In a significant legal ruling on Wednesday, a federal court in New York blocked President Donald Trump's ambitious plan to impose sweeping tariffs on imports from nearly every country around the globe. This decision by a three-judge panel of the U.S. Court of International Trade has considerable implications for U.S. trade policy and economic stability.
The court found that President Trump had exceeded his authority by invoking the 1977 International Emergency Economic Powers Act (IEEPA) to declare a national emergency and justify these extensive tariffs. The ruling highlights the tension between presidential power and congressional authority, a recurring theme in recent U.S. trade policy.
The tariffs in question have disrupted global commerce, unsettled financial markets, and raised concerns about potential price increases and recession—not only within the United States but around the world. Historically, the Court of International Trade handles civil cases related to trade matters, with its decisions subject to appeal in the U.S. Court of Appeals for the Federal Circuit and potentially the Supreme Court, where challenges to Trump's tariffs are anticipated to end up.
Which Tariffs Were Blocked?
The court's ruling specifically targets the tariffs imposed last month on nearly all U.S. trading partners, as well as those levied previously against China, Mexico, and Canada. On April 2, Trump announced reciprocal tariffs of up to 50% on nations with which the United States faces a trade deficit, alongside a baseline tariff of 10% affecting most other countries. Although he later suspended the reciprocal tariffs for 90 days to encourage negotiations, the baseline tariffs remained in force.
Claiming extraordinary powers under IEEPA, Trump declared the U.S. trade deficits a national emergency, a justification he used to bypass Congress. This declaration followed his earlier invocation of the same law to impose tariffs on Canada, Mexico, and China, citing illegal immigration and drug trafficking as reasons for the national emergency.
The U.S. Constitution grants Congress the authority to impose taxes, including tariffs, yet over time, lawmakers have allowed presidents to assume greater control over tariff decisions—a power Trump has leveraged extensively.
The legality of these tariffs is currently being challenged in at least seven lawsuits. In the recent ruling, the Court combined two significant cases: one filed by five small businesses and another by twelve U.S. states.
Court’s Rationale for the Ruling
The court's decision to rule against the president stems from its conclusion that Trump's expansive tariffs exceeded his regulatory authority under IEEPA. The judges noted that the tariffs failed to address the issues they were designed to mitigate. The states involved argued that America's longstanding trade deficits do not constitute an immediate emergency, as they have persisted for 49 consecutive years, regardless of economic conditions.
Implications for Trump’s Trade Agenda
Wendy Cutler, a former U.S. trade official and current vice president at the Asia Society Policy Institute, remarked that the ruling "throws the president’s trade policy into turmoil." She suggested that trade partners might hesitate to make further concessions during the 90-day tariff pause, waiting for clearer legal guidance.
Businesses are also likely to reassess their supply chain strategies, possibly accelerating shipments to the U.S. to mitigate the risk of tariffs being reinstated if the ruling is appealed. The court did acknowledge that Trump has limited authority to impose tariffs to address trade deficits under the Trade Act of 1974; however, this law restricts tariffs to 15% for a duration of only 150 days with countries that exhibit significant trade deficits.
As Eswar Prasad, a professor of trade policy at Cornell University, stated, the ruling effectively dismantles the Trump administration's justification for imposing tariffs through federal emergency powers, asserting that it oversteps congressional authority and undermines due process. "The ruling makes it clear that the broad tariffs imposed unilaterally by Trump represent an overreach of executive power," Prasad concluded.
