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Inu Manak is a fellow for trade policy at the Council on Foreign Relations.
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In a major blow to President Donald Trump’s trade agenda, the U.S. Court of International Trade (CIT) ruled on Wednesday that the sweeping tariffs imposed by his administration are illegal. The decision by the New York-based court follows a series of lawsuits that argued that Trump’s so-called reciprocal tariffs exceed his presidential authority.
The CIT’s ruling affects the tariffs that Trump imposed under the International Emergency Economic Powers Act (IEEPA), which gives the president some power to regulate commerce after declaring a national emergency. It does not affect other, more specific tariffs he has imposed on commodities such as steel.
While this derails some of the Trump administration’s trade plans, it does not necessarily mean the end of its trade wars. On Thursday, a federal appeals court granted the administration’s request to pause the decision while it reviews the case, keeping the tariffs in place until at least June 9. The White House has also indicated its intention to take the case to the U.S. Supreme Court if necessary.
Much can happen while this legal drama unfolds. In the meantime, here are some of the major implications caused by the court’s ruling.
What immediate effect will this ruling have?
The CIT ordered the Trump administration to stop collecting tariffs imposed under IEEPA within ten days. Those tariffs include levies on Canada, China, and Mexico to allegedly curb illegal fentanyl trafficking, as well as Trump’s April 2 “Liberation Day” tariffs that imposed a baseline 10 percent rate on virtually all U.S. trading partners.
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The Trump administration has already appealed the CIT’s ruling, and it appears the stay they obtained will buy the White House some time. If the tariffs are lifted, as the CIT ordered, much of the administration’s trade agenda will be effectively reset.
In the meantime, there will likely be a scramble to sort out what happens to goods that are imported into the United States before tariffs are no longer collected, and there’s a chance that shipments en route could turn around and await the order to lift the tariffs.
How will it affect U.S. industries and businesses?
The lawsuits brought against the Trump administration’s IEEPA tariffs have mainly come from small businesses who have been especially hurt by the tariff actions. The CIT ruling would be welcome relief to those businesses who were worried about closing up shop, laying off staff, and simply staying afloat.
Lifting the tariffs would have an impact across the broader economy as well, alleviating the need to raise prices on a range of consumer goods, as Walmart recently suggested it would need to do.
What effect will the court’s ruling have on Trump’s broader trade agenda and the administration’s tariff negotiations?
The ruling delivers a stunning blow to the Trump administration’s trade agenda. It states that IEEPA does not provide “unbounded authority” to the president, nor does it grant him the power to use tariffs as leverage against an unconnected threat. This comprises the very basis of Trump’s push to negotiate a flurry of deals ahead of an arbitrary July 9 deadline. He has repeatedly threatened to impose additional “reciprocal” tariffs on countries that have not negotiated a solution by that date.
With the IEEPA tariffs rescinded, the administration no longer has any leverage to compel countries to negotiate on the steepest tariffs that it has threatened. There will still be countries interested in negotiating the removal of duties imposed under other trade authorities, such as the Section 232 tariffs on aluminum and steel or on vehicles and auto parts. The Section 232 authority allows the president to “adjust” imports that “threaten to impair the national security.”
Countries already in the negotiating queue are surely reevaluating their offers and are likely to revise their approach to ongoing trade talks. So far, only two “deals” have been reached, with China and the United Kingdom (UK). However, they are essentially frameworks for negotiating additional deals, though the UK deal provides relief on some Section 232 duties.
What are the Trump administration’s options to get its agenda back on track?
The Trump administration was quick to appeal the CIT ruling. By Thursday afternoon, the White House had already obtained an emergency stay from the U.S. Court of Appeals for the Federal Circuit (CAFC) while those judges consider the case.
CAFC has traditionally been more deferential to the president on issues involving national security. For example, in litigation over the first Trump administration’s aluminum and steel duties, the CAFC ruled [PDF] in 2021 that the president has broad discretion to modify tariffs. The difference here is that this earlier ruling was in response to Section 232, not IEEPA.
That means that this appeals court decision and other similar questions about the president’s tariff authority may not affect the current case because of how Section 232 powers differ. For example, IEEPA doesn’t even use the word “tariff” to describe actions that the president can take. Furthermore, as I detailed earlier this year, the predecessor statute to IEEPA—the 1917 Trading with the Enemy Act—faced litigation under the Richard Nixon administration. The CIT cited this case, which determined that a president’s action needed to have an “eminently reasonable relationship” with the declared emergency, in its ruling on Wednesday.
The standard for using IEEPA to levy tariffs may therefore be different than in the case of Section 232 duties. The particular issues raised by IEEPA are explored in more detail in an amicus submission by my CFR colleague Jennifer Hillman.
What else might the Trump administration do in response to the court’s decision?
What the Trump administration is likely to do next is lean even harder on other tariff authorities to continue its tariff push, but that will take time. Even if the administration pursues more Section 232 and Section 301 investigations—a provision on unfair trade practices in the 1974 Trade Act—they will need to follow basic procedures that allow stakeholders to comment on the proposed actions.
The Section 232 duties will be product-specific, as the ones on aluminum, steel, vehicles, and auto parts are. Action under Section 301 will require an investigation into unfair trade practices at the country level, such as the original China trade war tariffs.
The bottom line is that the Trump administration’s slapdash approach to trade policy has faced its first major obstacle, revealing the potential limits of executive authority over trade. Trump may finally have pushed too far.
This work represents the views and opinions solely of the author. The Council on Foreign Relations is an independent, nonpartisan membership organization, think tank, and publisher, and takes no institutional positions on matters of policy.