President Donald Trump’s sweeping use of tariffs has hit a major roadblock after a federal appeals court ruled that he exceeded his authority when imposing broad levies under emergency powers.
The U.S. Court of Appeals for the Federal Circuit ruled 7-4 that Trump’s reliance on the International Emergency Economic Powers Act (IEEPA) to declare trade deficits a “national emergency” and justify tariffs of up to 50 per cent was unlawful. The decision upholds a May ruling from a New York trade court but gives the administration until October to appeal to the Supreme Court before the tariffs are lifted.
Which tariffs are affected?
The decision strikes at the core of Trump’s so-called “reciprocal tariffs,” introduced in April, which targeted nearly all U.S. trading partners. It also covers earlier levies against Canada, Mexico, and China imposed in February under the same legal justification.
Notably, the case does not affect Trump’s tariffs imposed under other legal authorities — including steel, aluminum, and auto tariffs under the Trade Expansion Act of 1962, or earlier China-specific tariffs that both Trump and President Joe Biden maintained.
Why the court ruled against Trump
Judges concluded that IEEPA was never meant to give presidents unlimited power to set tariffs, writing that “it seems unlikely that Congress intended … to grant the President unlimited authority to impose tariffs.” Trump’s team argued precedent existed from Richard Nixon’s emergency use of tariffs in the 1970s, but the court dismissed that reasoning.
What it means for Trump’s trade agenda
The decision is a significant setback to Trump’s aggressive “America First” trade strategy. Tariffs have been central to his efforts to pressure countries into renegotiating trade deals. The ruling threatens both his leverage abroad and the billions in tariff revenue flowing into the U.S. Treasury — more than $159 billion by July, double the year before.
The Justice Department warned that refunding those duties could mean “financial ruin” for the U.S. if the tariffs are invalidated.
Next steps and alternatives
Trump has vowed to appeal to the Supreme Court, saying on his social platform that the ruling, if allowed to stand, “would literally destroy the United States of America.”
Even if the appeal fails, Trump still has some fallback options. Under the Trade Act of 1974, he could impose limited tariffs (up to 15 per cent for 150 days) against countries with large trade deficits. He could also use Section 232 of the Trade Expansion Act — the same law used for steel and aluminum — but that would require a Commerce Department investigation and cannot be imposed unilaterally.
Global implications
Analysts warn that if Trump’s tariff powers are curtailed, it could embolden U.S. trade partners to push back harder against American demands. “The administration could lose a pillar of its negotiating strategy, which may embolden foreign governments to resist future demands, delay implementation of prior commitments, or even seek to renegotiate terms,” said Ashley Akers, a trade law expert at Holland & Knight.
For now, the tariffs remain in place — but the fate of one of Trump’s most powerful economic tools will ultimately be decided by the Supreme Court.