A federal appeals court has ruled that most of Donald Trump’s tariffs exceed his powers as president.
So-called reciprocal tariffs imposed on nearly every country the U.S. trades with are illegal, the U.S. Court of Appeals said Friday.
The decision upholds a May ruling by the International Trade Court, which also rejected Trump’s argument that his global tariffs were authorised under the Emergency Economic Powers Act.
The court did not strike down the tariffs but said they would remain in place until mid-October, setting the stage for further litigation before the US Supreme Court.
Much remains unknown, but here’s what we understand at this point about the court’s decision and what it could mean for the U.S. president’s flagging policies.
What did the appeals court say?
In a 7-4 decision, the appeals court upheld the lower court’s conclusion that President Trump did not have the authority to impose global tariffs.
This was mainly because of the law Trump used to justify his policies, the International Emergency Economic Powers Act (IEEPA), which the justices said does not give “the power to impose tariffs, duties, etc., nor the power to levy taxes.”
The US Court of Appeals rejected Trump’s argument that the tariffs were authorised under his emergency economic powers, calling the levies “invalid because they are contrary to law”.
Trump immediately rejected the ruling, writing in Truth Social hours after it was handed down that the appeals court was “very biased” and the decision itself was a “disaster” for the country.
“If this decision stands, it will literally destroy the United States of America,” he wrote.
What is IEEPA?
The law, passed decades ago and used repeatedly by Trump during both of his terms in office, gives the US president significant powers to respond to national emergencies or serious threats from abroad.
The 1977 law states that the president can use a range of economic levers “to counter any unusual and extraordinary threat that originates wholly or substantially from outside the United States and is directed against national security, foreign policy, or the economy.”
It was used by both President Barack Obama and Joe Biden, who used the law to impose sanctions on Russia after the illegal annexation of Crimea in 2014 and then again after the full-scale invasion of Ukraine eight years later.
But the appeals court said in its ruling that the emergency law “does not give the president broad authority to impose tariffs.”
IEEPA “makes no mention of tariffs (or any synonyms thereof) and contains no procedural safeguards that clearly limit the president’s authority to impose tariffs,” they said.
Trump, in announcing the global tariffs, argued that the trade imbalance was detrimental to USA national security and therefore a national emergency.
However, the court ruled that imposing tariffs is not within the president’s authority and that “the power to manage the public finances (including the power to levy taxes) belongs to Congress.”
Why is this significant?
Aside from being a significant blow to the centrepiece of President Trump’s agenda – tariffs – the federal appeals court ruling could have a direct impact on the US economy, as well as setting off a chain reaction in global markets.
“Businesses will be subject to uncertainty,” Dr Linda Yue, an economist at Oxford University and London Business School, told the BBC Today programme.
While countries wait to see if the Supreme Court accepts the case, which seems likely, they may decide to suspend doing business with the US.
If this happens, according to Dr Yue, it could “dampen economic activity”.
There are also significant consequences that could manifest themselves in the political sphere.
For example, if the Supreme Court reverses the federal appeals court decision and upholds the Trump administration, it could set a precedent that would push the president to use IEEPA more aggressively than he has done so far.
What happens next.
The case will likely go to the highest court in the U.S., as Trump told Truth Social.
“Our indifferent and short-sighted politicians have allowed tariffs to be used against us,” Trump wrote. – Now, with the help of the U.S. Supreme Court, we will use them for the good of our nation and make America rich, strong and powerful again!”
A conservative majority on the US High Court could potentially increase the likelihood that it will uphold the president’s views.
Six of the nine justices were appointed by Republican presidents, including three by Trump during his first term in the White House.
But the court is also more critical of presidents when it believes they overstep their authority in matters not approved by Congress