The vast majority of President Donald Trump’s global tariffs have been ruled illegal and blocked by the US trade court, dealing a major blow to a pillar of his economic agenda.
On Wednesday, a three-judge panel of the US Court of International Trade in Manhattan unanimously ruled in favor of the Democratic-led states and small businesses that accused Trump of wrongly invoking the emergency law to justify most of his tariffs. The court gave the Trump administration 10 days to “implement” its order but did not provide any specific steps that must be taken to lift the tariffs.
This order applies to Trump’s global unified tariffs, tariffs imposed on countries such as China, and tariffs related to fentanyl imposed on China, Canada and Mexico. Other tariffs imposed under different authorities, such as those imposed under the so-called “Section 232” and “Section 301”, including tariffs on steel, aluminum and automobiles, are not affected.
The Department of Justice has filed a notice of appeal with the US Court of Appeals for the Federal Circuit. The US Supreme Court may ultimately have the final say on this major case that could affect trillions of dollars in global trade. Currently, the ruling permanently blocks the implementation of these tariffs, unless the appeals court allows Trump to reinstate them during the litigation.
The ruling sent US stock index futures soaring, with Nasdaq 100 futures contracts rising as much as 2.1%. The dollar strengthened and the yen weakened.
This ruling is one of the biggest setbacks Trump has suffered in court amid a wave of lawsuits challenging the boundaries of his executive powers. Other lawsuits include Trump’s mass firing of federal workers, restrictions on birthright citizenship, and cuts to federal spending that Congress has approved.
The judge rejected the government’s argument that Trump had the right to unilaterally impose tariffs under a law aimed at addressing financial transactions during a national emergency. This ruling was a so-called summary judgment, meaning that the plaintiff in the lower court could achieve a final victory without a trial.
Trump’s executive order invoked the International Emergency Economic Powers Act to provide a basis for imposing large-scale global tariffs. The act grants the president the power to control various financial transactions in certain emergency situations, usually including sanctions.
The president said that the US trade deficit and drug trafficking at the US border were national emergencies, so he could invoke the law. The judge said that Trump’s lawyers stated at the court hearing that their intention was to “put pressure” on other countries to reach better agreements.
The panel, which includes a judge appointed by Trump, one by Barack Obama and one by Ronald Reagan, wrote: “The government’s ‘pressure’ argument actually concedes that the direct effect of tariffs targeted at a particular country is merely to burden that country.”
The Trump administration argued in court documents that the plaintiffs inappropriately challenged his executive order, “inviting judicial second-guessing of the president’s judgment.”
Trump said he was allowed to use the emergency law to impose tariffs because the “huge and persistent” annual trade deficit of the United States on a global scale posed an “unusual and extraordinary threat” to national security and the economy.
The government had asked the panel of judges to make a narrow ruling in favor of the plaintiff, but the court held that, given the nature of the tariffs, this was impossible.
The expert group stated: “There is no issue of narrow relief here; if the challenged tariff order is illegal for the plaintiff, it is illegal for all.”
Timothy Moe, chief Asia-Pacific equity strategist at Goldman Sachs, said in an interview with Bloomberg Television: “This may be seen as a heavy blow, but it’s not the final outcome. Specifically, the Trump administration can still take many other alternative measures to maintain tariffs.”
“More details are needed,” said Rodrigo Catril, a strategist at National Australia Bank in Sydney. “Especially whether there is a ban or if it will go to an appeal process, and whether the tariffs remain in place for now. The best guess at this stage is that the government has enough power to bypass the ruling and impose tariffs on multiple grounds.”
Mingze Wu, a currency trader at StoneX Financial Pte in Singapore, said: “The dollar was sold off heavily due to tariffs, so it’s reasonable to see the opposite now as the trade outlook has become somewhat more optimistic to a certain extent.”
