On Friday, February 20th, the United States Supreme Court issued its decision in Learning Resources, Inc. v. Trump, a case challenging the Trump Administration’s use of the International Emergency Economic Powers Act (IEEPA) to impose tariffs on U.S. trading partners.

In a 6–3 ruling, the Court affirmed the decision of the U.S. Court of Appeals for the Federal Circuit, holding that IEEPA does not authorize the President to unilaterally impose tariffs. The Court concluded that the statute does not confer tariff-imposing authority absent explicit congressional authorization, effectively invalidating the Administration’s reciprocal tariff program implemented under IEEPA.

The lawsuit, brought last summer by a coalition of state governments and small businesses, argued that the Administration lacked a qualifying national emergency to justify invoking IEEPA. The Administration had asserted that the longstanding U.S. trade deficit constituted such an emergency. The Court rejected that interpretation.

Impact on Premium Cigars

Under the now-invalidated reciprocal tariff framework, Nicaragua was specifically designated and subjected to an 18 percent tariff rate. The Dominican Republic and Honduras were not individually identified and were therefore subject to the baseline reciprocal rate of 10 percent.

Prior to the implementation of the IEEPA tariffs, premium cigars imported from Nicaragua, Honduras, and the Dominican Republic received duty-free treatment under the Central America–Dominican Republic Free Trade Agreement (CAFTA-DR).

Administration Response: Section 122 Tariffs

Following the Court’s decision, President Trump announced that the Administration would pursue new tariffs under Section 122 of the Trade Act of 1974. The President initially announced a global tariff rate of 10 percent. On February 21, the Administration announced an additional 5 percent increase, bringing the total global tariff rate to 15 percent—the statutory maximum permitted under Section 122.

Under the Trade Act, tariffs imposed pursuant to Section 122 may remain in effect for up to 150 days. Any extension beyond that period would require congressional approval. As of now the tariffs will expire on July 24th. The new tariff regime went into effect at 12:01 a.m. on Tuesday, February 24th.

Looking Ahead

Given the statutory limitations of Section 122, it is expected that the current 15 percent global tariff rate will remain in place for the duration of the 150-day period unless Congress acts.

For products originating from the Dominican Republic and Honduras, the Section 122 tariff represents an increase from the prior 10 percent rate imposed under IEEPA. Conversely, for Nicaragua, the Section 122 tariff reflects a decrease from the previous 18 percent rate applied under the IEEPA framework.

The Administration has also signaled that it may pursue alternative tariff authorities, including Section 232 (national security-related tariffs) and Section 301 (retaliatory tariffs), to impose future trade measures.

Most recently, Nicaragua was subject to a Section 301 investigation that carried the potential for increased tariffs. However, as a result of coordinated advocacy by CRA and allied organizations, premium cigars were ultimately excluded from any additional tariff action.

CRA will continue to closely monitor developments related to U.S. trade policy and will provide updates as additional information becomes available.

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