Trump tariffs: US appeals court rules levies illegal; but tariffs intact until Oct 14

Virendra Pandit

New Delhi: Amid America alarmingly isolated internationally for the first time since 1945, and its highly controversial tariffs raising a firestorm across the planet, a federal US appeals court ruled on Friday that President Donald Trump has no legal right to impose sweeping tariffs on almost every country on Earth but kept them in place for now, allowing him two-weeks’ time to challenge the ruling by October 14 in the Supreme Court, the media reported on Saturday.

As expected, Trump, who vowed an appeal, denounced the ruling, warning of “financial ruin” if it stands, while his administration argued the levies were lawful and crucial for national security and trade leverage.

Trump has previously claimed that the tariff revenue, flowing in billions of dollars, could offset the US national debt amounting to nearly USD 37 trillion.

The court largely upheld a prior ruling from the US Court of International Trade, stating the US Congress never intended to give the President unlimited power under the International Emergency Economic Powers Act (IEEPA). The 7-4 decision means Trump’s tariffs remain in effect for now.

The US Court of Appeals for the Federal Circuit ruled that Trump was not legally allowed to declare national emergencies and impose import taxes on almost every country in the world, a ruling that largely upheld a May decision by a specialised federal trade court in New York.

“It seems unlikely that Congress intended to … grant the President unlimited authority to impose tariffs,” the judges wrote, according to media reports.

“If allowed to stand, this Decision would literally destroy the United States of America,” Trump wrote on his social medial platform Truth Social.

The White House spokesman, Kush Desai, said Trump had acted lawfully, and “We look forward to ultimate victory on this matter.”

The ruling complicates Trump’s ambitions to upend decades of American trade policy completely on his own. He has alternative laws for imposing import taxes, but they would limit the speed and severity with which he could act. His tariffs — and the erratic way he’s rolled them out — have shaken global markets, alienated US trading partners and allies and raised fears of higher prices and slower economic growth in the US and overseas.

But he also used the levies to pressure the European Union, Japan, and other countries into accepting unilateral trade deals and to bring tens of billions of dollars into the federal Treasury to help pay for the massive tax cuts he signed into law on July 4.

“While existing trade deals may not automatically unravel, the administration could lose a pillar of its negotiating strategy, which may embolden foreign governments to resist future demands, delay implementation of prior commitments, or even seek to renegotiate terms,” Ashley Akers, senior counsel at the Holland & Knight law firm and a former Justice Department trial lawyer, said before the appeals court decision.

The government argued that if the tariffs are struck down, it might have to refund some of the import taxes that it’s collected, delivering a financial blow to the US Treasury.

“It would be 1929 all over again, a GREAT DEPRESSION!” Trump said in a previous post on Truth Social.

Revenue from tariffs totalled USD 159 billion by July, more than double what it was at the same point in 2024. Indeed, the Justice Department warned in a legal filing this month that revoking the tariffs could mean “financial ruin” for the United States.

The ruling involves two sets of import taxes, both of which Trump justified by declaring a national emergency under the 1977 IEEPA: the sweeping tariffs he announced on April 2 — “Liberation Day,” he called it — when he imposed “reciprocal” tariffs of up to 50 percent on countries with which the US runs trade deficits, and a “baseline” 10 percent tariff on just about everyone else.

The national emergency underlying the tariffs, Trump said, was the long-running gap between what the US sells to and what it buys from the rest of the world. He started levying modified tariff rates in August, but goods from countries with which the US runs a surplus also face the taxes.

On February 1, he announced the “trafficking tariffs’” on imports from Canada, China, and Mexico, to get them to do more to stop what he declared a national emergency: the ‘illegal’ flow of drugs and immigrants across their borders into the US.

The Constitution gives US Congress the power to impose taxes, including tariffs. But over decades, lawmakers have ceded their authority to the President, and Trump has made the most of the power vacuum.

But his assertion that IEEPA essentially gives him unlimited power to tax imports quickly drew legal challenges — at least seven cases. No President had ever used the law to justify tariffs, although IEEPA had been used frequently to impose export restrictions and other sanctions on US adversaries such as Iran and North Korea.

The plaintiffs argued that the emergency power law does not authorize the use of tariffs,  and that the trade deficit hardly meets the definition of an “unusual and extraordinary” threat that would justify declaring an emergency under the law. The US, after all, has run trade deficits — in which it buys more from foreign countries than it sells them — for 49 straight years and in good times and bad.

The Trump administration argued that courts approved the then President Richard Nixon’s emergency use of tariffs in a 1971 economic crisis following his decision to end a policy linking the US dollar to the price of gold. The Nixon administration successfully cited its authority under the 1917 Trading With Enemy Act, which preceded the IEEPA.

In May, the US Court of International Trade in New York rejected the argument, ruling that Trump’s Liberation Day tariffs “exceed any authority granted to the President” under the emergency powers law. The court combined two challenges — one by five businesses and the other by 12 US states — into a single case.

In the case of the drug trafficking and immigration tariffs on Canada, China and Mexico, the trade court ruled that the levies did not meet the IEEPA’s requirement that they “deal with’” the problem they were supposed to address.

The court challenge does not cover other Trump tariffs, including levies on foreign steel, aluminium, and auto sector that he imposed after Commerce Department investigations concluded that they were threats to US national security.

Nor did it include the tariffs that Trump imposed on China in his first term — and President Joe Biden retained — after a government investigation concluded that the Chinese used unfair practices to give their own technology firms an edge over rivals from the US and other Western countries.

Trump could potentially cite alternative authorities to impose import taxes, although they are more limited. Section 122 of the Trade Act of 1974, for instance, allows him to tax imports from countries with which the US runs big trade deficits at 15 percent for 150 days.

Likewise, Section 301 of the 1974 law allows him to tax imports from countries found to have engaged in unfair trade practices after an investigation by the Office of the US Trade Representative. Trump used the Section 301 authority to launch his first-term trade war with China.

Trump said the fresh court ruling that most of his tariffs were not legal was “incorrect,” adding that all tariffs were still in effect.

“ALL TARIFFS ARE STILL IN EFFECT! Today a Highly Partisan Appeals Court incorrectly said that our Tariffs should be removed, but they know the United States of America will win in the end,” he wrote on Truth Social.