Federal Court Blocks Broad Tariffs, Curbs Presidential Trade Authority

A landmark federal court decision in New York has significantly curbed the expansive executive authority previously invoked to impose widespread tariffs. This ruling represents a substantial check on presidential power concerning trade policy, specifically challenging the declaration of a national emergency to justify broad-ranging economic measures.

Judicial Intervention in Trade Policy

A three-judge panel of the US Court of International Trade determined that President Donald Trump exceeded his statutory authority. The court’s decision centered on the invocation of the 1977 International Emergency Economic Powers Act (IEEPA) to declare a national emergency, which was then used to justify sweeping tariffs across numerous trading partners. These tariffs had marked a departure from established US trade practices, creating global economic uncertainty and potential inflationary pressures.

The US Court of International Trade holds jurisdiction over civil trade disputes. Its rulings can be appealed to the US Court of Appeals for the Federal Circuit in Washington and subsequently to the Supreme Court, where such high-profile challenges often culminate.

Tariffs Subject to the Ruling

The court’s judgment specifically blocked tariffs that had recently been applied to nearly all US trading partners, as well as prior levies on goods from China, Mexico, and Canada. Initially, in April, the administration had introduced “reciprocal” tariffs of up to 50% on countries with which the US maintained a trade deficit, alongside a 10% baseline tariff on most other nations. While the reciprocal tariffs were temporarily suspended for negotiation, the baseline tariffs remained active.

President Trump justified these taxes under IEEPA by deeming the United States’ persistent trade deficits a “national emergency,” claiming extraordinary power without requiring congressional approval. Previously, in February of the same year, he had also utilized IEEPA to impose tariffs on Canada, Mexico, and China, citing concerns over illegal immigration and drug flows as a national emergency requiring action from those countries. While the US Constitution grants Congress the power to levy taxes, including tariffs, legislative actions over time have allowed presidents to assume more tariff-setting authority, which President Trump had frequently exercised.

The ruling on Wednesday consolidated two of at least seven lawsuits challenging these tariffs, including one initiated by small businesses and another by twelve US states. It is important to note that certain other tariffs imposed by the Trump administration, such as those on foreign steel, aluminum, and automobiles, were not affected by this ruling. These specific levies were enacted under a different legal framework that mandated a Commerce Department investigation, rather than relying solely on presidential discretion.

Rationale Behind the Court’s Decision

The administration had contended that prior court decisions, notably President Richard Nixon’s emergency use of tariffs in 1971 to address a financial crisis stemming from the dollar’s devaluation, set a precedent. The Nixon administration had successfully invoked the 1917 Trading With the Enemy Act, which influenced the legal language of the later IEEPA.

However, the court distinguished President Trump’s actions from this historical precedent. It concluded that President Trump’s broad tariffs exceeded his authority under IEEPA to regulate imports. Furthermore, the court found that the tariffs failed to address the purported problems they were meant to solve. The states involved in the lawsuit highlighted that America’s trade deficits are a long-standing economic feature, occurring for decades, which undermines the notion of a “sudden emergency” requiring such drastic measures.

Implications for Trade Policy

This court decision introduces significant uncertainty into the nation’s trade policy. Experts, such as Wendy Cutler, Vice President at the Asia Society Policy Institute and a former US trade official, suggest that negotiating partners might pause further concessions to the US until greater legal clarity emerges. Businesses may also need to re-evaluate their supply chain strategies, potentially accelerating shipments to mitigate the risk of tariffs being reinstated on appeal.

While this ruling curtails the use of IEEPA for sweeping tariffs based on declared national emergencies related to trade deficits, the president still retains more limited authority under other statutes, such as the Trade Act of 1974. However, that act imposes stricter limits, generally restricting tariffs to 15% and for a duration of only 150 days, applicable primarily to countries with significant trade imbalances with the US.

Eswar Prasad, a professor of trade policy at Cornell University, commented that the ruling “destroys the Trump administration’s rationale for using federal emergency powers to impose tariffs, which oversteps congressional authority and contravenes any notion of due process.” He emphasized that the judgment clearly asserts that the broad, unilaterally imposed tariffs constituted an executive overreach.