WASHINGTON (AP) — President Donald Trump is adamantly asserting his almost limitless powers to circumvent Congress and impose severe taxes on foreign goods.
However, a federal court has now placed hurdles in his way.
A panel of three judges from the US International Trade Court ruled on Wednesday that Trump overstepped his authority by invoking the 1977 International Emergency Economic Powers Act. This act allows for the declaration of a national emergency tax and customer duties on imports from nearly all nations worldwide.
This ruling represents a significant defeat for Trump. His volatile trade policy has unsettled financial markets, caused paralysis in businesses due to uncertainty, and increased concerns about rising prices, slowing economic growth.
Nevertheless, Trump’s trade conflict is far from over. On Thursday, the Federal Circuit Court of Appeals permitted the president to temporarily continue collecting tariffs under the Emergency Act while appealing the Trade Court’s decision.
Jeffrey Schwab, a senior adviser to the nonprofit Liberty Judicial Center, which represents five small businesses that are suing, described the Court of Appeals’ ruling as merely a “procedural step.”
The administration has other avenues to pursue the president’s goal of attracting factories to America through tariffs, generating revenue for the US Treasury, and exerting pressure on other countries to yield to his demands.
The financial markets responded positively to news of the halt on Trump’s tariffs, showing a slight uptick on Thursday.
“Investors are likely eager to explore alternatives that will enable the White House to persist with the trade agenda,” remarked Matthew Ryan, head of market strategy at financial services firm Ebury.
Trump’s IEPA tariffs have been contested in at least seven lawsuits. In the ruling from Wednesday, the Trade Court consolidated two cases—one filed by five small businesses and another by 12 states across the US.
The US Court of International Trade has jurisdiction over civil litigation, including trade matters. Trump’s legal battles over tariffs are widely anticipated to reach the U.S. Supreme Court.
Which customs duties did the court block?
The court’s ruling blocks tariffs that Trump imposed last month affecting nearly all US trading partners, as well as previous taxes on China, Mexico, and Canada.
On April 2nd, referred to as his day of liberation, in a nation facing trade deficits and a baseline tariff of 10% on most imports, he enforced what were termed mutual tariffs of up to 50%. These mutual tariffs were subsequently suspended, allowing countries 90 days to negotiate trade agreements with the US to lower obstacles to US exports. However, baseline tariffs remained intact.
By asserting the extraordinary power to act unilaterally, Trump justified the tariffs under IEPA by declaring the longstanding US trade deficit a “national emergency.”
“The reason he opted for IEPA was that he believed he could take these actions unilaterally without extensive oversight from Congress,” said Schwab.
In February, he invoked laws to place tariffs on Canada, Mexico, and China, declaring illegal immigration and drug trafficking across the US border a national emergency, contending that the three countries needed to do more to address those issues.
The US Constitution grants Congress the authority to impose taxes, including tariffs. However, lawmakers are slowly allowing the president to wield greater power over tariffs, which Trump has seized upon.
Why did the court rule against the president?
The administration claimed that the court had previously sanctioned the emergency use of tariffs during then-President Richard Nixon’s economic turmoil. Nixon’s administration successfully cited its authority under a 1917 law concerning dealing with enemies.
The court dismissed the administration’s argument and found that Trump’s radical tariffs exceeded the powers to regulate imports under the IEPA, stating that the tariffs were ineffective in resolving the issues they were intended to address. In their case, the states highlighted that the US trade deficit had developed steadily over the past 49 years, irrespective of economic conditions.
Another federal judge also prevented Trump from employing his emergency powers to enforce tariffs, ruling in a case brought by two Illinois-based educational toy companies. This decision blocked the collection of tariffs from the companies involved in the lawsuit and came just a day after the broader discovery from the Trade Court.
So, what does this mean for Trump’s trade agenda?
Wendy Cutler, a former US trade officer now serving as vice president at the Asian Association’s Policy Institute, remarked that Wednesday’s decision “threw the president’s trade policy into turmoil.”
Other countries may hesitate to make concessions during Trump’s 90-day pause if the court upholds a decision to strike down the IEPA tariffs. “Can these negotiations advance?” questioned Antonio Rivera, a partner at Arentfox Schiff and former customs and border security legal advisor.
Similarly, businesses may need to reassess their supply chain strategies, possibly expediting shipments to the US to mitigate the risk of tariffs returning on appeal.
Still, tariffs remain in effect on other products under Trump’s administration, including foreign steel, aluminum, and automobiles. These tariffs were enacted under a different legal framework, Section 232 of the Trade Expansion Act of 1962, which mandates an investigation by the Commerce Department and cannot be unilaterally imposed by the President.
Trump retains authority to raise tariffs under Section 232 and may also pursue additional measures. For instance, the Commerce Department began an investigation last month under Section 232 concerning the national security implications of pharmaceutical imports.
The court also upheld tariffs imposed on China during Trump’s first term, with President Joe Biden maintaining the dispute over Beijing’s aggressive tactics, which allegedly provide Chinese companies with unfair advantages through subsidies and intellectual property theft. Trump may choose to escalate these tariffs to exert further pressure on China.
Furthermore, the Trade Court indicated on Wednesday that Trump’s powers to impose tariffs aimed at addressing the trade deficit under the 1974 Trade Act are more limited.
What are the economic implications of the decisions?
With the IEPA tariffs in place, the average tariff rate in the US reached 15%, the highest in decades, compared to 2.5% before Trump’s tariffs commenced this year. Without these tariffs, the current US tariff rate stands at 6.5%, according to economists Stephen Brown and Jennifer McKeun from Capital Economics.
They project that the US economy could see faster growth in the latter half of 2025, with an annual rate of 2%, up from their earlier forecast of 1.5%, without IEPA tariffs in effect. Inflation is anticipated to rise at a slower pace as well.
Importers may experience some relief. On Thursday, attorney Peter Harrell, a fellow at the Carnegie Foundation for International Peace, asserted on X, formerly known as Twitter, that the Trade Court’s ruling “should provide refunds for importers ultimately responsible for the (IEEPA) tariffs.”
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AP Economics Writer Christopher Al Gerber contributed to this report.
Source: apnews.com