What to Know After Trade Court Rules Against Trump's Tariffs

Yahoo

4 days ago

The U.S. Court of International Trade building in New York on April 24, 2025. Credit - Yuki Iwamura—Bloomberg/Getty Images
Donald Trump's sweeping and volatile tariffs have left businesses in uncertainty, roiled global markets, upended U.S. relations with trading partners, and pushed up the prices of consumer goods. But on Wednesday, a federal court ruled that Trump didn't have the authority to impose them in the first place.
A three-judge panel at the U.S. Court of International Trade (USCIT) in New York ruled that Trump overstepped his authority by implementing a tariff regime on dozens of countries in a bid to enliven domestic manufacturing and to slash budget deficits by generating revenue from import levies. The Administration has also used the tariffs as bargaining chips for trade deals more favorable to the U.S.—as well as in geopolitical negotiations.
The Wednesday court ruling may provide temporary relief for affected consumers and businesses—halting a 30% tariff on China, 25% tariff on certain goods from Mexico and Canada, and 10% universal tariffs on most of the rest of the world—and it throws a wrench in the centerpiece of Trump's agenda, though the Trump Administration swiftly filed an appeal.
Here's what to know about the ruling.
The USCIT has jurisdiction over civil cases arising from U.S. customs and international trade laws.
Its website states that 'the court may grant any relief appropriate to the particular case before it, including, but not limited to, money judgments, writs of mandamus, and preliminary or permanent injunctions.'
The panel of judges that ruled on Trump's tariffs were all appointed by different Presidents: Judge Jane Restani was appointed by Ronald Reagan; Judge Gary Katzmann was appointed by Barack Obama, and Timothy Reif was appointed by Trump during his first term.
The USCIT issued its opinion on two consolidated cases concerning Trump's tariffs. The first was filed by New York-based wine importer V.O.S. Selections along with four other small businesses, and the second was filed by 12 different states.
In imposing tariffs, which Congress has the constitutional power to approve, Trump invoked his authority under the International Emergency Economic Powers Act of 1977 (IEEPA), which grants the President authority to regulate commerce in light of threats that can constitute a national emergency. It was the first time a President invoked the IEEPA in a tariff situation. These include the tariffs Trump imposed earlier this year on Canada, China, and Mexico, which were aimed at curbing the entry of fentanyl into the country, as well as his April 2 'Liberation Day' so-called 'reciprocal' tariffs, which were aimed at taxing dozens of nations due to their trade surpluses with the U.S.
The plaintiffs argued that Trump did not have authority under IEEPA to impose such widespread tariffs.
The court said that it 'does not read IEEPA to confer such unbounded authority and sets aside the challenged tariffs imposed thereunder.' The court said that the worldwide retaliatory duties 'exceed any authority granted to the President by IEEPA to regulate importation,' while the drug trafficking-related levies 'fail because they do not deal with the threats set forth in those orders.'
'A tax deals with a budget deficit by raising revenue. A dam deals with flooding by holding back a river. But there is no such association between the act of imposing a tariff and the 'unusual and extraordinary threat[s]' that the Trafficking Orders purport to combat,' the court wrote.
In its conclusion, the court ruled in favor of a permanent injunction on the tariff orders nationwide.
Trump has 10 days to put the injunction into effect, per the order accompanying the ruling. The court ordered that four of Trump's executive orders are invalid and must be repealed. Trump's 25% steel, aluminum, and auto tariffs, however, were left in place, pending a Commerce Department investigation.
The ruling noted that the President has the power to impose certain tariffs when the Secretary of Commerce 'finds that an 'article is being imported into the United States in such quantities or under such circumstances as to threaten to impair the national security'' under Section 232 of the Trade Expansion Act of 1962.
The ruling threatens to upend ongoing trade-deal negotiations, though Trump could still impose new 'restricted' tariffs, the ruling noted, so long as they are 'in response to 'fundamental international payment problems'' which include substantial trade deficits under Section 122 of the Trade Act of 1974. This authorizes the President to impose tariffs of as much as 15% for up to 150 days.
