A pair of courtroom defeats has blown a hole in President Donald Trump’s plan to use historically high tariffs to reshape global trade, raise hundreds of billions of dollars in new tax revenue and boost the fortunes of domestic manufacturers.
Late Thursday, the administration celebrated a legal win, when a federal appeals court paused implementation of one of the court judgments and allowed the government to continue collecting the tariffs at issue.
The White House may yet be able to prevail in a protracted legal struggle over the president’s favorite trade war weapon, an emergency powers act that dates to the Carter administration. But for now, officials are battling on multiple legal fronts to save his high-risk strategy while eyeing alternative ways of imposing sweeping import taxes if they fail.
The twin courtroom setbacks show how Trump’s thirst for unilateral action and embrace of a maximalist legal strategy backfired, leading to a federal court ruling Wednesday that he overreached in his use of emergency powers to tackle chronic problems such as the trade deficit.
More than four months into his term, Trump’s trade war strategy has led to a cul-de-sac of his own making. The administration can use other legal authorities to reimpose the tariffs, if its appeal fails. But that will take time. The president has spent four months charging headlong down a risky path and now may be forced to start over. The continuing uncertainty, meanwhile, has both diplomatic and commercial consequences.
“If the Administration wants to pursue significant tariff changes, it will need to seek new authority from Congress or use other tariff-raising authorities. None of these statutes give the President the latitude in which he has operated in recent months,” said John Veroneau, a former U.S. trade negotiator under President George W. Bush. “Since few members of Congress campaigned last year on raising tariffs, it seems highly unlikely that Congress would grant the president sweeping new authority to raise tariffs.”
Trump’s second-term trade blitzkrieg, which he says is needed to protect the American working class from unfair foreign powers, has unnerved investors, cost U.S. businesses billions of dollars and left consumers fretting over renewed inflation.
Still, White House officials on Thursday struck a confident pose, insisting that they would prevail with an appeal of the decision by the Court of International Trade, a specialized federal court in New York, which issued the first ruling rebuffing the president. Hours later, a federal appeals court granted their bid for a temporary stay, freezing the status quo while it considers the merits of the case.
Yet before it did, a second federal court rejected the president’s emergency powers claim, brushing aside Trump administration warnings of “catastrophic harm” for its negotiations with U.S. trading partners.
Treasury Secretary Scott Bessent has been racing to conclude trade negotiations with China and more than a dozen other nations, under a pair of 90-day deadlines established by the president. Trump paused his highest tariffs to allow talks to proceed but threatened to reinstate them if substantial progress was not made.
U.S. trading partners may feel less urgency about bargaining now that the trade court has hollowed out that threat.
“We have a slightly better position now, seeing that some of the tariffs are not — even inside the legal system of the United States — are not accepted,” said Bernd Lange, chair of the European Parliament’s international trade committee.
Lange, who was in Washington this week heading an eight-member delegation that met with administration officials, said he was “not totally optimistic” about talks between the European Union and the United States. But he said he expects serious talks to begin next week when European negotiators arrive in Washington, with less than six weeks remaining before Trump’s deadline.
Meanwhile, businesses, which have been whipsawed for months by the president’s habit of threatening, imposing, and removing tariffs, remain unsure about how to proceed. The trade court’s ruling gave the administration 10 days to remove the improper tariffs. So even before the appeals court hit pause, nothing had changed on the ground.
Some companies debated resuming importing, counting on a tariff respite. But others were wary, fearing that any holiday from Trump’s tariffs could prove brief. Executives are under pressure: Corporate profits fell by $118 billion in the first three months of the year, according to Bureau of Economic Analysis data released Thursday.
“What the court ruling does is it basically guarantees uncertainty for the foreseeable future,” said Jake Colvin, president of the National Foreign Trade Council, which represents importers such as Ford, IBM and Caterpillar.
Even some administration allies question the president’s gamble on the emergency powers act. The 10 percent universal tariff that the trade court ruled illegal could raise more than $300 billion in annual revenue, which could help offset some of the cost of the president’s tax legislation, said Nick Iacovella, executive vice president of the Coalition for a Prosperous America, which supports the use of tariffs to raise revenue and protect domestic industry.
“Why would the president and his team not say to Congress, legislate this 10 percent universal tariff? That would just render this whole thing moot,” he said.
White House press secretary Karoline Leavitt accused the trade court of “judicial overreach” in blocking the president’s tariffs. Justice Department attorneys told a federal appeals court that if it failed to grant immediate relief, they would petition the Supreme Court on Friday to maintain the current tariff schedule.
But the appeals court acted quickly, freezing the trade court’s ruling and allowing the government to continue collecting the tariffs. They include the 10 percent universal tariff on all imported goods and taxes on goods from China, Mexico and Canada that the president said were needed to combat the smuggling of people and drugs.
The second strike against the president’s use of the emergency powers act came in a decision by U.S. District Judge Rudolph Contreras in federal court in D.C.
In a case brought by two small businesses, Learning Resources and hand2mind, Contreras rejected the government’s request to transfer the case to the specialized trade court in New York. The plaintiffs would suffer “irreparable harm” and an “existential threat” to their businesses if the tariffs were allowed to stand.
“This case is not about tariffs qua tariffs. It is about whether IEEPA enables the president to unilaterally impose, revoke, pause, reinstate, and adjust tariffs to reorder the global economy. The Court agrees with Plaintiffs that it does not,” Contreras wrote, using the acronym for the emergency powers act.
The White House is expected to appeal.
During his first term, Trump relied on provisions of U.S. trade laws that previous presidents had used to raise taxes on imports, citing national security concerns or persistent violations of trading rules by other nations.
But those laws require the government to gather evidence, solicit public comment and proceed at a measured pace. Within hours of returning to the White House in January, Trump demonstrated his willingness to wage a global trade war using every bit of executive power he could muster.
Goods from Mexico, Canada, China, the European Union, and a group of developing countries known as the BRICS, all were threatened with punishing tariffs before the sun set on the first day of his second term.
The president did not say so at the time, but he would not wait for the government’s customary bureaucratic process to play out before imposing new import taxes. Instead, he would declare economic emergencies and effectively dare his opponents and the courts to stop him.
From the start, Trump opted for a go-it-alone tariff strategy that sidelined Congress and relied on the 1977 International Emergency Economic Powers Act to reshape U.S. trade relations. The legislation gives the president broad powers to control economic activity in the event of a declared national emergency. But it had never been used to levy import taxes.
“Part of the appeal of IEEPA to the administration is that it is a very fast process and it doesn’t require long investigations or public input or the preparation of detailed reports. Instead, it’s a very fast-moving process that allows the president to implement and change tariffs and tariff levels very quickly,” said Patrick Childress, who until earlier this month was an attorney in the Office of the U.S. Trade Representative and is now a partner with Holland & Knight.
Trump also has used his authority to impose tariffs to protect national security, notably on steel, aluminum, and automobiles, relying on Section 232 of the 1962 trade act. Those tariffs were not affected by either of the court rulings against the IEEPA tariffs.
And he has ordered the Commerce Department to conduct seven investigations into whether imports of products such as copper, lumber, trucks and commercial aircraft are high enough to pose security worries.
Before the president can impose tariffs under Section 232, he must receive a detailed report from the Commerce Department, which can take up to 270 days to produce it.
