A federal appeals court ruled that most of the tariffs imposed by President Donald Trump under emergency powers are illegal, striking a major blow to one of his central trade strategies. The decision, issued Friday, found that the International Emergency Economic Powers Act (IEEPA) does not give the president authority to impose tariffs.
In a 7-4 ruling, the U.S. Court of Appeals for the Federal Circuit said the statute grants the president broad power during a national emergency, but not the ability to set tariffs or taxes. The court ordered the tariffs to remain in effect until Oct. 14, allowing time for the administration to appeal to the U.S. Supreme Court.
Trump has leaned heavily on tariffs as a tool of foreign policy in his second term, arguing that the measures protect U.S. manufacturing and national security. The administration imposed the challenged tariffs in 2020, citing concerns over trade deficits and cross-border drug trafficking. The February tariffs targeted imports from China, Canada and Mexico, while a broader set followed in April as part of a wider trade dispute.
Judges say law not intended for tariffs
The court said Congress did not intend IEEPA to serve as a blanket authority for economic measures like tariffs. Judges pointed out that the law, originally passed in 1977, has traditionally been used to freeze assets and impose sanctions during foreign crises.
Legal challenges came from a group of small U.S. businesses and 12 Democratic-led states. They argued that the Constitution gives Congress, not the president, the power to set tariffs, and any delegation of that authority must be clearly defined and limited. Previous lower court rulings in New York and Washington had also found the Trump tariffs illegal under IEEPA.
The decision does not impact tariffs enacted under other laws, such as those on steel and aluminum. Trump has defended his use of IEEPA, saying the trade imbalance and illegal fentanyl imports from neighboring countries justified his actions. However, the court found no language in the statute supporting the imposition of duties.
White House silent as businesses watch closely
The White House, U.S. Trade Representative, and Commerce Department have not commented on the ruling. Market reaction remained muted, with analysts suggesting businesses will proceed cautiously while awaiting further legal developments.
Brian Jacobsen, chief economist at Annex Wealth Management, said most companies are likely to act as though the tariffs will remain, at least in the short term. He noted the administration may consider using other legal avenues to maintain trade measures if the Supreme Court upholds the ruling that deemed the Trump tariffs illegal.
