This recent ruling was made by a three-judge panel of the U.S. Court of International Trade. This ruling has big consequences for the Chinese tariffs former President Donald Trump slapped on. The court ruled that February 2018 was outside of Trump’s statutory authority. He illegally used a national emergency as a pretext to raise tariffs on Canada, Mexico, and China. This is a momentous decision that stops Trump’s plan to levy huge tariffs on imports from nearly every country on Earth. In doing so, it redefines the terrain of U.S. trade policy.
The administration imposed the tariffs using the 1977 International Emergency Economic Powers Act (IEEPA). Specifically, this law gives the president authority to impose economic sanctions against any country that threatens the national emergency. The court found that Trump’s rationale for declaring a national emergency was arbitrary and capricious. As a counter, it claimed that what he had done was an overreach of executive power. As this ruling makes clear, the U.S. Constitution gives the power to levy taxes, including tariffs, exclusively to Congress.
Beyond blocking broad tariffs, the sweeping ruling raises questions about the fate of Trump’s reciprocal tariffs in the future. These tariffs reached levels as high as 50% on all of the countries the United States had a trade deficit with. In addition, Trump enacted a starting 10% tariff on almost all other countries. As critics of the administration have pointed out, these measures represented a radical departure from decades of U.S. trade policy.
These tariffs have roiled financial markets. They further jeopardize inflation-fighting efforts and risk plunging both U.S. and global economies into recession. The court’s decision to combine two cases, one brought by five small businesses and another by 12 U.S. states, highlights the widespread discontent with Trump’s tariff strategy.
That’s according to Wendy Cutler, a former U.S. trade official who today is vice president at the Asia Society Policy Institute. Here’s what she told us about the possible implications of the court’s decision. She noted that “partners negotiating hard during the 90-day tariff pause period may be tempted to hold off making further concessions to the U.S. until there is more legal clarity.” This note of caution is likely a local observance of fears that current trade negotiations might be held up while countries anticipate the result of more future legal challenges.
Trump’s unilateral power to impose tariffs is now severely limited by the Trade Act of 1974. He is only able to impose tariffs as high 15% for no more than 150 days on countries that have created such trade deficits. This act limits even more than Trump’s unilateral actions under the IEEPA what all of Trump’s IEEPA unilateral trade actions can apply to.
The legal challenge against Trump’s tariffs are not an isolated occurrence. There are at least seven different lawsuits disputing the validity of these tariffs. Experts like Eswar Prasad, a professor of trade policy at Cornell University, have underscored the importance of the court’s ruling. Prasad stated, “The ruling makes it clear that the broad tariffs imposed unilaterally by Trump represent an overreach of executive power.”
