What’s Next for Trump’s Trade War After Court Blocks Tariffs

The US Court of International Trade has blocked the vast majority of President Donald Trump’s tariffs, dealing a blow to a key pillar of his economic agenda.

A panel of three judges unanimously ruled on May 28 that the bulk of the new import taxes were issued illegally, concluding that Trump wrongfully invoked an emergency law to justify the levies. It’s a rare rebuke as the courts tend to defer to the president on trade matters.

The decision is one of the biggest legal setbacks for the Trump administration amid a wave of lawsuits over executive orders that test the limits of presidential authority. The verdict could also test the power of the courts to enforce their rulings if the executive branch chooses to defy the judges’ orders.

The ruling issued by the New York-based trade court permanently blocks the duties in question unless an appeals court allows Trump to reinstate them during litigation. The government has been given 10 days to complete the bureaucratic process of unwinding the tariffs.

The Justice Department immediately filed a notice of appeal and has asked the trade court to delay its ruling while the challenge proceeds. The trade court ordered plaintiffs to respond to the request by May 30 at noon. As the case works its way through the legal system, the fate of the tariffs hanging over trillions of dollars of global trade could ultimately lie in the hands of the Supreme Court.

“It is critical, for the country’s national security and the president’s conduct of ongoing, delicate diplomatic efforts, that the court stay its judgment,” the administration said. “The harm to the conduct of foreign affairs from the relief ordered by the court could not be greater.”

Which tariffs have been blocked by the trade court?

The order applies to the “reciprocal” tariffs that Trump announced April 2 on imports from almost 60 countries, which were subsequently paused until early July. It also includes the separate tariffs levied on goods from China, Canada and Mexico.

Article 1 of the US Constitution gives Congress the power to levy taxes and duties and to “regulate commerce with Foreign Nations.” But Congress has for decades delegated parts of its power over trade via various bits of legislation, most of which allow presidents to deploy tariffs only for limited reasons.

Trump in his first term tested the boundaries of those powers. But this time around he invoked what he claimed were virtually unlimited powers under the International Emergency Economic Powers Act to impose tariffs via executive orders, though the 1977 law had never been used for that purpose before. The law doesn’t mention tariffs.

The IEEPA, passed in 1977, grants the president authority over a variety of financial transactions during certain emergencies, although the typical tool is sanctions. Trump cited the trade deficits with other countries and drug trafficking at the US border as national emergencies that allowed him to invoke the law to impose tariffs.

If the court’s decision holds, it would in a matter of days eliminate a 30 percent duty on imports from China, a tariff of as high as 25 percent on goods from Canada and Mexico, and a 10 percent levy on most other goods entering the US.

The ruling doesn’t affect the sectoral duties imposed using different legal foundations, such as the levies on steel, aluminum and automobiles put in place by harnessing Section 232 of the 1962 Trade Expansion Act. Those tariffs depend on a Commerce Department investigation that concluded that imports of such products pose a national security risk. The Trump administration has laid the groundwork to target pharmaceutical products and semiconductors, among other things, with Section 232 tariffs. The ruling also doesn’t affect tariffs imposed under Section 301, which authorizes levies based on unfair trade practices.

What was the lawsuit about?

Several lawsuits have been launched challenging Trump’s tariffs. This ruling responded to two cases brought before the US Court of International Trade.

One was filed on April 14 by the Liberty Justice Center — a libertarian-leaning legal advocacy group — on behalf of five small businesses. The companies include a wine distributor in New York, a Vermont-based brand of women’s cycling apparel, and a small electronics manufacturer in Virginia.

Their lawsuit argued that Trump was misusing IEEPA. The Liberty Justice Center said the US trade deficits were “neither an emergency nor an unusual or extraordinary threat” and even if they were, the emergency law doesn’t allow a president to impose across-the-board tariffs.

The other case was filed on April 23, brought by the attorneys general of 12 Democratic-led US states. They make the same allegations and argue that Trump’s tariffs amount to a massive tax on American consumers and infringe on the authority of Congress.

What did the trade court decide?

The three judges concluded that because of the Constitution’s “express allocation of the tariff power to Congress,” IEEPA does not “delegate an unbounded tariff authority to the President.”

The ruling determined that Trump’s initial executive order announcing global tariffs, as well as his subsequent order imposing additional levies on imports from countries that retaliated, exceeded the president’s authority under the emergency law.

A third executive order, hitting goods from Mexico and Canada with tariffs, was deemed to be illegal because those levies do not ultimately attempt to address the emergency used to justify them.

