Federal Court Challenges Trump’s Authority on Tariffs

WASHINGTON (AP) — President Donald Trump has controversially asserted broad powers to bypass Congress and impose extensive tariffs on foreign goods. However, a recent ruling from a federal court has raised significant obstacles to these efforts.

A three-judge panel from the U.S. Court of International Trade ruled on Wednesday that Trump exceeded his authority by invoking the 1977 International Emergency Economic Powers Act (IEEPA) to declare a national emergency and impose tariffs on imports from nearly every country globally.

This ruling represents a considerable setback for Trump, whose unpredictable trade policies have unsettled financial markets, created uncertainty for businesses, and sparked worries over rising prices and decelerating economic growth. Following the decision, Trump took to his platform Truth Social, declaring: “The ruling by the U.S. Court of International Trade is so wrong, and so political! Hopefully, the Supreme Court will reverse this horrible, Country threatening decision, QUICKLY and DECISIVELY.”

Although this ruling poses challenges, Trump’s trade wars are not yet over. The Court of Appeals for the Federal Circuit has permitted the president to continue collecting tariffs temporarily while he appeals the trade court’s decision.

Jeffrey Schwab, senior counsel at the Liberty Justice Center, which represented five small businesses involved in the case, referred to the appeals court’s ruling as a “procedural step.” He expressed optimism that the courts will ultimately block these tariffs, which he stated pose “a direct threat” to his clients’ livelihoods.

The administration still has avenues to pursue its goal of utilizing tariffs to attract manufacturing back to the U.S., generate revenue for the Treasury, and compel other nations to comply with U.S. demands.

In reaction to the news, financial markets exhibited a muted response, with stocks rising slightly. “Investors are not getting too carried away, presumably in the expectation that the White House will find a workaround that allows them to continue to pursue their trade agenda,” commented Matthew Ryan, head of market strategy at Ebury.

Ruling on Tariffs: What Was Blocked?

The court’s decision halts the tariffs Trump imposed last month on almost all U.S. trading partners and those on China, Mexico, and Canada implemented earlier. On April 2, the president designated this day as “Liberation Day,” enacting tariffs of up to 50% on countries with which the U.S. has a trade deficit, and 10% baseline tariffs on almost all other nations. Although he later suspended the reciprocal tariffs for 90 days to facilitate negotiations, the baseline tariffs remained in effect.

By claiming extraordinary powers to act without Congressional approval, Trump justified these taxes under the IEEPA, citing the country’s long-standing trade deficits as a “national emergency.” Schwab noted, “The reason he chose IEEPA was he thought he could do this unilaterally without much oversight by Congress.”

In February, Trump similarly invoked the law to impose tariffs on Canada, Mexico, and China, arguing that surges of illegal immigration and drug trafficking warranted such measures.

Why Did the Court Rule Against Trump?

While the administration argued that past courts had upheld emergency tariffs imposed by Richard Nixon during economic tumult, this court rejected that argument. It found that Trump’s extensive tariffs surpassed his authority under the IEEPA. Furthermore, the judges noted that the tariffs failed to address the issues they purported to solve; the states involved in the case pointed out that America’s trade deficits have persisted for 49 consecutive years, regardless of economic conditions.

Additionally, a federal judge also blocked Trump’s emergency use of tariff powers in a separate case involving two Illinois-based educational toy companies, which only affects the companies involved in that suit.

The State of Trump’s Trade Agenda

Wendy Cutler, a former trade official currently with the Asia Society Policy Institute, stated that the recent ruling “throws the president’s trade policy into turmoil.” With the 90-day pause in place, Trump may encounter difficulties persuading other nations to concede, especially if there’s a risk the courts may uphold the ruling against the IEEPA tariffs.

Businesses may need to reevaluate their supply chains, potentially accelerating shipments to the U.S. to mitigate the risk of tariffs being reinstated on appeal. However, many other tariffs remain intact, including those on steel, aluminum, and autos, imposed under different legal authority — Section 232 of the Trade Expansion Act of 1962 — which cannot simply be executed at the president’s discretion.

Trump retains authority to increase these Section 232 tariffs and pursue new tariffs. Recently, the Commerce Department initiated a Section 232 investigation into the national security implications of pharmaceutical imports. Additionally, tariffs on China established during Trump’s first term have largely remained under President Joe Biden.

Economic Implications of the Court’s Decision

With the IEEPA tariffs, the average U.S. tariff rate climbed to 15%, the highest it has been in decades, compared to just 2.5% prior to Trump’s tariff policies. Economists from Capital Economics forecast that the U.S. economy could grow at a rate of 2% in the latter half of 2025 without the burden of the IEEPA tariffs, an increase from their earlier projection of 1.5%.

Importers might be in line for relief. Peter Harrell, a fellow at the Carnegie Endowment for International Peace, remarked that if the trade court’s ruling is upheld, importers should eventually receive refunds for IEEPA tariffs paid so far, though the government may delay these refunds pending the outcome of the appeals process.