A sharply divided U.S. appeals court delivered a landmark ruling on Friday, declaring that most of Donald Trump’s signature tariffs are illegal. The decision strikes at the heart of the Republican president's use of duties as a primary tool of international economic policy.
The court, however, has allowed the tariffs to remain in effect until October 14, giving the Trump administration a window to appeal the monumental decision to the U.S. Supreme Court.
This ruling emerges as a separate legal battle over the independence of the Federal Reserve also appears destined for the Supreme Court, setting the stage for an unprecedented judicial showdown this year over the entirety of Trump's economic agenda.
Trump has made tariffs a cornerstone of his second-term foreign policy, wielding them to exert political pressure and renegotiate trade deals with nations exporting goods to the United States. While the tariffs have given his administration leverage to secure economic concessions from trading partners, they have also fueled volatility in financial markets.
In a fiery response on his Truth Social platform, Trump lamented the court's decision, calling it "extremely biased." He warned, "If these Tariffs are overturned, it will be a total disaster for the country." Despite his criticism, he predicted a reversal, stating he expects the tariffs will benefit the nation "with the help of the Supreme Court."
The Legal Reasoning: A Question of Presidential Power
The 7-4 decision by the U.S. Court of Appeals for the Federal Circuit in Washington, D.C., addressed the legality of what Trump termed "reciprocal" tariffs imposed as part of his trade war in April, as well as a separate batch of tariffs levied in February on China, Canada, and Mexico.
The court’s decision does not affect tariffs enacted under different legal authority, such as Trump’s duties on imported steel and aluminum.
'Unusual and Extraordinary' Threats
Trump justified both sets of tariffs under the International Emergency Economic Powers Act (IEEPA). This 1977 law grants the president authority to address "unusual and extraordinary" threats during national emergencies. However, the court found that this authority does not extend to imposing tariffs.
"The statute grants the President considerable authority to take several actions in response to a declared national emergency, but none of these actions explicitly includes the authority to impose tariffs, duties, or the like, or the power to tax," the court wrote in its majority opinion. "It seems Congress, in enacting IEEPA, did not intend to cast aside prior practice and grant the President unlimited authority to impose tariffs."
Historically, IEEPA has been used to impose sanctions on adversaries or freeze their assets. Trump is the first president to use the act to impose tariffs broadly. He argued the measures were justified by trade imbalances, a decline in U.S. manufacturing power, and the cross-border flow of illicit drugs. The Trump Justice Department contended that the law allows for tariffs under emergency provisions that permit the president to "regulate" or block imports entirely.
A Collision Course with the Supreme Court
The ruling stems from two lawsuits—one filed by five small U.S. businesses and another by 12 Democratic-led U.S. states. They argued that the Constitution grants Congress, not the president, the power to enact taxes and tariffs, and that any delegation of that power must be both explicit and narrow.
This decision affirms a May 28 ruling by the New York-based U.S. Court of International Trade, which also found the president had overstepped his authority.
Experts noted that the administration likely anticipated this outcome. "It's well known that the administration was expecting this result and is preparing a Plan B, presumably to sustain the tariffs through other statutes," said William Reinsch, a former senior Commerce Department official now at the Center for Strategic and International Studies.
The immediate market reaction in after-hours trading was minimal. However, the long-term implications are significant. "The last thing the market or American businesses need is more uncertainty on trade," said Art Hogan, chief market strategist at B. Riley Wealth.
With Trump also embroiled in a legal fight to remove Federal Reserve Governor Lisa Cook, potentially ending the central bank's independence, the stakes are incredibly high.
"I think this puts Trump's entire economic agenda on a collision course with the Supreme Court. It's unlike anything we've ever seen," said Josh Lipsky, head of international economics at the Atlantic Council.
While the Supreme Court's 6-3 conservative majority has issued several rulings favorable to Trump's second-term agenda, it has also recently pushed back against broad interpretations of old statutes that grant new, sweeping powers to the president.
