Court of International Trade strikes down Trump’s tariffs

The U.S. Court of International Trade on Wednesday blocked steep reciprocal tariffs unilaterally imposed by President Donald Trump on scores of countries in April to correct what he said were persistent trade imbalances.

The ruling deals a potentially serious blow to the Republican president’s economic agenda and ongoing efforts to negotiate trade deals with various nations.

Dow futures jumped 500 points on news of the ruling, which the Trump administration immediately appealed to the U.S. Court of Appeals for the Federal Circuit.

The Supreme Court could have the last say in the case.

In its ruling, a three-judge panel on the Court of International Trade said that the International Emergency Economic Powers Act, which Trump invoked to impose the tariffs, does not authorize a president to levy universal duties on imports.

“The Worldwide and Retaliatory Tariff Orders exceed any authority granted to the President by IEEPA to regulate importation by means of tariffs,” the judges wrote.

And separate, specific tariffs on Canada, Mexico and China related to drug trafficking “fail because they do not deal with the threats set forth in those orders,” the panel wrote.

Implementing tariffs typically requires congressional approval.

But Trump chose to bypass Congress by declaring a national economic emergency under IEEPA, which became law in 1977, and then using the purported emergency as justification for cutting Congress out of the process.

The panel not only ordered a permanent halt to the tariffs at issue in the case, but it also barred any future modifications to them.

The Trump administration was given 10 days to make the necessary changes to carry out the judges’ orders.

Several existing tariffs on specific products like aluminum and steel are not impacted by Wednesday’s ruling, because the president did not invoke IEEPA powers to justify their necessity.

White House spokesperson Kush Desai, in a statement on the ruling, said, “Foreign countries’ nonreciprocal treatment of the United States has fueled America’s historic and persistent trade deficits.”

“These deficits have created a national emergency that has decimated American communities, left our workers behind, and weakened our defense industrial base – facts that the court did not dispute.”

“It is not for unelected judges to decide how to properly address a national emergency,” Desai added.

One of the lead plaintiffs in the case, Oregon Attorney General Dan Rayfield, called the ruling “a victory not just for Oregon, but for working families, small businesses, and everyday Americans.”

“President Trump’s sweeping tariffs were unlawful, reckless, and economically devastating,” Rayfield said in a statement. 

“They triggered retaliatory measures, inflated prices on essential goods, and placed an unfair burden on American families, small businesses and manufacturers.”

Trade expert Jack Slagle, in an email to CNBC, called the ruling “a significant setback for the administration, which has leaned heavily on IEEPA to impose tariffs at will against China, Mexico, Canada, and everywhere else.”

But, “even if the Supreme Court doesn’t hold up the tariffs, it doesn’t necessarily mean the end of tariffs on imported goods. It may not even result in a relative pause of the trade conflict,” said Slagle, the founder of NexINT Global.

“We can expect that the president and his trade advisors will be reviewing all options, and to be clear, this is all far from over,” he said.

Wednesday’s ruling responded to two separate lawsuits challenging Trump’s tariffs.

One suit was filed by a group of state attorneys general. The other suit was filed by five American businesses that rely on goods imported to the U.S., which are affected by tariffs.

The three-judge panel said in its ruling that Trump’s tariff orders were “unlawful as to all,” not just to the plaintiffs.

Trump, on April 2, unveiled sweeping reciprocal tariffs on imports from nations around the world, ranging from 11% to 84%. 

Days later, on April 9, he issued a 90-day pause in the duties, but kept in place the 10% baseline tariffs on most products entering the country.

The panel in its ruling Wednesday said it did not see a clear connection between the purported emergency that Trump was using to justify the tariffs that responded to drug trafficking, and what tariffs can do in practice.

Trump had argued at the time that a 25% tariff on goods from Mexico and Canada, and a 10% levy on imports from China, were urgently necessary because the countries had failed to “arrest, seize, detain, or otherwise intercept” drugs and drug traffickers.

But the judges found that there was no clear link between the president’s stated goal of cutting international drug trafficking, and the method Trump was using to pursue it: charging import duties on legal trade.

“Customs’s collection of tariffs on lawful imports does not evidently relate to foreign governments’ efforts ‘to arrest, seize, detain, or otherwise intercept’ bad actors within their respective jurisdictions,” the panel said.