A divided US appeals court ruled on Friday that most of Donald Trump’s tariffs are illegal, a decision that undermines the Republican president’s use of duties as a key international economic policy tool. The court allowed the tariffs to remain in place until October 14, giving the Trump administration an opportunity to file an appeal with the US Supreme Court.
This ruling comes as a legal dispute over the independence of the Federal Reserve also appears headed for the Supreme Court, setting the stage for an unprecedented legal showdown this year over Trump’s entire economic policy.
Throughout his second term, Trump has made tariffs a central pillar of US foreign policy, using them to apply political pressure and renegotiate trade agreements with countries that export goods to the United States. While the tariffs have given the Trump administration leverage to secure economic concessions from trading partners, they have also increased volatility in financial markets.
Trump expressed his disappointment with the ruling from what he called a “highly partisan” court, posting on Truth Social: “If these Tariffs ever went away, it would be a total disaster for the Country.” However, he predicted a reversal, saying he expected the tariffs to benefit the country “with the help of the Supreme Court.”
The 7-4 decision from the US Court of Appeals for the Federal Circuit in Washington, DC, addressed the legality of what Trump calls “reciprocal” tariffs imposed as part of his trade war in April, as well as a separate set of tariffs levied in February against China, Canada, and Mexico. Six of the judges in the majority and two of the dissenting judges were appointed by Democratic presidents, while one judge in the majority and two dissenters were appointed by Republican presidents.
The court’s decision does not affect tariffs issued under other legal authorities, such as Trump’s tariffs on steel and aluminum imports.
‘Unusual and Extraordinary’
Trump justified both sets of tariffs—as well as more recent levies—under the International Emergency Economic Powers Act (IEEPA). The IEEPA grants the president the power to address “unusual and extraordinary” threats during national emergencies.
“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 stated. “It seems unlikely that Congress intended, in enacting IEEPA, to depart from its past practice and grant the President unlimited authority to impose tariffs.”
The 1977 law has historically been used to impose sanctions on adversaries or freeze their assets. Trump, the first president to use IEEPA to impose tariffs, argues that the measures were justified due to trade imbalances, the decline of US manufacturing power, and the cross-border flow of drugs.
Trump’s Department of Justice has argued that the law allows for tariffs under emergency provisions that authorize a president to “regulate” imports or block them entirely.
In April, Trump declared a national emergency over the fact that the US imports more than it exports, a situation that has existed for decades. Trump asserted that this persistent trade deficit was undermining US manufacturing capability and military readiness. He claimed the February tariffs against China, Canada, and Mexico were necessary because those countries were not doing enough to stop illegal fentanyl from crossing US borders, a claim that the countries have denied.
More Uncertainty
William Reinsch, a former senior Commerce Department official now with the Center for Strategic and International Studies, said the Trump administration had been preparing for this ruling. “It’s common knowledge the administration has been anticipating this outcome and is preparing a Plan B, presumably to keep the tariffs in place via other statutes.”
There was little reaction to the ruling in after-hours stock trading. “The last thing the market or corporate America needs is more uncertainty on trade,” said Art Hogan, chief market strategist at B. Riley Wealth.
Trump is also involved in a legal battle to remove Federal Reserve Governor Lisa Cook, a move that could challenge the central bank’s independence. “I think it puts Trump’s entire economic agenda on a potential collision course with the Supreme Court. It’s unlike anything we’ve seen ever,” said Josh Lipsky, chair of international economics at the Atlantic Council.
The 6-3 conservative majority Supreme Court has issued several rulings in favor of Trump’s second-term agenda but has also recently been hostile to broad interpretations of old statutes that grant presidents newly discovered powers.
The appeals court’s decision stems from two separate cases, one brought by five small US businesses and another by 12 Democratic-led US states. Both lawsuits argued that the IEEPA does not authorize tariffs. According to the lawsuits, the Constitution grants Congress, not the president, the authority to issue taxes and tariffs, and any delegation of that authority must be both explicit and limited.
On May 28, the New York-based US Court of International Trade ruled against Trump’s tariff policies, stating that the president had overstepped his authority when he imposed both sets of challenged tariffs. The three-judge panel included a judge who was appointed by Trump in his first term. Another court in Washington also ruled that the IEEPA does not authorize Trump’s tariffs, and the government has appealed that decision as well. At least eight lawsuits, including one filed by the state of California, have challenged Trump’s tariff policies.
