Trump has boldly asserted his almost limitless authority to put massive tariffs on imported goods without consulting Congress.
Another obstacle has been placed in his way by a federal court.
U.S. Court of International Trade judges said on Wednesday that Trump exceeded his power by imposing duties on imports from nearly every country in the globe and declaring a national emergency under the 1977 International Emergency Economic Powers Act.
A major defeat for Trump, whose unpredictable trade policies have shook up the stock market, immobilized companies in fear, and stoked concerns of price hikes and sluggish economic development.
Economists and trade experts, however, agree that Trump’s trade fights will continue for some time. The government is considering other options to achieve the president’s aim of use tariffs to collect funds for the U.S. Treasury, compel other nations into complying with his demands, and bring manufacturers back to the United States. They are appealing the ruling.
Stocks climbed slightly on Thursday, but the financial markets remained relatively quiet despite their desire to see Trump’s tariffs lifted.
Financial services expert Matthew Ryan of Ebury noted that investors are being cautious, perhaps because they believe the White House will discover a way to keep pursuing their trade agenda.
There are seven cases that are contesting Trump’s IEEPA tariffs. On Wednesday, the trade court merged two lawsuits, one filed by five small companies and another by twelve states in the United States.
For civil matters pertaining to commerce, the United States Court of International commerce has authority. Washington, DC’s U.S. Court of Appeals for the Federal Circuit will hear the Trump administration’s appeal of Wednesday’s decision. It is generally believed that the United States Supreme Court will hear the case challenging Trump’s tariff.
Which tariffs were blocked by the court?
Trump levied tariffs on China, Mexico, and Canada before slapping them on nearly all U.S. trading partners last month, and the court’s judgment prohibits them all.
Trump levied 10% baseline tariffs on nearly all countries and so-called reciprocal tariffs of up to 50% on nations with which the US has a trade imbalance on April 2 (which he dubbed Liberation Day). To give other nations 90 days to work out trade deals with the US and lower their obstacles to US exports, he then put a 90-day halt to the reciprocal tariffs. However, he maintained the basic tariffs.
Claiming unprecedented authority to act without legislative permission, he used the United States’ ongoing trade imbalances as “a national emergency” to justify the levies under IEEPA.
The reason he picked IEEPA, according to Jeffrey Schwab, senior attorney and head of litigation at the nonprofit Liberty Justice Center, was because he believed he could handle this on his own without much guidance from Congress. He appeared in trade court on behalf of the five small firms.
He had already used the legal authority to levy tariffs on China, Mexico, and Canada in February, claiming that the influx of illegal immigrants and narcotics into the United States was a national emergency necessitating greater action from those three nations.
Tariffs and other forms of taxation are under Congress’s purview according to the United States Constitution. Legislators have given presidents increasing authority over tariffs, which Trump has exploited to his advantage.
For what reasons did the court reject the president’s case?
In an effort to justify the imposition of tariffs during the economic crisis that ensued when Nixon ended the policy that tied the value of the dollar to gold, the administration said that the courts had previously authorized such measures. Prior to and a source of some of the legal terminology included in IEEPA, the Nixon administration effectively invoked its jurisdiction under the 1917 Trading With Enemy Act.
The court found that Trump’s broad tariffs were beyond his power to control imports under IEEPA, rejecting the administration’s position. Furthermore, it claimed that the tariffs had little effect on the issues they were meant to resolve. The states argued that the trade imbalances in the United States do not constitute an immediate national emergency. Through thick and thin, the US has piled them up for 49 years running.
The imposition of tariffs by Trump under an emergency powers statute is being blocked by yet another federal judge. Following a lawsuit filed by two educational toy firms located in Illinois, U.S. District Judge Rudolph Contreras issued a preliminary injunction on Thursday. The trade court issued its more general conclusion the day before the verdict was announced.
Given this, what does the future hold for Trump’s trade agenda?
The court’s ruling “throws the president’s trade policy into turmoil,” according to Wendy Cutler, a former U.S. trade official and current vice president of the Asia Society strategy Institute.
Legal certainty is needed before partners bargaining hard during the 90-day tariff pause period can make more concessions to the U.S., she said.
To counteract the possibility that the tariffs would be imposed during the appeal process, businesses will also need to reevaluate their supply chain management strategies. This may involve expediting shipments to the US.
The decision does not, however, invalidate other tariffs imposed by Trump, such as those on imported steel, aluminum, and automobiles. Section 232 of the Trade Expansion Act of 1962, which was used to apply such taxes, necessitates an investigation by the Commerce Department and cannot be unilaterally applied by the president.
The power to increase such Section 232 tariffs remains with Trump. And he can seek out other ones as well. For example, this month, the Commerce Department initiated a Section 232 inquiry to examine the potential effects of pharmaceutical imports on national security.
The tariffs that Trump and Biden imposed on China during their administrations remain in effect, as determined by the court. The penalties stem from a disagreement over Beijing’s policy of using force to give Chinese firms a technological advantage. China was accused by the United States of unjustly subsidizing its own businesses, cybertheft, and coercion of foreign and American enterprises into disclosing trade secrets. If Trump want to increase the pressure on China, he may broaden those tariffs.
On Wednesday, the trade court also made notice of the fact that although if Trump’s authority to levy tariffs to resolve trade imbalances is more restricted under the Trade Act of 1974, another legislation,. However, tariffs on nations with which the US has large trade deficits are limited to 15% for a period of 150 days under that statute.
In terms of money and the economy, what kind of consequences may this decision have?
The average tariff rate in the United States reached a record high of 15% during the IEEPA tariffs, the highest level in decades, and increased from 2.5% prior to the start of Trump’s tariff assault this year. Capital Economics’ Stephen Brown and Jennifer McKeown estimate that even without them, the 6.5% tariff rate in the United States is substantial.
They claim that if the IEEPA tariffs weren’t in place, the U.S. economy would expand at a quicker rate in the second half of 2025, reaching 2% annually instead of the 1.5% they had previously predicted. You wouldn’t see price increases either.
We may be able to help importers. Thursday, X (now called Twitter) was graced with the words “if the trade court’s decision is upheld, importers should eventually be able to get a refund of (IEEPA) tariffs paid to date” by attorney Peter Harrell, a fellow at the Carnegie Endowment for International Peace. On the other hand, the government is likely to try to delay handing out refunds until all appeals have been exhausted.