Much of President Trump’s sweeping tariffs were halted on Wednesday when a federal court ruled that an emergency law does not give the president unilateral authority to impose tariffs on nearly every trading partner.
The ruling offers a huge blow to Trump’s trade agenda and declares that his “Liberation Day” tariffs, including those imposed on China, are illegal. Most of those tariffs had been reduced to 10 percent but could now have to go away entirely while refunds are provided to those who paid duties.
Still, the ruling leaves room for the Trump administration to replace some of those tariffs with new ones under different U.S. laws. It would also leave tariffs in place on some imports, including cars and aluminum.
That means negotiations between much of the world and a Trump administration using tariffs as leverage will likely continue.
Here are takeaways ruling and what could come next.
It’s a sweeping ruling, but leaves Trump with options
The ruling from the three-judge panel on the U.S. Court of International Trade unanimously ruled Congress did not delegate “unbounded” tariff authority to the president in the 1977 International Emergency Economic Powers Act (IEEPA).
The decision was not handed down by a group of liberal, Democratic appointees.
The three-judge panel comprised of Judge Timothy Reif, a Trump appointee, Judge Jane Restani, an appointee of former President Reagan, and Judge Gary Katzmann, an appointee of former President Obama.
Wednesday’s decision came in response to two separate lawsuits, part of a broader wave of litigation challenging Trump’s tariffs.
The IEEPA has been the linchpin of Trump’s tariff regime; he signed an executive order to declare a national emergency under IEEPA related to foreign terrorist organizations and drug cartels, which he later expanded to then impose tariffs on Canada, Mexico and China.
Trump later invoked IEEPA to impose the 10 percent tariffs on all trading partners, which could have included additional hefty tariffs on dozens of countries of up to 50 percent depending on the course of negotiations.
The court, in the ruling, called out Trump for pausing those tariffs for 90 days, moving the effective date to July 9, and amending the duty rate on China “several times in retaliation.”
“Because of the Constitution’s express allocation of the tariff power to Congress… we do not read IEEPA to delegate an unbounded tariff authority to the President,” the court wrote.
The ruling declares that the “The Worldwide and Retaliatory Tariffs,” which are the 10 percent on all trading partners and reciprocal tariffs that are currently on pause for 90 days, are not authorized by the IEEPA.
It also declares that the “Trafficking Tariffs” imposed on Canada, Mexico and China to try to stop international drug cartels and the spread of fentanyl into the U.S. also are not authorized by the IEEPA.
The court argued that the president is not authorized “to impose unbounded tariffs.”
The judges gave the Trump administration 10 days to issue any administrative orders needed to cancel the tariffs.
The court also took on the argument from some in the Trump administration that tariffs are for leverage, noting that officials have said the tariffs on Mexico, Canada and China are related to a desire for a change in behavior from those nations. It ruled that the use of tariffs as leverage does not give the president Constitutional authority.
As sweeping as the ruling was, however, it does not cut off all of Trump’s options to impose tariffs. The president could seek to re-impose tariffs on countries using other laws or trade measures as the legal justification.
Some tariffs remain in place
The court did not strike down Trump’s tariffs on specific products, which are in place on steel, aluminum and automobiles.
When Trump implemented those tariffs, he leaned on a 1962 law, Section 232, that gave the president the power to take action when the Commerce secretary finds an import into the U.S. represents a threat to national security.
Trump’s tariffs on steel and aluminum went into effect in March. The 25 percent tariff on aluminum represents a 15-point increase from the previous 10 percent levied on imports of the metal.
The tariffs on imported automobiles and auto parts, which went into effect this month, were recently scaled back to spare foreign auto parts from facing a double hit from the auto tariffs and his previously imposed import taxes on foreign metals.
Additionally, tariffs imposed under Section 301, which allows for tariffs if there are unfair trade practices, have been in place on some goods from China since the Biden administration and would remain.
These tariffs are all different from the “Liberation Day” tariffs, which were more sweeping and covered all exports to the United States from the affected countries.
Markets rally – but not that much
Trump’s tariffs have led to market gyrations, none greater than in the aftermath of “Liberation Day” when the S&P 500 lost 7 percent of its value.
Trump’s approval ratings also took a hit, seemingly reaching a low point at about his 100th day in office.
As Trump eased off on his tariffs, markets have risen, reaching the point where they have gained back most of their losses from when Trump first entered office on Jan. 20.
Markets rallied Thursday morning in response to the court ruling, but in a rather muted way – in what is perhaps a reaction to the uncertainty of where things stand. The S&P had gained just 0.33 percent in its first hour of business on Thursday.
Trump vows to keep fighting
Another reason the markets may be watching warily is that Trump is vowing to keep imposing tariffs.
Trump’s National Economic Council director Kevin Hassett said on Thursday morning that the administration feels confident the ruling is “incorrect” and vowed to appeal it before looking at other ways to impose tariffs.
“What’s going to happen is, first, we’re going to see what happens on appeal, and we’re very confident in our success there, because, after all, hundreds and hundreds of thousands of Americans have died because of mostly Chinese fentanyl and Chinese fentanyl coming in from Mexico and Canada,” Hassett told FOX Business Network’s “Mornings with Maria.”
Within two hours on Wednesday night, the Justice Department appealed the ruling to the U.S. Court of Appeals for the Federal Circuit based in Washington, D.C.
The administration is seeking to immediately lift the ruling, warning in court filings that it “jeopardizes ongoing negotiations with dozens of countries by severely constraining the President’s leverage and undermining the premise of the ongoing negotiations.”
The administration could seek emergency relief from the Supreme Court if their request is denied. Several other legal challenges to Trump’s tariffs are ongoing, but they remain in earlier stages.
The ruling could help Trump politically
Trump’s tariff regime has not been popular, and it’s possible the court ruling in ending the Liberation Day tariffs could end up helping the president politically.
There’s little doubt the tariffs were a risk to Trump’s popularity.
After Liberation Day, as U.S. stock markets plummeted, fears of a recession were on the rise.
An Allianz Trade Global Survey released last week found that 54 percent of U.S. companies plan to increase prices due to tariffs and 45 percent of Chinese companies said the same.
The survey also found that 38 percent of global companies were planning to increase prices because of the tariffs, which marked a 7-point increase from before “Liberation Day.”
Trump and top officials had struggled with messaging to defend the tariffs, admitting that prices will increase while also calling on companies like Walmart to absorb the tariffs to help consumers. Americans were bracing for an uptick in prices, especially around back to school time in September and the holiday season in December.
The White House is now vowing to move forward with tariffs again, and Trump on Wednesday reacted negatively when a reporter brought up a derogatory term called the “TACO trade” that refers to markets rising after Trump lowers tariffs he has imposed. TACO is an acronym for “Trump always chickens out.”
“I’ve never heard that. You mean because I reduced China from 145 percent that I set down to 100, and then down to another number, and I said you have to open up your whole country?” Trump said when asked about the term. “And because I gave the European Union a 50 percent tariff and they called up and said, ‘Please let’s meet right now.’”
“You call that chickening out?” Trump said.
Zach Schonfeld contributed to this report.
