fact sheet” released by the White House, this executive order aims to “counter[] the ongoing health emergency posed by the illicit flow of synthetic opioids into the U.S.” by “targeting deceptive shipping practices by Chinese-based shippers, many of whom hide illicit substances, including synthetic opioids, in low-value packages to exploit the de minimis exemption.”

Although the de minimis exemption currently remains available for shipments of goods valued at or under $800 that are imported from other jurisdictions, the two April 2, 2025, executive orders make clear that the Trump administration is contemplating closing the de minimis exemption for some—and possibly all—of the other imports to which it still applies.  Whether international carriers are able to effectively navigate these new requirements will be a bellwether for the fate of the de minimis exception for goods originating from other countries.

Historical Context

The April 2, 2025, tariff actions—styled by President Trump as “Liberation Day”—represent a seismic shift in the United States’ approach to international trade.  Since the liberalization of global trade beginning in the 1940s, tariffs or similar restrictions on imports have generally been used—or threatened—selectively to protect specific industries.  One exception was a 10 percent across-the-board ad valorem tariff imposed by President Richard Nixon in 1971 as part of an effort to negotiate monetary policy with the Group of Ten.  In an indication of the decisive, long-term trend away from the use tariffs following the Second World War, the effective average tariff rate in the United States had decreased to less than five percent by the 2010s. 

President Trump’s so-called reciprocal tariff announcement relies on a historical justification for the imposition of higher tariffs.  Until the introduction of the U.S. federal income tax via a constitutional amendment in 1913, tariffs were among the largest sources of federal revenue.  The Smoot-Hawley tariffs, however, had a different purpose: to shield U.S. industry from foreign competition during the nascent Great Depression.  Since the 1940s, tariffs have had a negligible impact on federal revenue and have instead been developed on a multilateral or bilateral basis for broader economic purposes, including protecting or redeveloping sectors of the U.S. economy, including the automotive manufacturing, steel and aluminum production, and agricultural industries.  Presidnet Trump’s tariffs draw on this tradition to justify the dramatic increases in the effective tariff rates for virtually all of the United States’ trading partners, stating that the increased tariffs are designed to reverse “the decline in American manufacturing” and ensure “[t]he future of American competitiveness.”  However, it is evident that at least part of the attraction is the claimed ability for tariffs to lead to significant revenue for the federal government.

President Trump’s tariff actions to date also signify the culmination of a broad shift in tariff policy-making power from Congress to the president.  Tariff policy in the United States has historically been the domain of Congress, which is expressly empowered to impose tariffs under Article I, Section 8 of the U.S. Constitution.  Since the 1930s, the Congress has periodically delegated tariff-related authorities to the president, albeit under carefully delineated circumstances. 

Key statutes expanding the president’s power to control tariff policy include the Reciprocal Tariffs Act in 1934 (which granted President Franklin Roosevelt the power to negotiate tariff reduction agreements with foreign nations), the Trade Expansion Act of 1962 (which allows the president to call for an investigation of imports that threaten national security and impose tariffs in response to affirmative findings, among other actions), and the Trade Act of 1974 (which empowers the U.S. Trade Representative to impose tariffs against “unjustifiable,” “unreasonable,” and “discriminatory” trade actions by other nations, among other actions).  In addition and importantly, in the past the Congress has authorized the president to negotiate multilateral trade agreements under special “fast track” legislation permitting passage of implementing legislation pursuant to an “up or down vote” in the Congress without the possibility of amendments.  President Trump’s unilateral tariff action therefore constitutes both a departure from more than 70 years of liberalized global trade policy and—in the absence of a legal challenge or significant congressional action—a dramatic expansion of the executive’s authority to impose tariffs.

Initial Reactions

The reciprocal tariff actions announced by President Trump in April 2025 have sent shockwaves through the global trading system.  EU officials have called the reciprocal tariff actions “brutal and unfounded,” “an immense difficulty for Europe,” and “a major blow to the world economy.”  While leaders maintain that they can—and should—negotiate with the United States to lower trade barriers, they have also declared their readiness to impose countermeasures in response to the reciprocal tariffs and earlier tariffs on steel and aluminum imports, for which the European Union is finalizing a package of tariffs on up to 26 billion euros of U.S. industrial and agricultural goods.  Indeed, in response to this new round of tariffs, EU members state and officials are considering more unconventional responses to the Trump administration’s trade actions, including the addition of digital services—a major U.S. export to the European Union—to the list of U.S. industries subject to duties, taxes, or penalties.  This would likely further the Trump administration’s concerns that Brussels is targeting U.S.-based “big tech” companies with over-reaching regulation.    

