Trump’s Tariffs Ruled Illegal, What’s Next?

A federal appeals court has delivered a significant blow to President Donald Trump’s trade agenda, ruling 7-4 on Friday that his use of the 1977 International Emergency Economic Powers Act (IEEPA) to impose sweeping tariffs on nearly all U.S. trading partners exceeds his authority.

The U.S. Court of Appeals for the Federal Circuit upheld a May decision by the U.S. Court of International Trade, which declared Trump’s “Liberation Day” tariffs of April 2—imposing up to 50% reciprocal tariffs and a 10% baseline on most countries—and February tariffs on China, Canada, and Mexico to combat fentanyl trafficking as illegal. The court emphasized that IEEPA, which grants presidents power to address “unusual and extraordinary” threats during national emergencies, does not explicitly authorize tariffs, a power constitutionally reserved for Congress.

The ruling, however, is stayed until October 14, allowing the Trump administration to appeal to the U.S. Supreme Court, where the case is widely expected to land due to its constitutional implications. Trump, in a Truth Social post, called the decision a “total disaster” and vowed to fight it, asserting that tariffs are critical to U.S. economic strength. White House spokesperson Kush Desai echoed this, stating, “The president’s tariffs remain in effect, and we look forward to ultimate victory.”

Impacted Tariffs

The decision targets two sets of tariffs:

• Reciprocal Tariffs (April 2, 2025): These imposed a 10% baseline duty on nearly all trading partners, with higher rates (up to 50%) on countries with U.S. trade deficits, such as Laos (40%) and Algeria (30%). Some nations, including the EU, Japan, and the UK, negotiated lower rates to avoid harsher levies.
• Fentanyl-Related Tariffs (February 2025): Levies of 25% on Canada and Mexico and 20% on China, justified by Trump as addressing drug trafficking.

Unaffected tariffs include those on steel, aluminum, and autos under Section 232 of the Trade Expansion Act of 1962, which require Commerce Department investigations, and tariffs on China from Trump’s first term, continued by President Joe Biden, under Section 301 of the Trade Act of 1974.

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Economic and Policy Implications

The ruling creates uncertainty for businesses and consumers, who bear tariff costs, with estimates suggesting an additional $1,200-$2,800 per U.S. household in 2025. Tariff revenue reached $159 billion by July, doubling last year’s figures, but a potential Supreme Court loss could force refunds, straining federal finances. The Justice Department warned that revoking tariffs could lead to “financial ruin.”

Trade negotiations may also falter. The threat of tariffs secured deals with the EU, Japan, and others, but the ruling could weaken Trump’s leverage, prompting foreign governments to resist or renegotiate terms. Ashley Akers, a former Justice Department lawyer, noted that the decision might embolden trading partners to delay commitments.

Alternative Legal Avenues

If the Supreme Court upholds the ruling, Trump could pursue other statutes, though they are narrower:

• Section 122 of the Trade Act of 1974: Allows up to 15% tariffs for 150 days to address trade deficits, limiting scope and duration.
• Section 232 of the Trade Expansion Act of 1962: Permits tariffs for national security but requires investigations, as used for steel and aluminum.
• Section 338 of the Trade Act of 1930: Enables up to 50% tariffs on countries discriminating against U.S. trade, though unused for decades.

Trump’s trade advisor Peter Navarro indicated the administration would explore these options, stating, “Even if we lose, we will do it another way.”

Next Steps

The Supreme Court is likely to review the case at its September 29 conference or later in the 2025-2026 term, given its constitutional weight. Legal experts are divided on the outcome, citing the Court’s conservative majority but its recent skepticism of expansive executive powers, as seen in the 2023 student loan forgiveness ruling. Until a final decision, tariffs remain in effect, continuing to disrupt markets and supply chains.

The ruling underscores a broader debate over presidential authority versus congressional power, with critics arguing Trump’s actions bypass constitutional checks. Neal Katyal, representing plaintiffs, emphasized, “The tariff power belongs to Congress, not the president.” Meanwhile, the administration insists tariffs are vital for national security and economic competitiveness, setting the stage for a high-stakes Supreme Court showdown.

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