A U.S. federal appeals court has delivered a major blow to President Donald Trump’s trade agenda, ruling 7-4 that his “reciprocal” tariffs, imposed under the International Emergency Economic Powers Act (IEEPA), are illegal. The decision, which upholds a prior ruling by the Court of International Trade, declares that Trump overstepped his authority by using emergency powers to slap tariffs of unlimited duration on nearly all global imports. This sets the stage for a high-stakes legal battle at the U.S. Supreme Court, with global trade partners and businesses bracing for prolonged uncertainty.
The appeals court emphasized that the U.S. Constitution grants Congress, not the president, the power to impose taxes, including tariffs. Citing Article 1, Section 8, the majority stated, “Tariffs are a core Congressional power,” rejecting Trump’s claim that the IEEPA allows him to unilaterally raise revenue through tariffs without congressional approval. The IEEPA, a 1977 law historically used for sanctions and asset freezes, was invoked by Trump in April 2025 to impose a 10% baseline tariff on most imports and higher “reciprocal” tariffs—up to 50% on countries like India—under the guise of addressing trade deficits as a national emergency.
Despite the ruling, the tariffs remain in effect until October 14, 2025, giving the Trump administration time to appeal to the Supreme Court. Trump, who has called the decision a “total disaster” on Truth Social, vowed to fight on, claiming the tariffs are vital to making America “rich and strong again.” White House spokesman Kush Desai echoed this, asserting that the tariffs “defend our national and economic security” and predicting “ultimate victory” at the Supreme Court. The administration argues that revoking the tariffs could force the U.S. to refund billions in collected revenue, potentially destabilizing the economy.
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The ruling does not affect tariffs on specific sectors like steel and aluminum, imposed under other laws, nor does it reverse the suspension of the de minimis exemption, which has disrupted global postage for low-value goods. However, if upheld, it could lower tariff rates on many imports to pre-April levels, potentially easing costs for U.S. businesses and consumers. Economists warn that Trump’s tariffs, ranging from 15% on EU goods to 50% on Indian imports, risk fueling inflation and harming small businesses, with GDP growth projections already downgraded.
For trading partners, the decision creates a dilemma. Many rushed to negotiate deals with Trump after his April “Liberation Day” tariffs, but the ruling may prompt them to pause, awaiting the Supreme Court’s verdict. Countries like Japan and the EU, which secured concessions to avoid higher tariffs, now face uncertainty over those agreements. The ruling also raises questions about Trump’s broader trade war, including tariffs on Canada, Mexico, and China aimed at curbing fentanyl trafficking, which were also deemed unlawful.
The Supreme Court, with its 6-3 conservative majority—including three Trump appointees—will face a critical test of the separation of powers. The appeals court argued that the IEEPA’s provision to “regulate importation” does not extend to imposing sweeping tariffs, a view bolstered by the Supreme Court’s “major questions doctrine,” which limits executive overreach without clear congressional intent. However, dissenting judges, like Richard Taranto, contended that the IEEPA grants broad emergency authority, potentially swaying the Supreme Court’s conservative bloc.
If the Supreme Court upholds the tariffs, it could expand presidential power, potentially undermining Congress’s constitutional authority over taxation. Critics, including 12 Democratic-led states and small businesses like V.O.S. Selections, argue that Trump’s use of the IEEPA is an “enormous usurpation” of legislative power, with trade deficits—a decades-long norm—not qualifying as an emergency. Conversely, a ruling against Trump could force him to seek alternative legal avenues, such as the Trade Act of 1974, which imposes stricter limits on tariff implementation.
As the legal battle looms, global markets remain jittery, with the U.S. dollar rallying and Asian equities rising after the ruling, though economists warn of dampened economic activity if uncertainty persists. The outcome will not only shape Trump’s trade legacy but also define the boundaries of executive power in U.S. economic policy, with far-reaching implications for international trade and America’s fiscal future.
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