In response to what was described as the Trump administration’s “unwarranted and unjustified tariffs that will fundamentally change the international trading system,” Canadian prime minister Mark Carney announced the imposition of 25 percent tariffs on U.S. vehicles that are not compliant with the USMCA, as well as on non-Canadian and non-Mexican components of USMCA-compliant vehicles imported from the United States.  Canada has to date otherwise refrained from immediate countermeasures in light of President Trump’s decision not to impose full reciprocal tariffs on Canada. 

Other immediate reactions to President Trump’s orders ranged from the imposition of retaliatory measures to expressions of confidence in trade relations with the United States and hopefulness for negotiations.  It remains to be seen whether a more cautious and conciliatory approach will lead to tariff relief for certain countries. 

China’s Retaliatory Measures 

China, the fourth-largest importer of U.S. goods and third-largest source of U.S. imports, took a more active approach to countering the president’s announced tariffs.  On April 4, 2025, China’s Finance Ministry announced that it will match President Trump’s new 34 percent tariffs on Chinese goods with its own 34 percent retaliatory tariff on imports from the United States.

In addition to the 34 percent tariff, China also announced a range of other retaliatory measures on April 4, including the following:

  • China’s Ministry of Commerce added 11 U.S. companies to its list of so-called “unreliable entities,” which bars them from engaging in all import and export activities in China and making new investments in China.
  • Beijing added 16 U.S. entities to its export control list, which prohibits exports of dual-use items to the listed firms. Nearly all of the firms so targeted operate in the defense and aerospace industries.
  • The Ministry of Commerce announced the launch of an anti-dumping probe into imports of certain medical computed tomography tubes from the United States and India.
  • Beijing launched an anti-monopoly investigation into the PRC subsidiary of a major U.S. chemical company.
  • Beijing announced export controls on seven types of rare earth minerals to the United States, which are vital to end uses ranging from electric cars to defense. Notably, the United States imports its rare earth materials predominantly from China, which produces approximately 90 percent of the world’s supply.

In response to China’s retaliatory measures, President Trump on April 7 threatened the imposition of a further 50 percent tariff on Chinese goods, which would increase the potential baseline tariff rate on many Chinese goods to 104 percent.  In the absence of indications of de-escalation between China and the United States, the possibility of additional tit-for-tat escalatory measures appears to be increasing. 

Compliance and Mitigation

In today’s deeply interwoven global trading system, the imposition of nearly across-the-board universal and reciprocal U.S. tariffs poses complex challenges for a wide array of industries and companies both within and outside of the United States.  We discuss several compliance considerations and possible mitigation strategies to address these challenges below. 

Transactions Between Related Parties

The Trump administration’s sweeping changes to cross-border trade place greater scrutiny on, and raise new risks related to, multinationals’ compliance with overlapping yet dueling customs-valuation and transfer-pricing regimes used to determine the transaction price for the cross-border sale of goods between related parties into the United States.  The amount of a tariff depends on the value of the goods subject to the tariff and the origin of the good.  Related parties have the ability to adjust both values and origin of the sale, subject to customs and transfer-pricing rules and restrictions—both of which will be affected by the Trump administration’s sweeping changes and retaliatory responses by foreign countries.

  1. To the extent the costs of tariffs, which are imposed on the importers involved, are borne by a multinational enterprise (MNE) and not passed through to customers, tariffs may affect the taxable income allocated across multiple jurisdictions around the world under U.S. and OECD transfer-pricing principles—which could cause further economic and administrative challenges in these jurisdictions, including in the United States with the Internal Revenue Service. To the extent transfer-pricing principles are used for customs’ valuation purposes, this could also lead to audits by customs authorities around the world.
  2. Differential tariffs by trading partner may incentivize MNEs to seek short-term and long-term changes to their cross-border transactions (including related-party transactions) and supply chains to mitigate and reduce the cost of these tariffs. Such adjustments are not without risk and require careful consideration and bespoke analysis and planning given the competing customs-valuation and transfer-pricing regimes within both the United States and other jurisdictions in what is likely to be an increased enforcement environment. 

