 "Most of US President Donald Trump's tariffs were ruled illegal by a federal appeals court. File image/Reuters")
Donald Trump’s tariffs continue to make headlines as a court in the United States ruled that most of them were illegal, striking a massive blow to the core of the American president’s aggressive trade policy.
However, the tariffs, according to the court, will stay in effect through mid-October, giving Trump’s administration time to take the fight to the Supreme Court.
The decision marks a blow to the US president, who has wielded tariffs as a wide-ranging economic policy tool. It could also cast doubt over deals Trump has struck with major trading partners such as the European Union, and raised the question of what would happen to the billions of dollars collected by the United States since the tariffs were put in place if the conservative-majority Supreme Court does not back him.
If you are still trying to grasp all that has happened — the why, whats and hows — continue to read on as we decipher the latest on the issue of tariffs.
What did the court rule on Trump’s tariffs?
On Friday (August 29), the US Court of Appeals for the Federal Circuit in a seven-four decision ruled that President Trump had overstepped his authority in invoking the International Emergency Economic Powers Act (IEEPA) to impose most of his tariffs. The act from 1977 gives the president the power to respond to “unusual and extraordinary” threats at times of national emergencies. Trump had earlier declared a national emergency on trade, arguing that a trade imbalance is harmful to US national security.
Notably, no American president has previously used IEEPA to put tariffs on imported goods, according to a recent Congressional Research Service report.
“The statute bestows significant authority on the president to undertake a number of actions in response to a declared national emergency, but none of these actions explicitly include the power to impose tariffs, duties, or the like, or the power to tax,” the court noted.
The court further ruled that US Constitution gave Congress exclusive powers to regulate commerce with other nations and this was not superseded by the president’s remit to safeguard the economy. “The core Congressional power to impose taxes such as tariffs is vested exclusively in the legislative branch by the Constitution,” said the ruling, adding, “Tariffs are a core Congressional power.”
Impact Shorts
More ShortsThe court has agreed not to put the ruling into effect until October 14, allowing Trump and his administration to appeal to a higher court.
How did the tariffs issue reach the court?
The US court ruling that most of Trump’s tariffs are illegal stems from two lawsuits — one by small businesses and the other by a coalition of US states.
The lawsuits were filed after Trump passed executive orders in April imposing a baseline 10 per cent tariff on every country in the world as well a reciprocal tariff on dozens of others, calling it America’s ‘Liberation Day’.
At the time, VOS Selections Inc, a wine and spirits importer, and Plastic Services and Products, a pipe and fittings company, sued Trump over his use of the International Emergency Economic Powers Act of 1977, saying he has “no authority to issue across-the-board worldwide tariffs without congressional approval.”
In May, the US Court of International Trade struck down the tariffs , saying the president had exceeded his authority when he imposed the tariffs. However, that decision was put on hold during the appeal process.
So, which tariffs are now illegal?
The court’s ruling applies to the reciprocal tariffs Trump imposed in April, as well as separate tariffs on China, Canada and Mexico that the administration put in place citing emergency powers granted under a 1970s-era law.
The court’s decision does not impact other tariffs, authorised under different authorities, such as taxes on imported steel and aluminium. They also don’t impact the tariffs that Trump imposed on China in his first term, which President Joe Biden kept after a government investigation concluded that the Chinese used unfair practices to give their own technology firms an edge over rivals from the United States and other Western countries.
How has the Trump administration reacted?
Shortly after the court’s ruling, Trump expressed his unhappiness with a series of posts on social media. He wrote on Truth Social, “If allowed to stand, this decision would literally destroy the United States of America.”
“Today a highly partisan appeals court incorrectly said that our tariffs should be removed, but they know the United States of America will win in the end,” he wrote, adding, If these tariffs ever went away, it would be a total disaster for the country. It would make us financially weak, and we have to be strong.”
He added that he would fight back “with the help of the United States Supreme Court.” In fact, Attorney General Pam Bondi said the Justice Department would appeal the ruling, accusing the court of undermining “the United States on the world stage.”
“The judges of the Federal Circuit are interfering with the president’s vital and constitutionally central role in foreign policy. This decision is wrong and undermines the United States on the world stage," Bondi said in a post on X. “[The Justice Department] will appeal this decision and continue to fight to restore the president’s lawful authority,” she added.
Treasury Secretary Scott Bessent warned that suspending the effectiveness of tariffs “would lead to dangerous diplomatic embarrassment.” Similarly, Commerce Secretary Howard Lutnick noted, “Such a ruling would threaten broader US strategic interests at home and abroad, likely lead to retaliation and the unwinding of agreed-upon deals by foreign-trading partners.”
Lutnick added that they could also “derail critical ongoing negotiations” with partners.
Later, White House spokesman Kush Desai, while defending tariffs stated that the remain in effect and that “President Trump lawfully exercised the tariff powers granted to him by Congress to defend our national and economic security from foreign threats”.
What happens next?
The tariff ruling deals a huge blow to Trump and his economic policy. It also raises doubts on deals some nations agreed with the US for reduced tariffs rates.
Additionally, the Trump administration might have to refund some of the import taxes that it’s collected, delivering a financial blow to the US Treasury. It would also put Trump on shaky ground to impose tariffs in the future. As Ashley Akers, senior counsel at the Holland & Knight law firm and a former Justice Department trial lawyer told the Associated Press, “While existing trade deals may not automatically unravel, the administration could lose a pillar of its negotiating strategy, which may embolden foreign governments to resist future demands, delay implementation of prior commitments, or even seek to renegotiate terms.”
Does this mean Trump can’t impose tariffs again?
No. While Trump won’t be able to use the IEEPA, the US president has a number of other ways to impose import tariffs.
Trump could get Lutnick and US trade representatives to carry out investigations under Section 301 of the 1974 US Trade Act against various trading partners, which would allow tariffs to be implemented after an investigation runs its course. He could also use Section 232 of the 1962 trade law, which he is already using for steel and aluminium duties.
There is also a never-before-used trade law, Section 338 of the Trade Act of 1930, which allows the president to impose tariffs of up to 50 per cent on imports from countries.
With inputs from agencies