Article Focus Summary:
This article covers the recent decision by a U.S. federal appeals court to temporarily uphold the 2025 tariffs on plastics and chemical imports under the International Emergency Economic Powers Act (IEEPA), following a legal challenge. It examines the implications for trade partners like China, Canada, and Mexico, the broader impact on commodity prices, and the legal basis for U.S. tariff enforcement.
Court Grants Temporary Stay on Lower Court Ruling
On May 30, 2025, the U.S. Court of Appeals for the Federal Circuit granted a stay that permits the United States to maintain tariffs imposed under the International Emergency Economic Powers Act (IEEPA), effectively overriding an earlier ruling by the U.S. Court of International Trade (CIT). The original CIT decision had found that the executive branch overstepped its legal authority in issuing these tariffs, especially under Executive Orders targeting imports from China, Canada, and Mexico.
The stay allows nearly all chemical and plastic tariffs introduced in 2025 to remain intact during the appellate review process. The federal case under appeal is numbered 2025-1812, with the original suit filed under 25-cv-00066 by firms including VOS Selections, Genova Pipe, Microkits, FishUSA, and Terry Precision Cycling.
Breakdown of Contested Tariffs
The upheld tariffs cover several strategic executive measures:
- 10% universal base tariff under Executive Order 14257, effective April 2, 2025, initially applied to most countries as part of a trade deficit mitigation plan.
- Canadian imports under Executive Order 14193, originally targeting narcotics trafficking but later narrowed to exclude USMCA-compliant goods.
- Mexican imports under Executive Order 14194, similarly refocused on non-USMCA-compliant products.
- Chinese imports under Executive Order 14195, applying a 20% tariff to address drug-related national security risks.
These tariffs do not include sector-specific measures such as those targeting steel, aluminum, or auto parts.
Industry and Trade Implications
U.S. Import Dependencies and Trade Shifts
Despite a trade surplus in many plastic and chemical sectors, the U.S. relies heavily on imports for key inputs such as polyethylene (PE), methanol, base oils, PET, MDI, ammonia, and various aromatics like benzene, toluene, and mixed xylenes. For example, U.S. states bordering Canada source PE and related materials more efficiently from Canadian producers than from domestic Gulf Coast facilities.
Tariff continuance may disincentivize imports from countries affected by the IEEPA-based orders, but may also result in reallocation of global supply chains, especially as importers pivot to suppliers in Europe or Southeast Asia. These redirected exports have caused downstream disruption and price reductions in global chemical markets.
Repercussions for China and Retaliatory Measures
China responded to the IEEPA-based tariffs with countermeasures, including levies on U.S. ethane, polyethylene, and liquefied petroleum gas (LPG). Notably, some exemptions were granted for key inputs to support China’s large propane dehydrogenation (PDH) facilities that convert LPG into propylene.
Should the final appellate decision favor the plaintiffs, it could reinstate access for many redirected exports to the U.S. market and reduce retaliatory trade actions from China and others.
European and Canadian Responses
The European Union is poised to apply retaliatory duties on almost all major commodity plastic exports from the U.S., potentially including oleochemicals, tall oil, caustic soda, and surfactants. Canada has drafted a similar tariff list targeting U.S. exports of PE, polypropylene (PP), chemicals, and fertilizers. However, if the IEEPA tariffs are ultimately invalidated, these planned sanctions may be legally nullified.
Alternative U.S. Tariff Avenues
Even if the IEEPA-based tariffs are struck down in the final ruling, the U.S. administration may still invoke other statutes to impose similar trade restrictions:
- Trade Act of 1974, Section 122: Allows tariffs up to 15% for 150 days to manage balance of payments crises.
- Trade Act of 1974, Section 301: Targets unfair foreign trade practices, notably used during the U.S.-China trade war.
- Tariff Act of 1930, Section 338: Enables the president to impose up to 50% duties on discriminatory trade partners.
- Trade Expansion Act of 1962, Section 232: Used for national security-related import restrictions, notably on steel and aluminum.
Ongoing Section 232 investigations include pharmaceuticals, semiconductors, commercial aircraft, jet engines, copper, wood, and shipbuilding sectors.
Conclusion: Policy Impact and Strategic Outlook
The U.S. Court of Appeals’ stay on the IEEPA tariff ruling prolongs a period of uncertainty for global chemical and plastics trade. While offering temporary relief to the administration’s trade enforcement mechanisms, the final outcome will significantly influence U.S. international economic strategy and legal precedents for future presidential tariff authority.
Export Market Insight:
Affected U.S. tariffs target imports mainly from China, Canada, and Mexico. China has rerouted exports of PE and LPG to Southeast Asia and Europe. Export values of related U.S. products, such as ethane and PDH inputs, have fluctuated amid retaliatory tariffs, with EU and Canadian countermeasures poised for implementation if litigation fails.
Top Competitors:
Major competitors include Chinese PE exporters like Sinopec and PetroChina, U.S. firms such as Dow and ExxonMobil, and Canadian producers like NOVA Chemicals. Key U.S. importers of plastics and chemicals are concentrated along the U.S.-Canada border and Gulf Coast.