Foreign Trade Zones and Subzones

A foreign trade zone (FTZ), or FTZ subzone, is a facility authorized by the Foreign Trade Zone Board of the U.S. Department of Commerce, and subject to monitoring by CBP, that is considered outside of the “customs territory” of the United States. (A regular FTZ is a public facility, whereas an FTZ subzone is typically an area within a single company’s facility.) Under typical circumstances, foreign and domestic merchandise may be admitted into an FTZ, or FTZ subzone, for storage or processing (or other permissible activities), and duties on the foreign merchandise are not payable until the articles enter U.S. commerce (i.e. when removed from the zone for U.S. consumption).  Importers ordinarily have a choice of paying duties either at the rate applicable to the foreign articles at the time they are admitted to the zone or, if used in manufacturing or processing, at the rate applicable to the product produced in the zone when it is removed for consumption.  Under normal circumstances, FTZs and FTZ subzones offer numerous benefits and can mitigate duty liability by deferring when duty is owed, reducing the applicable tariff rate, or offering relief from duties for goods exported from the zone (i.e. goods that never enter U.S. commerce, so long as they are not destined for Canada or Mexico).

Under the Order, as well as other recent trade remedy actions by the Trump administration, these benefits are limited. Imported merchandise that is subject to the trade remedy tariffs under IEEPA, Section 301, or Section 232 must be admitted into an FTZ under “privileged foreign” status.  Under PF status, the merchandise is recorded at its condition and duty rate at the time of admission to the zone, which is determined based on its foreign origin and classification.  This means that once merchandise is admitted in PF status, any subsequent processing or manufacturing activities performed within the zone will not permit a lower duty rate to be applied.  With PF status, the duty rate is effectively “locked in” to that of the merchandise when it entered the zone.  Nonetheless, an FTZ or FTZ subzone could still allow some flexibility under the new measures by deferring when the duties are due and also allowing duty free re-exports.

Contractual Review

Companies seeking to navigate the fast-shifting U.S. tariff environment should consider reviewing their customer-facing and supplier-facing contracts to clarify which party bears responsibility for paying the tariffs and to identify any points of conflict or ambiguity in the event that customers seek to challenge or renegotiate terms.  Particularly important provisions include those (1) determining which party will pay applicable duties, taxes, or value-added tax (VAT); (2) assigning responsibility for cross-border transportation and completion of customs formalities, including by use of Incoterms; (3) permitting termination or a declaration of force majeure in the event that government actions result in price increases; and (4) permitting, prohibiting, or rationing price increases, or describing what is included in the price of goods.

Potential Liability Under the False Claims Act

As fast-evolving and unpredictable tariffs increase complexity for companies, compliance with the U.S. False Claims Act (FCA) will be essential.  The FCA is a key tool in the federal arsenal, which prohibits the avoidance of monetary obligations to the U.S. government by the presentation of false information.  Through qui tam (or whistleblower) provisions, the FCA provides significant economic incentives for private parties, such as employees and customers, to bring lawsuits for alleged violations of the FCA.  If an importer is found to be in violation of the FCA, penalties consist of substantial “treble damages,” equaling the amount of the U.S. government’s damages multiplied by three, as well as inflation-adjusted penalties, currently ranging from $14,308 to $28,619 per successful claim.

Reflecting recent statements by a senior Department of Justice official, the U.S. government has used the FCA aggressively to pursue fraudulent statements related to customs valuation and applicable duties.  For example, on March 25, 2025, the government settled FCA claims against a U.S.-based importer of multilayered wood flooring.  After its competitor and the United States sued the importer for evasion of antidumping, countervailing, and Section 301 duties, the United States and the importer settled the case for $8.1 million (an amount adjusted according to the respondents’ ability to pay).  The U.S. Attorney responsible for prosecuting the case called the settlement “a message” to companies that the United States takes seriously its commitment to pursuing alleged FCA violations.

