Political Affairs Across the Nation

Political Affairs Across the Nation

President's Tariff Policy Faces Legal Hurdle as Court Limits Sweeping Taxes on Imports

WASHINGTON - A federal court has challenged President Donald Trump's authority to impose tariffs on a global scale, marking a significant setback for his controversial trade policies. A panel of judges from the U.S. Court of International Trade ruled on Wednesday that the President overstepped his power in invoking the 1977 International Emergency Economic Powers Act (IEEPA) to tax imports from numerous countries.

The ruling came as a blow to Trump, whose erratic trade policies have created turbulence in financial markets, left businesses in limbo, and raised concerns about potential price hikes and slowed economic growth. The President's trade wars, however, are not yet over. The Court of Appeals for the Federal Circuit, in a separate decision on Thursday, allowed Trump to maintain the collection of tariffs under the IEEPA while the decision is challenged.

The administration has other avenues to persist in its goal of using tariffs to stimulate domestic manufacturing, fill government coffers, and compel foreign compliance. The response of financial markets, eager to see an end to the tariffs, was muted, with a modest increase in stocks on Thursday. "Investors are not getting too carried away, presumably in the expectation that the White House will find a workaround that allows them to continue to pursue their trade agenda," said Matthew Ryan, head of market strategy at the financial services firm Ebury.

The IEEPA tariffs are currently facing legal scrutiny in at least seven separate lawsuits. In its ruling on Wednesday, the U.S. Court of International Trade consolidated two cases - one brought by five businesses and another by 12 U.S. states. The Court of International Trade, which handles civil cases involving trade, is expected to pass the legal challenge to the U.S. Supreme Court.

The court's decision blocks tariffs that Trump implemented last month on almost all U.S. trading partners and tariffs he imposed earlier on China, Mexico, and Canada. Trump had imposed up to 50% tariffs on nations with which the United States runs a trade deficit, while also imposing a 10% baseline tariff on most others. On April 2, he referred to this action as "Liberation Day." He later suspended the reciprocal tariffs for 90 days to facilitate trade negotiations with the affected countries.

The administration argued that courts had approved President Richard Nixon's use of tariffs during the economic chaos following Nixon's decision to end a policy linking the U.S. dollar to the price of gold. The court, however, rejected this argument in this instance, determining that Trump's extensive tariffs exceeded the scope of power that he was authorized to regulate imports under the IEEPA. The court also stated that the tariffs were ineffective in addressing the problems they were intended to solve, given that the United States has accumulated trade deficits for 49 straight years.

On the same day, another federal judge blocked Trump's use of an emergency powers law to impose tariffs in a lawsuit from two educational toy companies based in Illinois. This decision, handed down separately, only affects the collection of tariffs from the companies that submitted the lawsuit. The administration has until now relied on the IEEPA and Section 232 of the Trade Expansion Act of 1962 - which requires a Commerce Department investigation - to justify tariffs on foreign trade.

The court decision leaves in place other tariffs, including those on foreign steel, aluminum, and automobiles; tariffs Trump imposed on China in a dispute over Beijing's use of aggressive tactics to favor domestic companies; and tariffs that President Joe Biden upheld after taking office. The trade court also noted that Trump retains more limited power to impose tariffs to address trade deficits under another statute, the Trade Act of 1974, which restricts tariffs to 15% and for 150 days on countries with which the United States runs substantial trade deficits.

The ultimate impact of the decision on the U.S. economy and financial markets remains to be seen. With the average tariff rate now 6.5%, economists expect the U.S. economy to grow at a faster rate in the second half of 2025 if the weight of the IEEPA tariffs is removed, with a more moderate rise in prices. Importers may stand to benefit if the trade court's decision is upheld and they can secure refunds for tariffs they have already paid.

AP Economics Writer Christopher Rugaber contributed to this story.

1. The President's authority to impose tariffs on imports was questioned by a federal court, marking a challenge to his trade policies under the 1977 International Emergency Economic Powers Act (IEEPA).
2. The US Court of International Trade ruled that the President overstepped his power in invoking the IEEPA to tax imports from numerous countries.
3. The court's decision blocks tariffs that Trump implemented on various trading partners, including China, Mexico, and Canada.
4. The administration has other avenues to persist in its goal of using tariffs, but the ultimate impact on the US economy and financial markets remains uncertain.
5. A separate federal judge also blocked Trump's use of an emergency powers law to impose tariffs in a lawsuit from two educational toy companies based in Illinois.
6. The court's decision leaves in place other tariffs, including those on foreign steel, aluminum, and automobiles.
7. Trump had referred to his action as "Liberation Day," but the court determined that his extensive tariffs exceeded the scope of power authorized under the IEEPA and were ineffective in addressing the problems they were intended to solve.

Read also:

• Still no breakthrough on the 2024 budget in sight - FDP in no hurry
• Paris attacker shows no remorse after killing a German tourist
• SPD parliamentary group: No more adoption of the 2024 budget this year
• EU agrees on new energy requirements for buildings - no refurbishment obligation