The panel made clear that it wasn’t passing judgment on the “wisdom or likely effectiveness of the president’s use of tariffs as leverage.” Instead, the judges said that Trump’s imposition of tariffs was “impermissible not because it is unwise or ineffective, but because [federal law] does not allow it.”

What does the ruling mean for Trump’s tariff agenda?

The ruling may not be a permanent setback for Trump’s push to reshape global trade. For starters, Trump and his administration have dismissed judges as biased when they’ve been handed unfavorable verdicts and his government has been accused of failing to fully comply with court orders. It remains to be seen whether the administration will obey the trade court’s decision, which White House spokesman Kush Desai said was made by “unelected judges” who should not have the power “to decide how to properly address a national emergency.”

The tariffs could yet be reinstated after an appeals process, which will first head to the US Court of Appeals for the Federal Circuit in Washington, DC.

If the trade court’s ruling isn’t ignored and survives an appeal, the unraveling of a large portion of Trump’s tariffs could exacerbate concerns about the state of America’s public finances. Bond market investors, in particular, have been questioning the trajectory of the country’s mounting debt load.

The administration had cited increased tariff revenue as a way to offset the tax cuts in what Trump calls the “big, beautiful” budget bill now before Congress, which is estimated to cost $3.8 trillion over the next decade. US importers paid a record $16.5 billion in tariffs in April — a number Trump’s aides had said they expected to rise in the coming months — but it’s unclear whether the ruling entitles them to a refund.

Senior White House officials downplayed the implications of the trade court’s ruling. “Nothing’s really changed,” Trump trade adviser Peter Navarro told Bloomberg Television. “The big picture here is we’ve got a very strong case with IEEPA,” he said. “But the court basically tells us, if we lose that, we just do some other things.”

The president still has other tools available to impose tariffs, such as his Section 232 national security powers, though they are more limited than what Trump attempted to use IEEPA for. To take similarly sweeping action, he could temporarily roll out import taxes of as high as 15 percent for a maximum of 150 days using a provision of the 1974 Trade Act. But this can only be done unilaterally in the event of a “large and serious” US balance-of-payments crisis, to help correct an international balance-of-payments disequilibrium, or to prevent an “imminent and significant” depreciation of the dollar. The administration could also initiate investigations into countries’ unfair trade and economic policies under Section 301, though those would take longer to implement.

What does the ruling mean for trade deals that are in the works?

For major trading partners that are negotiating with the Trump administration over tariffs, including China, the European Union, India and Japan, they must now decide whether to press ahead with efforts to secure deals or slow walk talks on the bet that they now have a stronger hand.

Also thrown into doubt is the outline of a trade deal that Trump reached with the UK. That potential pact calls for the imposition of a 10 percent US tariff on all imports from the UK, but those duties would be null and void if the trade court’s decision endures.

“I don’t know why any country would want to engage in negotiations to get out of tariffs that have now been declared illegal,” said Jennifer Hillman, a Georgetown Law School professor and former World Trade Organization judge and general counsel for the US Trade Representative. “It’s a very definitive decision that the reciprocal worldwide tariffs are simply illegal.”

What is the US Court of International Trade?

The US trade court is part of the nation’s federal court system and was created by Congress to handle specialised disputes about trade and customs, including tariffs. Its decisions are appealed on the same track as rulings from district courts, meaning a challenge by Trump would go to a federal appeals court and then, potentially, the Supreme Court.

Nine judges constitute the US Court of International Trade. As with other federal courts, these judges are appointed by sitting presidents, with the advice and consent of the Senate. The panel of three that oversaw the two tariffs cases were appointed by three separate presidents: Trump, Barack Obama and Ronald Reagan.

What if the Trump administration doesn’t comply with the trade court’s ruling?

Judges have no ability to take action against a US president, who has broad immunity for official actions. They can find federal agency officials or their lawyers in contempt of court and fine them for defying a judge’s orders. Financial sanctions can also be imposed on federal agencies for failure to comply and in extreme cases, judges can jail officials for contempt. More typically, however, judges rely on the power of shame to try to bring officials into compliance with their directives.

Judges have no police powers, but they can order the US Marshals to bring someone to court. While the marshals must comply with a judicial order, they also work for the Justice Department, which is under the president’s control. This could theoretically trigger a constitutional crisis if the president orders marshals not to comply with a judge’s order.

The US government was designed to have three co-equal branches — executive, legislative and judicial — that check and balance one another. Scholars argue that the democratic system would be undermined if one branch refuses to abide by the role of the other two.

By Erik Larson, Laura Curtis, Josh Wingrove and Shawn Donnan