Initial Legal Challenges

Given the immediate and outsized impact of the Trump administration’s tariffs—as well as their unprecedented scope and questionable legal foundation—some businesses and policymakers have already taken steps to challenge the president’s tariff authority.  The first judicial challenge to the IEEPA-based tariffs imposed by the Trump administration was filed on April 3, 2025, in the U.S. District Court for the Northern District of Florida.  The case, Emily Ley Paper Inc. (d/b/a “Simplified”) v. Trump, was brought by a Florida-based small business that sells premium planners and organizational tools and relies on imports from China.  The lawsuit argues that President Trump’s use of IEEPA to impose the tariffs is unlawful and unconstitutional, and presents four main legal claims: (1) the tariffs are in excess of the president’s authority because IEEPA does not clearly authorize them and the Supreme Court’s “major questions” doctrine bars finding such broad authority in the statute; (2) the tariffs lack a clear connection to the opioid-related national emergency cited as justification; (3) IEEPA, if interpreted to allow tariffs, violates the nondelegation doctrine by granting the president unchecked authority; and (4) the tariff-related modifications to the Harmonized Tariff Schedule of the United States violate the Administrative Procedure Act (APA).  The lawsuit contends that these tariffs inflict severe harm on the plaintiff by increasing costs, reducing competitiveness, and forcing potential layoffs, making them unsustainable.  The complaint seeks an injunction to block enforcement of the tariffs and to vacate all resulting modifications to the HTSUS.

Under the major questions doctrine, the Congress must clearly state its intent to give the president authority to take regulatory actions with outsized economic or political effects.  Emily Ley Paper argues that the economic effects of President Trump’s tariffs are clearly extraordinary, constituting “the largest tax increase in a generation” on the order of “hundreds of billions of dollars per year.”  Since Congress fails to even mention the word “tariff” in IEEPA, the company argues, the statute fails to clearly authorize the president to impose increased tariffs. 

Whether Emily Ley Paper will succeed in challenging President Trump’s orders remains to be seen.  Historically, judicial challenges to IEEPA-based restrictions (which have been rare and typically seen in the sanctions context, which has been the most frequent policy use of IEEPA-based restrictions) have faced an uphill battle.[3] 

Companies seeking to challenge the president’s tariff authority may also consider making constitutional arguments that President Trump’s tariffs violate the constitutional separation of powers.  As noted above, the constitution vests the power to “lay and collect Taxes, Duties, Imposts and Excises” and to “regulate Commerce with foreign Nations” with Congress.[4]  While delegations of legislative power to the executive branch have raised separation of power concerns in certain circumstances, the Supreme Court has authorized delegations of congressional authority “[s]o long as Congress ‘shall lay down by legislative act an intelligible principle to which the person or body authorized to [exercise the delegated authority] is directed to conform.’”[5]   In practice, almost any limitation or direction has been found to satisfy the “intelligible principle” test.  Moreover, the Supreme Court has found that delegations of constitutional authority relating to foreign affairs are permitted to be broader than those concerning domestic affairs.[6] 

We note members of Congress have also taken certain steps to limit the president’s exercise of tariff powers under IEEPA.  Bills to restrain the president’s tariff authorities have been introduced in both houses and on a bipartisan basis.  However, it remains unclear if such proposals have enough support to be passed and even more uncertain whether they have enough support to overcome an all but certain presidential veto if they made their way to the president’s desk.

Conclusion

In only a few short days, President Trump’s tariffs actions have profoundly altered the landscape of international trade and created manifold risks for companies across the U.S. and global economies.  Instability and uncertainty around the application and duration of the tariffs is likely to continue as a variety of legal and legislative challenges to the president’s unprecedented use of IEEPA take shape.  Further, President Trump’s use of effectively unilateral power to adjust or renegotiate tariff rates—combined with the desire of some U.S. trading partners to negotiate quick and lasting tariff relief—suggests that companies should prepare for possible sudden and dramatic shifts in applicable tariff rates.  Affected companies should also closely monitor the responses of major U.S. trading partners such as China, which has shown a readiness to impose strong retaliatory measures in response to President Trump’s orders.  An escalation in trade barriers between China and the United States threatens to further complicate trade and business activities between the world’s first- and second-largest economies.

While the tariffs’ scope is unprecedented, companies can consider initial steps to mitigate the impact of the tariffs on their core business activities and to protect themselves from novel compliance risks.  Careful attention to applicable tariff rates, possible exemptions, and potentially applicable mitigation measures will be key not just for multinational enterprises, but a wide range of U.S.- and foreign-based manufacturers, retailers, and service businesses.  Gibson Dunn lawyers stand ready to assist clients in navigating this period of change and uncertainty and will continue to monitor the Trump administration’s actions closely to assess the evolution of U.S. and global tariff policy. 

[1] While the tariffs have been characterized as reciprocal, they appear to have been based on balance of payments calculations rather than foreign tariff rates.

