Federal Court Rules Nearly All of President Trump’s Tariffs Illegal

What Happened?

The International Trade Court ruled that nearly all of President Trump’s tariffs are illegal because the President lacked the authority to impose them. In a unanimous decision, the three-judge panel stated, ‘The challenged Tariff Orders will be vacated and their operation permanently enjoined.’

In response the Trump Administration announced they plan to appeal the ruling, though exactly when that might happen remains uncertain. A group of twelve states had filed the lawsuit, with all twelve arguing that the tariffs had caused them and their citizens ‘direct financial harm.’

Why it Matters

The decision by the International Trade Court halts, at least for now, the tariffs imposed by the Trump Administration on a range of goods. When the decision was announced, the markets reacted positively, with futures contracts on the S&P 500 stock index jumping 1.4 percent on the news. Shortly after the ruling, the Justice Department issued a statement saying they plan to appeal the ruling as soon as possible.

A major issue in the ruling was whether or not the President’s actions were legally supported by the 1977 International Emergency Economic Powers Act, which President Trump had cited as the legal basis for his authority to impose tariffs. The 1977 law was the successor to the World War I Trading with the Enemies Act, which was designed to allow the federal government to regulate or halt commerce between U.S. citizens and foreign countries with which the U.S. was at war. 

President Nixon used the Trading with the Enemies Act to impose a broad 10% tariff, which led to calls in Congress to reform the law, which in turn led to the passage of the International Economic Emergency Powers Act (IEEPA) of 1977. That law gives the president broad powers to regulate commerce, including the imposition of tariffs, after the declaration of a national emergency, which President Trump has declared with respect to the U.S. trade deficit.

However, IEEPA has never been used to impose tariffs; previously it has only been used to sanction countries with which the U.S. was either engaged in conflicts or disputes. The International Trade Court ruled trade deficits do not meet the legal or Constitutional definition of a national emergency. While IEEPA does say the president can simply declare a national emergency then act on it, the International Trade Court ruling is the first judicial test of a presidential action under the law, which found that the president’s powers are not unlimited. 

The outcome of the appeal process will likely hinge on whether or not the appeals courts agree with the International Trade Court’s definition of a national emergency.

How it Affects You

The ruling means that the Trump tariffs are suspended, which should have immediate effects on almost every sector of the economy. While the markets welcomed the decision, a future appeal could reverse it and reinstate the tariffs.