A federal appeals court ruled that President Trump illegally imposed global tariffs under the emergency law, and the legal disputes triggered by this move are deepening, further intensifying the chaos in global trade.
On Friday evening, a panel of Washington judges ruled by a 7-4 vote, a major setback for Trump, although it gave both sides something to boast about.
Most judges upheld the International Trade Court’s ruling in May that the tariffs were illegal. But the judges, at Trump’s request, kept the tariffs in place during the case and suggested that the scope of the injunction might be narrowed to apply only to those who filed the lawsuit.
It remains unclear what the next steps will be in this case. The Trump administration may quickly appeal to the Supreme Court, or it may allow the trade court to rehear the case and possibly narrow the scope of the injunction against its tariffs.
Wendy Cutler, senior vice president of the Asia Society Policy Institute and a veteran U.S. trade negotiator, posted on LinkedIn: “Our trading partners must be feeling bewildered and confused. Many of them have already reached framework agreements with us, and some are still in the midst of negotiations.”
The case was brought by a group of Democratic-led states and a coalition of small businesses and involves trillions of dollars in global trade. If the final ruling goes against Trump’s tariffs, it will upend his trade deals and force the government to deal with refund claims for hundreds of billions of dollars in tariffs already paid.
“It’s very comforting,” said Elana Ruffman. Her family’s toy business, Learning Resources Inc., won another lawsuit against Trump’s tariffs imposed under the International Emergency Economic Powers Act (IEEPA). “The court agreed with us that the way these tariffs were implemented was not legal. That’s great.”
In a report to clients on Friday, Mollie Sitkowski, a trade lawyer at Faegre Drinker Biddle & Reath LLP, noted that the ruling “does not directly apply” to tariffs imposed on Brazil or India under the emergency law and may not resolve the issue of separately eliminating the “de minimis” exception for packages valued at less than $800.
The US Court of Appeals for the Federal Circuit ruled on Friday that Trump’s imposition of tariffs under the International Emergency Economic Powers Act (IEEPA) was incorrect. The panel determined that the federal law was never intended to be used in this way. In fact, the court pointed out that the law does not mention “tariffs” or “any synonyms”.
New York Attorney General Letitia James, who is a party to the tariff lawsuit, said in a statement, “The court has once again ruled that the president cannot fabricate a false economic emergency to justify billions of dollars in tariffs. These tariffs are taxes on Americans – they increase the costs for working families and businesses across the country, leading to higher inflation and job losses.”
The ruling applies to Trump’s “Freedom Day” global tariffs, which set a base rate of 10% and have been in place for several months. The US government said they were aimed at addressing the national emergency caused by the US trade deficit. The ruling also affects additional tariffs imposed on Mexico, China and Canada, which Trump said were justified due to the fentanyl crisis happening in the US. He also claimed that the US was in a state of national emergency under the International Emergency Economic Powers Act.
The decision also covers what Trump called reciprocal tariffs, which took effect on August 7 against dozens of countries that failed to reach a trade deal with the US government by August 1. Since then, the US has announced various exemptions and extensions, leaving the final tariffs on some countries still up in the air.
In May this year, the US Court of International Trade in Manhattan ruled for the first time that Trump’s tariffs were illegal. The Federal Circuit Court of Appeals suspended the ruling, allowing the Trump administration to continue threatening to impose tariffs during negotiations.
Just hours before the ruling was overturned on Friday, Trump administration officials told the appeals court that revoking the president’s tariffs would seriously harm US foreign policy. Treasury Secretary Scott Bessent said it would lead to “dangerous diplomatic embarrassment” and undermine trade negotiations. On Friday night, after the court overturned the ruling, Trump posted on X that if the tariffs were removed, “it would be a total disaster for the country.”
Carter, who served as a diplomat and negotiator at the Office of the United States Trade Representative for nearly three decades, said that the US government’s concerns about trade agreements may now have come true. In her post, she wrote that India, which is hit by a 50% tariff, “must be very happy”, while China “must be weighing its position on making concessions in ongoing negotiations”.
Carter said, “The EU’s efforts to secure domestic approval for the deal may be questioned, while Japan and South Korea have clearly only reached verbal agreements with little in writing. Therefore, they may choose to slow down their current efforts until the US laws become clearer, while still urging for a reduction in auto tariffs.”
