A federal court ruling on Friday last week has cast serious doubt on the legality of the majority of tariffs imposed during former President Donald Trump’s administration, stirring uncertainty for importers and the global trade environment. The U.S. Court of Appeals for the Federal Circuit ruled that most of Trump’s so-called “reciprocal tariffs” were illegal because they exceeded the authority granted by Congress. The ruling specifically targets tariffs that Trump implemented under the International Emergency Economic Powers Act (IEEPA), which he used to justify tariffs on imports from nearly every trading partner as a response to what he described as a national emergency linked to trade imbalances and security concerns. The Trump administration now faces a critical juncture as it considers its next steps.
The tariffs in question were announced on April 2, termed “Liberation Day” tariffs, and included levies that reached as high as 50% on imports from countries with significant trade deficits with the U.S. They extended beyond previously imposed tariffs on China, Canada, and Mexico and affected approximately 69% of U.S. imports. The court’s ruling, decided by a 7-4 vote, declared that imposing tariffs using the emergency powers statute was beyond the president’s authority, emphasizing that tariff-setting is explicitly a congressional responsibility. Despite the ruling, the court allowed the tariffs to remain in place until mid-October to give the Trump administration time to seek review from the U.S. Supreme Court.
This development has immediate implications for many businesses. Tariffs function as additional taxes on imported goods, which can increase costs for importers and consumers alike. The ruling creates uncertainty for companies trying to plan their sourcing and pricing strategies amid a looming possibility that these tariffs could be reversed. Experts warn that the unpredictability might disrupt economic activity, potentially dampening investment and trade relationships as foreign companies and trading partners await clarity. Importers now face the prospect that tariffs paid under these illegal measures might have to be refunded should the Supreme Court uphold the ruling.
Politically and legally, this case strikes at a controversial aspect of Trump’s trade policy, which sought to bypass Congress through emergency powers to enforce wide-reaching tariff measures. If the Supreme Court upholds the appeals court decision, it could set a precedent limiting the president’s ability to unilaterally impose tariffs without legislative backing. However, the Trump administration, including Treasury Secretary Scott Bessent, has indicated they have backup plans. Bessent noted there remain other legal authorities, such as the Smoot-Hawley Tariff Act of 1930, that could potentially be used to maintain tariffs, though this law carries a controversial legacy for worsening the Great Depression and sparking trade wars.
Additionally, it is important to note that not all tariffs imposed by Trump are affected by this ruling. Some targeted tariffs on metals like aluminum, steel, and copper were implemented under a separate legal authority related to national security (Section 232). These sector-specific tariffs are expected to remain in force regardless of the legal battle over the reciprocal tariffs. The administration also has the option to expand these tariffs further if they choose.
Looking forward, the next major step is the Supreme Court’s potential involvement. The Trump administration is expected to appeal the ruling, and the Supreme Court is likely to fast-track such a significant case given its impact on U.S. trade policy. Until then, businesses and global trading partners remain in a state of flux, unsure whether the current tariffs will stay, be removed, or be replaced by other measures. Some foreign governments might delay business dealings with the U.S. as they await legal clarity, which could disrupt international supply chains. The case highlights the delicate balance of powers in U.S. trade policy and the complex interplay between law, economics, and politics.
The appellate court decision marks a turning point that threatens to dismantle a key part of Trump’s trade agenda. While the tariffs remain in effect for now, the clock is ticking toward mid-October when a higher court ruling could reshape the landscape yet again. Meanwhile, the U.S. will have to navigate market uncertainty, legal challenges, and potential shifts in trade relations that will ripple far beyond American borders. Companies, investors, and policymakers will be closely watching the Supreme Court’s next moves and the Trump administration’s strategies in what could be a defining moment for U.S. trade policy in the years ahead.