[2] Hannah Miao, Breaking Down Trump’s Tariffs on China and the World, in Charts, Wall St. J. (Dec. 3, 2024), https://www.wsj.com/economy/trade/trum-tariff-rates-china-world-trad-charts-3d6aee09.

[3] For a case involving a challenge to import duties under the predecessor statute to IEEPA, see, e.g., Yoshida Int’l, Inc. v. United States, 526 F.2d 560 (C.C.P.A. 1975) (holding that President Nixon properly exercised his authority under the Trading with the Enemy Act (TWEA) to impose temporary 10 percent duties on all imports because Congress delegated a broad power to regulate foreign trade to the executive branch during “national emergencies,” President Nixon’s tariffs fell under a congressionally approved ceiling, and there was an “eminently reasonable relationship” between the claimed emergency and the tariff action).

[4] U.S. Const. art. I, § 8.

[5] Mistretta v. United States, 488 U.S. 361, 372 (1989) (quoting J.W. Hampton, Jr., & Co. v. United States, 276 U.S. 394, 406 (1928)) (emphasis added).

[6] See Zemel v. Rusk, 381 U.S. 1, 17 (1965) (“Congress—in giving the Executive authority over matters of foreign affairs-must of necessity paint with a brush broader than that it customarily wields in domestic areas.”); United States v. Curtiss–Wright Export Corp., 299 U.S. 304, 320 (1936) (explaining that delegations involving foreign affairs “must often accord to the president a degree of discretion and freedom from statutory restriction which would not be admissible were domestic affairs alone involved.”).

The following Gibson Dunn lawyers prepared this update: Adam M. Smith, Christopher Timura, Donald Harrison, Terrell Ussing, Samantha Sewall, Scott Toussaint, Karsten Ball, Hui Fang, Erika Holmberg, Kamia Williams, and Roxana Akbari.

Gibson Dunn’s lawyers are available to assist in addressing any questions you may have regarding these issues. For additional information about how we may assist you, please contact the Gibson Dunn lawyer with whom you usually work, the authors, or the following leaders and members of the firm’s International Trade Advisory & Enforcement, Tax Controversy & Litigation, or False Claims Act/Qui Tam Defense practice groups:

Tax Controversy & Litigation:

Sanford W. Stark – Chair, Washington, D.C. (+1 202.887.3650, sstark@gibsondunn.com)
Saul Mezei – Washington, D.C. (+1 202.955.8693, smezei@gibsondunn.com)
C. Terrell Ussing – Washington, D.C. (+1 202.887.3612, tussing@gibsondunn.com)


International Trade Advisory & Enforcement:

United States:
Ronald Kirk – Co-Chair, Dallas (+1 214.698.3295, rkirk@gibsondunn.com)
Adam M. Smith – Co-Chair, Washington, D.C. (+1 202.887.3547, asmith@gibsondunn.com)
Stephenie Gosnell Handler – Washington, D.C. (+1 202.955.8510, shandler@gibsondunn.com)
Donald Harrison – Washington, D.C. (+1 202.955.8560, dharrison@gibsondunn.com)
Christopher T. Timura – Washington, D.C. (+1 202.887.3690, ctimura@gibsondunn.com)
Matthew S. Axelrod – Washington, D.C. (+1 202.955.8517, maxelrod@gibsondunn.com)
David P. Burns – Washington, D.C. (+1 202.887.3786, dburns@gibsondunn.com)
Nicola T. Hanna – Los Angeles (+1 213.229.7269, nhanna@gibsondunn.com)
Courtney M. Brown – Washington, D.C. (+1 202.955.8685, cmbrown@gibsondunn.com)
Amanda H. Neely – Washington, D.C. (+1 202.777.9566, aneely@gibsondunn.com)
Samantha Sewall – Washington, D.C. (+1 202.887.3509, ssewall@gibsondunn.com)
Michelle A. Weinbaum – Washington, D.C. (+1 202.955.8274, mweinbaum@gibsondunn.com)
Hugh N. Danilack – Washington, D.C. (+1 202.777.9536, hdanilack@gibsondunn.com)
Mason Gauch – Houston (+1 346.718.6723, mgauch@gibsondunn.com)
Chris R. Mullen – Washington, D.C. (+1 202.955.8250, cmullen@gibsondunn.com)
Sarah L. Pongrace – New York (+1 212.351.3972, spongrace@gibsondunn.com)
Anna Searcey – Washington, D.C. (+1 202.887.3655, asearcey@gibsondunn.com)
Audi K. Syarief – Washington, D.C. (+1 202.955.8266, asyarief@gibsondunn.com)
Scott R. Toussaint – Washington, D.C. (+1 202.887.3588, stoussaint@gibsondunn.com)
Lindsay Bernsen Wardlaw – Washington, D.C. (+1 202.777.9475, lwardlaw@gibsondunn.com)
Shuo (Josh) Zhang – Washington, D.C. (+1 202.955.8270, szhang@gibsondunn.com)

