Trump to appeal as federal trade court blocks tariffs

The court ruled that the President overstepped his authority with the across-the-board levies, but Trump may switch to a provision he used to underpin his first-term tariffs on China.

Donald Trump’s tariffs have led to challenges in court overseas and in the US. Picture: Getty Images

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A federal trade court has ruled Donald Trump didn’t have the authority to impose sweeping tariffs on virtually every nation, voiding the levies that have sparked a global trade war and threatened to upend the world economy.

The decision on Wednesday from the Court of International Trade blocked one of the Trump administration’s most audacious assertions of executive power, under the International Emergency Economic Powers Act of 1977, and sets the stage for a possible appeal by the White House.

Shortly after the decision was handed down, lawyers for the Trump administration notified the court they will appeal.

“The court does not read IEEPA to confer such unbounded authority and sets aside the challenged tariffs imposed thereunder,” a three-judge panel wrote.

President Trump has used IEEPA to underpin most of his second-term tariffs – from duties on Canada, Mexico and China imposed over fentanyl smuggling, to the far-reaching reciprocal tariffs levied in early April on virtually every US trading partner. Trump later paused the reciprocal tariffs for 90 days to allow for negotiations.

Congress typically holds responsibility over tariffs, but has delegated many powers to the president over decades. When he imposed the levies in April, Trump said the US trade deficit had created a national emergency that has hobbled the economy and posed an unusual and extraordinary threat.

Wednesday’s ruling said it would be unconstitutional for Congress to delegate “unbounded tariff power” to the president. “An unlimited delegation of tariff authority would constitute an improper abdication of legislative power to another branch of government,” the court said. Congress placed limits in IEEPA, restricting when and how a president could place levies, the ruling said.

The panel also said the US trade deficit didn’t fit the law’s definition of an unusual and extraordinary threat.

The order blows a hole in global trade talks, already under way with more than a dozen nations, which began after the reciprocal tariffs were imposed. It also throws into question recent agreements with the UK and China, reached after the reciprocal tariffs were imposed.

The Trump tariffs led to several challenges in the Court of International Trade and in federal courts around the US. The trade court, which has nationwide jurisdiction over tariffs and trade disputes, was the first to rule on requests for injunctions after holding hearings in two cases. Appeals from the court are heard by the US Court of Appeals for the Federal Circuit and ultimately the Supreme Court.

White House spokesman Kush Desai said in response to the ruling that the trade deficit had weakened the country.

“It is not for unelected judges to decide how to properly address a national emergency,” Desai said. “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.”

New York-based wine importer VOS Selections and four other small businesses were the plaintiffs in one of the cases before the trade court. Another was filed by Oregon, New York and 10 other states, which additionally challenged tariffs Trump said he imposed on Canada and Mexico to stop illicit drugs and illegal immigrants from entering the US.

The plaintiffs in both cases said no other president had invoked IEEPA to impose tariffs, because nothing in the law authorises such power. There is also no emergency, they said, noting the US trade deficit has existed for decades without creating an economic crisis.

“This is a major victory for working families, businesses, and the rule of law,” New York attorney-general Letitia James said in a statement about the ruling. “The President cannot ignore the Constitution and impose massive tax hikes on the American people.”

If upheld, the ruling means the Trump administration must find another justification for its global tariffs. The administration has previously contemplated imposing duties under Section 301 of the Trade Act of 1974, which allows for tariffs that counter unfair foreign trade practices. That is the provision Trump used to underpin his first-term tariffs on China and is considered to be on firmer legal footing than IEEPA.

The “Liberation Day” tariffs placed 10 per cent levies on every nation. Trump imposed even higher rates on many countries he deemed “bad actors,” but later announced a 90-day pause on those duties. Trump ratcheted up tariffs on China to as high as 145 per cent and then lowered them again to 30 per cent.

Justice Department attorneys said that the tariffs were necessary to address a U.S. trade deficit that had increased by 40 per cent in the last five years. The deficit, they said, has had a cumulative effect on the country’s economy, threatening its supply chain, manufacturing and military preparedness.

During hearings on the cases, the three-judge panel parsed the language of IEEPA while grilling the government and the plaintiffs over the court’s role in the dispute and pressing them on a way to determine whether a national emergency truly existed.

Brian Marshall, a lawyer for the Oregon attorney-general’s office, said at a hearing for the states’ case that Trump’s tariffs were unprecedented and untenable.

“The government argues that so long as the President says he’s confronting an unusual and extraordinary threat that he can set tariffs of any amount from any country for any length of time, and no court may review it,” Marshall said during the hearing. “That’s a position that no court has ever embraced and, until this year, power no president has ever asserted.”

Justice Department attorney Brett Shumate conceded at one of the hearings that the court has the power to decide whether the language in IEEPA grants the President the authority to impose tariffs. However, that’s where the judiciary’s role ends, he said.

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