A federal appeals court ruled on Friday that former President Donald Trump did not have the legal authority to impose sweeping tariffs on nearly every country in the world, but it allowed his administration time to maintain the tariffs while pursuing an appeal to the Supreme Court. The US Court of Appeals for the Federal Circuit largely upheld a May ruling by the US Court of International Trade in New York, stating that Congress likely never intended to grant the President unlimited power to impose import taxes. The decision came in a 7-4 ruling.
Trump Administration Responds
President Trump vowed to appeal the ruling, claiming on social media that if it stood, it would “literally destroy the United States of America.” White House spokesperson Kush Desai said that Trump had acted lawfully and expressed confidence in achieving “ultimate victory on this matter.”
Impact on Trade Policy and Markets
The ruling complicates Trump’s efforts to overhaul American trade policy independently. While he could still impose tariffs using other laws, such as the Trade Act of 1974, those laws limit the speed and severity of tariffs. Trump’s broad tariffs have unsettled global markets, strained relations with allies, and sparked concerns about higher consumer prices and slower economic growth. Nevertheless, his administration used these tariffs to negotiate trade deals with the EU, Japan, and other countries and to generate revenue for the federal treasury, helping offset the tax cuts passed on July 4.
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Background on Tariffs and Legal Challenge
The court ruling addresses two sets of tariffs imposed under Trump’s declared national emergencies:
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Liberation Day Tariffs (April 2, 2025): Tariffs up to 50% on countries with US trade deficits and a baseline 10% on most other countries, justified by trade imbalances.
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Trafficking Tariffs (February 1, 2025): Tariffs on imports from Canada, China, and Mexico to combat what Trump termed a national emergency involving drug trafficking and illegal immigration.
Plaintiffs argued that the International Emergency Economic Powers Act (IEEPA), under which Trump declared the emergencies, does not authorize such tariffs. They noted that long-standing trade deficits do not constitute the “unusual and extraordinary” threat required for a national emergency declaration.
Administration’s Legal Argument
The Trump administration cited precedent, including President Nixon’s use of emergency tariffs in 1971 under the 1917 Trading With the Enemy Act, which influenced IEEPA’s language. However, both the trade court and the appeals court rejected these claims, ruling that Trump exceeded his legal authority.
Potential Financial Implications
The government warned that striking down the tariffs could force refunds on already collected import taxes, potentially affecting the US Treasury. By July, tariff revenue had reached $159 billion, more than double the previous year, prompting warnings of severe economic consequences if revoked.
Alternative Authorities for Tariffs
Trump could still impose import taxes under other laws, but these are more restrictive. For example, Section 122 of the Trade Act of 1974 allows a 15% tariff for 150 days on countries with significant trade deficits, while Section 301 permits tariffs after investigating unfair trade practices. Trump previously used Section 301 to target China during his first term.
Exclusions from the Ruling
The court challenge does not cover other tariffs, including those on steel, aluminum, autos, or earlier China tariffs maintained by the Biden administration after investigations of unfair trade practices.
This ruling limits Trump’s unilateral ability to impose broad, protectionist trade measures but leaves room for more targeted tariffs under existing laws, shaping future US trade policy and international negotiations.
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