There's also the chance that the Administration may simply ignore the ruling. A provision in the thousand-plus-page 'One Big Beautiful Bill,' which passed in the House last week and is now before the Senate, would effectively restrict judges' power to hold a litigant in contempt for defying court orders or injunctions. If the megabill becomes law, with the provision intact, critics say it could limit federal courts' ability to restrain some of Trump's moves.
Analysts warn that Trump will likely take other avenues to impose tariffs.
'This ruling represents a setback for the administration's tariff plans and increases uncertainty but might not change the final outcome for most major U.S. trading partners,' chief U.S. political economist at Goldman Sachs Alec Phillips told Bloomberg. 'For now, we expect the Trump administration will find other ways to impose tariffs.'
Timothy Moe, chief Asia Pacific equity strategist at Goldman Sachs, told Bloomberg TV, 'This might be considered a body blow, but it's not the final rendering.'
Minutes after the ruling, the Trump Administration filed a notice of appeal to the U.S. Court of Appeals for the Federal Circuit in Washington, D.C. The case may also later be appealed to the Supreme Court.
'The judicial coup is out of control,' White House deputy chief of staff for policy and homeland security adviser Stephen Miller posted on X.
'It is not for unelected judges to decide how to properly address a national emergency,' said White House deputy press secretary Kush Desai in a statement. Desai said that trade deficits have led to a national emergency that has 'decimated American communities, left our workers behind, and weakened our defense industrial base—facts that the court did not dispute.' He added: 'President Trump pledged to put America First, and the Administration is committed to using every lever of executive power to address this crisis and restore American greatness.'
'This administration was already a joke in so many ways,' posted George Conway, attorney and a founder of the anti-Trump political action committee The Lincoln Project, on X. 'But the USCIT's decision striking down Trump's tariffs could not make him look more hapless.'
The Independent Institute, a nonpartisan think tank that has previously criticized Trump's tariffs, posted a blog with the headline: 'Happy Liberation from Trump's Tariffs Day.'
Gregory Meeks, the ranking Democrat on the House Foreign Affairs Committee who co-led an amicus brief in support of the 12 plaintiff states in the case, said in a statement: 'I'm encouraged by the court's decision today to block President Trump's so-called 'liberation day' tariffs, confirming what we've long known: these tariffs are an illegal abuse of executive power. Trump's declaration of a bogus national emergency to justify his global trade war was an absurd and unlawful use of IEEPA.'
'The law is clear: no president has the power to single-handedly raise taxes whenever they like,' New York Attorney General Letitia James, one of the attorneys general who filed the lawsuit, said in a statement. 'These tariffs are a massive tax hike on working families and American businesses that would have led to more inflation, economic damage to businesses of all sizes, and job losses across the country if allowed to continue. This decision is a major victory for our efforts to uphold the law and protect New Yorkers from illegal policies that threaten American jobs and economy.'
Around the world, economists and leaders—and by early indications, markets—have also embraced the ruling.
Hong Kong Financial Secretary Paul Chan told reporters the ruling would 'at least bring President Trump to reason.'
'For economies that have more diversified export baskets, this is a reprieve,' Nick Marro, principal economist for Asia at the Economist Intelligence Unit, told the BBC, noting that Asian economies will largely embrace the ruling. 'But that's not everyone,' he added, pointing to economies like South Korea and Taiwan that could still be 'held hostage' to U.S. tariffs on auto and metals exports.
Others reacted more cautiously.
Australian Trade Minister Don Farrell told the Guardian that Australia will 'continue to engage and strongly advocate for the removal of tariffs.' He noted that there may be 'further legal processes through the courts,' adding that the Australian government 'has been consistent in the view that these tariffs on Australian imports into the U.S. are unjustified.'
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