A US appeals court has dealt a major blow to President Donald Trump’s trade policy, ruling that his sweeping use of emergency powers to impose tariffs was illegal. The ruling, while temporarily leaving the tariffs in place until October, has set the stage for a Supreme Court battle that could redefine presidential authority in trade. Here’s a detailed look.
The court’s decision
The US Court of Appeals for the Federal Circuit, in a 7-4 ruling, said Trump exceeded his powers under the International Emergency Economic Powers Act (IEEPA).
The judgment upheld an earlier ruling by the Court of International Trade, which had also struck down the tariffs.
However, the appeals court allowed the duties to stay in place until October 14, giving the White House time to appeal.
Trump reacted on Truth Social: “The United States of America will win in the end.”
What tariffs are in dispute?
The contested tariffs are not minor add-ons but the very core of Trump’s second-term trade agenda.
On April 2 (Liberation Day), Trump imposed a 10% baseline tariff on nearly all US trading partners. He also announced “reciprocal tariffs” of up to 50% on countries with which the US ran trade deficits.
Since returning to office in January, Trump invoked IEEPA to establish a 10% baseline tariff, with higher rates for dozens of economies, though AFP did not cite a maximum figure.
In addition, both agencies note that Trump used emergency powers to target Canada, Mexico and China, citing drug trafficking and migration as grounds for the duties.
Important distinction: The court ruling applies only to tariffs imposed under IEEPA. It does not affect Trump’s steel, aluminium, auto or China-specific tariffs levied under separate trade statutes.
Why did the court strike them down?
At the heart of the ruling lies the question of what counts as a “national emergency.”
The court found that while IEEPA gives the president wide authority to regulate commerce during emergencies, it does not explicitly grant the power to impose tariffs or taxes.
The judges wrote: “The statute bestows significant authority on the President to regulate commercial transactions and the use of property, but none of these actions explicitly include the power to impose tariffs, duties, or the like.”
In essence, the court rejected Trump’s claim that trade deficits or drug flows across borders could be treated as emergencies warranting blanket tariffs.
Judges wrote that Congress was unlikely to have intended to give presidents “unlimited authority” over tariffs.
The decision largely upheld a May ruling by a New York trade court, but allowed the tariffs to remain in place temporarily while the administration appeals to the US Supreme Court.
Four dissenting judges sided with Trump, saying IEEPA is not an unconstitutional delegation of power, leaving a possible legal path for his team.
The economic stakes
The ruling is not just about constitutional law — it carries enormous financial and diplomatic implications.
Tariff revenues
AP reports that tariff collections had surged to $159 billion by July, more than double the revenue compared to the same period last year.
If the tariffs are struck down permanently, the US Treasury could face billions in refund claims from importers.
Trade negotiations
Trump used the tariffs as leverage to pressure the European Union, Japan, and the UK into signing new trade agreements.
AFP points out that if the tariffs collapse, these deals could unravel, leaving US negotiators empty-handed.
Diplomatic risks
Commerce Secretary Howard Lutnick warned the appeals court that suspending the tariffs would damage US “strategic interests” and undercut ongoing negotiations.
Treasury Secretary Scott Bessent went further, saying the US risked “dangerous diplomatic embarrassment” if the policy crumbled.
What happens next?
The Trump administration is preparing an appeal to the Supreme Court, which has a conservative majority. Until then, the tariffs remain in force.
If the Supreme Court upholds the lower court ruling, Trump will still have other legal avenues, though narrower:
Trade Act of 1974: Allows tariffs of up to 15% for 150 days on countries running trade surpluses with the US.
Section 232 of the 1962 Trade Expansion Act: Permits tariffs after Commerce Department investigations, usually on national security grounds (used earlier for steel, aluminium, and auto imports).
These tools are more limited and would not allow Trump to replicate the sweeping powers he claimed under IEEPA.
If the courts permanently block Trump’s use of IEEPA, India and other emerging economies stand to gain by avoiding across-the-board duties.
However, sector-specific tariffs, on steel, pharmaceuticals, or IT hardware, could still be imposed through other trade statutes, meaning Indian exporters are not fully in the clear.
The broader significance
This case is about more than tariffs. It is about whether a US president can use “emergency” powers to reshape global trade unilaterally.
If Trump wins at the Supreme Court, future presidents could wield tariffs as a standing foreign policy weapon, bypassing Congress.
If the court strikes him down, it will mark a historic limit on executive trade authority, reaffirming Congress’s constitutional role in taxation and tariffs.
(With inputs from Associated Press, AFP)