Asia:
Kelly Austin – Denver/Hong Kong (+1 303.298.5980, kaustin@gibsondunn.com)
David A. Wolber – Hong Kong (+852 2214 3764, dwolber@gibsondunn.com)
Fang Xue – Beijing (+86 10 6502 8687, fxue@gibsondunn.com)
Qi Yue – Beijing (+86 10 6502 8534, qyue@gibsondunn.com)
Dharak Bhavsar – Hong Kong (+852 2214 3755, dbhavsar@gibsondunn.com)
Arnold Pun – Hong Kong (+852 2214 3838, apun@gibsondunn.com)

Europe:
Attila Borsos – Brussels (+32 2 554 72 10, aborsos@gibsondunn.com)
Patrick Doris – London (+44 207 071 4276, pdoris@gibsondunn.com)
Michelle M. Kirschner – London (+44 20 7071 4212, mkirschner@gibsondunn.com)
Penny Madden KC – London (+44 20 7071 4226, pmadden@gibsondunn.com)
Irene Polieri – London (+44 20 7071 4199, ipolieri@gibsondunn.com)
Benno Schwarz – Munich (+49 89 189 33 110, bschwarz@gibsondunn.com)
Nikita Malevanny – Munich (+49 89 189 33 224, nmalevanny@gibsondunn.com)
Melina Kronester – Munich (+49 89 189 33 225, mkronester@gibsondunn.com)
Vanessa Ludwig – Frankfurt (+49 69 247 411 531, vludwig@gibsondunn.com)


False Claims Act/Qui Tam Defense:

Washington, D.C.
Jonathan M. Phillips – Co-Chair (+1 202.887.3546, jphillips@gibsondunn.com)
Stuart F. Delery (+1 202.955.8515,sdelery@gibsondunn.com)
F. Joseph Warin (+1 202.887.3609, fwarin@gibsondunn.com)
Jake M. Shields (+1 202.955.8201, jmshields@gibsondunn.com)
Gustav W. Eyler (+1 202.955.8610, geyler@gibsondunn.com)
Lindsay M. Paulin (+1 202.887.3701, lpaulin@gibsondunn.com)
Geoffrey M. Sigler (+1 202.887.3752, gsigler@gibsondunn.com)
Joseph D. West (+1 202.955.8658, jwest@gibsondunn.com)

San Francisco
Winston Y. Chan – Co-Chair (+1 415.393.8362, wchan@gibsondunn.com)
Charles J. Stevens (+1 415.393.8391, cstevens@gibsondunn.com)

New York
Reed Brodsky (+1 212.351.5334, rbrodsky@gibsondunn.com)
Mylan Denerstein (+1 212.351.3850, mdenerstein@gibsondunn.com)

Denver
John D.W. Partridge (+1 303.298.5931, jpartridge@gibsondunn.com)
Ryan T. Bergsieker (+1 303.298.5774, rbergsieker@gibsondunn.com)
Monica K. Loseman (+1 303.298.5784, mloseman@gibsondunn.com)

Dallas
Andrew LeGrand (+1 214.698.3405, alegrand@gibsondunn.com)

Los Angeles
James L. Zelenay Jr. (+1 213.229.7449, jzelenay@gibsondunn.com)
Nicola T. Hanna (+1 213.229.7269, nhanna@gibsondunn.com)
Jeremy S. Smith (+1 213.229.7973, jssmith@gibsondunn.com)
Deborah L. Stein (+1 213.229.7164, dstein@gibsondunn.com)
Dhananjay S. Manthripragada (+1 213.229.7366, dmanthripragada@gibsondunn.com)

Palo Alto
Benjamin Wagner (+1 650.849.5395, bwagner@gibsondunn.com)

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