A US federal court has delivered a landmark ruling that President Donald Trump exceeded his authority by imposing sweeping tariffs under the 1977 International Emergency Economic Powers Act (IEEPA). The decision challenges a key pillar of Trump's tariff agenda and could result in the rollback of billions in trade duties.
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On 28 May, the Court of International Trade determined that the IEEPA does not grant the president power to unilaterally impose broad import tariffs unless directly addressing an "unusual and extraordinary threat." The court concluded that longstanding issues such as trade deficits, drug trafficking, and immigration concerns, cited by the administration, did not meet the threshold.
The ruling affects 10–30% tariffs on Chinese, Canadian, and Mexican imports tied to fentanyl and immigration concerns, as well as global trade surplus tariffs and suspended reciprocal duties, set to take effect from 9 July.
However, the decision does not impact tariffs implemented under separate authorities.
These include:
- Steel and aluminium tariffs (25%), active since 12 March.
- Auto and auto parts tariffs (25%), active since 3 April and 3 May, respectively.
The White House has ten days to halt the invalidated tariffs but has already filed an appeal to the US Court of Appeals for the Federal Circuit. The matter is expected to escalate to the Supreme Court. If the ruling is upheld, the administration may be required to refund up to $13.7 billion in tariffs collected under the IEEPA, with $7.9 billion of that from imports from China and Hong Kong, according to US Customs and Border Protection.
Despite the legal blow, Trump's administration retains ample authority to continue imposing trade barriers. Legal frameworks such as Section 232 (national security), Section 301 (unfair trade practices), Section 122 (balance of payments), and Section 338 (retaliatory tariffs) remain available. These mechanisms demand more thorough investigations but still enable unilateral action by the president.
New tariffs are already being explored for sectors including pharmaceuticals, semiconductors, trucks, critical minerals, seafood, cranes, copper, lumber, aircraft, and shipbuilding.
ING economists noted that the ruling introduces both legal and political hurdles for the continued use of emergency powers in trade policy. 'This ruling marks a significant legal and political challenge to the use of emergency powers in trade policy and adds another layer of uncertainty to the whole US trade policy,' the report said.
While some welcomed the ruling, ING warned: 'We warn against too much relief or even complacency at this point.' The administration may respond with more aggressive tariffs, particularly on European exports such as pharmaceuticals, which 'would still be subject to tariffs of more than 20%.'
The decision could affect ongoing trade talks with the EU and China and further complicate fiscal dynamics in the US. 'Let's not forget that one justification behind current trade tensions was not only the US trade balance deficit but also the search for additional government revenues,' ING stated.
Markets reacted with optimism, as US equity futures rose just over 1%, partly boosted by Nvidia's Q1 earnings. US Treasury yields climbed 5 basis points, and the dollar saw a mild rebound, reflecting cautious optimism that 'Washington's tariff policies do face some constitutional oversight after all.'
Nevertheless, ING analysts concluded that further tariff announcements are likely, maintaining high uncertainty in global trade and markets.
More information:
ING
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