In a landmark decision, a U.S. trade court has significantly curtailed President Donald Trump’s extensive tariff strategy, ruling that he overstepped his constitutional authority. The judgment, delivered on Wednesday, May 28, 2025, found that the power to regulate international commerce rests solely with Congress, a prerogative not overridden by the president’s emergency powers.
Court Curbs Trump’s Tariff Powers, Citing Congressional Authority
NEW YORK, USA – A U.S. trade court delivered a significant blow to President Donald Trump’s trade policies on Wednesday, issuing a sweeping ruling that blocks the majority of his broad tariffs on imports. The Court of International Trade declared that the President exceeded his constitutional authority by imposing these across-the-board duties on U.S. trading partners.
Congress Holds the Reins on Commerce
The Court of International Trade emphasized that the U.S. Constitution grants Congress exclusive power to regulate commerce with other nations. This authority, the court asserted, is not superseded by the president’s emergency powers, even when aimed at safeguarding the U.S. economy.
“The court does not pass upon the wisdom or likely effectiveness of the President’s use of tariffs as leverage,” a three-judge panel stated in their decision. They issued a permanent injunction on the blanket tariff orders Trump has implemented since January, adding, “That use is impermissible not because it is unwise or ineffective, but because federal law does not allow it.”
Markets React Positively to Ruling
Financial markets responded enthusiastically to the court’s decision. The U.S. dollar experienced a rally, surging against major currencies such as the euro, yen, and Swiss franc. Wall Street futures also saw an uptick, and equities across Asia jumped, reflecting investor relief and optimism.
The court has given the Trump administration 10 days to issue new orders that reflect this permanent injunction. However, the Trump administration swiftly filed a notice of appeal, challenging the court’s jurisdiction over the matter.
Emergency Powers Misapplied?
The court’s ruling immediately invalidated all of Trump’s tariff orders issued since January that were based on the International Emergency Economic Powers Act (IEEPA). This law is designed to address “unusual and extraordinary” threats during a national emergency. It’s important to note that the court’s decision does not affect certain industry-specific tariffs, such as those on automobiles, steel, and aluminum, which were issued under a different statute.
Decisions by the Manhattan-based Court of International Trade, which specializes in international trade and customs law disputes, can be appealed to the U.S. Court of Appeals for the Federal Circuit in Washington, D.C., and ultimately to the U.S. Supreme Court.
Trade Turmoil and White House Response
President Trump’s reliance on tariffs has been a cornerstone of his administration’s trade wars, leading to significant disruptions in global trade flows and volatility in financial markets. Businesses of all sizes have faced considerable challenges in managing supply chains, production, staffing, and pricing due to the unpredictable nature of these tariffs.
A White House spokesperson, Kush Desai, defended the administration’s stance, stating, “U.S. trade deficits with other countries constituted 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.” Desai added, “It is not for unelected judges to decide how to properly address a national emergency.”
Future of Trump’s Tariff Strategy
If this ruling stands, it creates a significant hurdle for Trump’s strategy of using steep tariffs to extract concessions from trading partners. It also introduces considerable uncertainty into ongoing negotiations with the European Union, China, and numerous other countries.
However, analysts at Goldman Sachs noted that the order does not block sector-specific levies, and other legal avenues remain for the Trump administration to impose broad or country-specific tariffs. “This ruling represents a setback for the administration’s tariff plans and increases uncertainty but might not change the final outcome for most major U.S. trading partners,” wrote analyst Alec Phillips.
President Trump has consistently promised that tariffs would bring manufacturing jobs back to the U.S. and reduce the $1.2 trillion U.S. goods trade deficit, a key campaign pledge. Without the immediate leverage provided by these tariffs, the administration may need to explore new approaches or adopt a slower pace in its trade negotiations.
Initial reactions from Asian policymakers were cautious. Japan’s economy minister indicated he would examine the ruling’s details, while the Bank of Korea projected that the effective tariff rate on South Korean exports would fall from 13.3% to 9.7% under the ruling. Hong Kong’s financial secretary expressed hope that the court’s decision would “at least bring President Trump to reason.”
Businesses Voice Relief
The court’s decision stems from lawsuits filed by the nonpartisan Liberty Justice Center, representing five small U.S. businesses, and a separate suit by 12 U.S. states. The businesses, ranging from a New York wine and spirits importer to a Virginia-based maker of educational kits, have argued that the tariffs severely impede their operations.
“There is no question here of narrowly tailored relief; if the challenged Tariff Orders are unlawful as to Plaintiffs they are unlawful as to all,” the judges asserted. At least five other legal challenges to the tariffs are currently pending.
Oregon Attorney General Dan Rayfield, whose office is leading the states’ lawsuit, described Trump’s tariffs as “unlawful, reckless and economically devastating.” He welcomed the ruling, stating, “This ruling reaffirms that our laws matter, and that trade decisions can’t be made on the president’s whim.”
Historically, the IEEPA has been used to impose sanctions or freeze assets of U.S. enemies. President Trump is the first U.S. president to employ it for imposing tariffs. The Justice Department had sought to dismiss the lawsuits, arguing that plaintiffs had not yet been harmed by tariffs they hadn’t paid, and that only Congress, not private businesses, could challenge a national emergency declared under IEEPA.
In early April, President Trump declared the trade deficit a national emergency, justifying a 10% across-the-board tariff on all imports, with higher rates for countries with large trade deficits with the U.S., particularly China. While country-specific rates were paused for 90 days a week later, the baseline 10% duty was implemented for most nations. More recently, on May 12, the Trump administration announced a temporary reduction in the steepest tariffs on China as both countries work towards a longer-term trade deal, agreeing to cut tariffs on each other for at least 90 days.
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