The legal fight over US President Donald Trump’s global tariffs is deepening after a federal appeals court ruled the levies were issued illegally under an emergency law, extending the chaos in global trade.
A 7-4 decision by a panel of judges on Friday was a major setback for Trump, even as it gives both sides something to boast about.
The majority upheld a May ruling by the Court of International Trade that the tariffs were illegal. However, the judges left the levies intact while the case proceeds, as Trump had requested, and suggested that any injunction could potentially be narrowed to apply only to those who sued.
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It is unclear exactly where the case goes from here. The Trump administration could quickly appeal the ruling to the US Supreme Court, or it could allow the trade court to revisit the matter and potentially narrow the injunction against his tariffs.
“Our trading partners must be dazed and confused,” Asia Society Policy Institute senior vice president and veteran US trade negotiator Wendy Cutler said. “Many of them entered into framework deals with us and some are still negotiating.”
Trillions of dollars of global trade are embroiled in the case, which was filed by Democratic-led states and a group of small businesses. A final ruling against Trump’s tariffs would upend his trade deals and force the government to contend with demands for hundreds of billions of dollars in refunds on levies already paid.
“It’s very gratifying,” said Elana Ruffman, whose family-owned toy businesses Learning Resources Inc won a separate lawsuit over Trump’s tariffs issued under the International Emergency Economic Powers Act (IEEPA). “It’s great that the court agrees with us that the way these tariffs are implemented is not legal.”
The ruling held that Trump was wrong to issue tariffs under IEEPA, a federal law that the panel concluded was never intended to be used in such a manner. Indeed, the court noted that the law does not mention tariffs “or any of its synonyms.”
“Once again, a court has ruled that the president cannot invent a fake economic emergency to justify billions of dollars in tariffs,” said New York Attorney General Letitia James, who is a party to the tariff lawsuit. “These tariffs are a tax on Americans — they raise costs for working families and businesses throughout our country, causing more inflation and job losses.”
The ruling applies to Trump’s “Liberation Day” global tariffs that set a 10 percent baseline and have been in effect for months, which the administration said are meant to address a national emergency around US trade deficits.
It affects the extra levies on Mexico, China and Canada that Trump said were justified by the ongoing fentanyl crisis in the US, which he also said was a national emergency under IEEPA.
The decision also covers Trump’s so-called “reciprocal” tariffs that took effect on Aug. 7 for dozens of nations that failed to reach trade deals with the administration by Aug. 1. Various carve-outs and extensions have been announced since then, leaving the final tariffs for some nations up in the air.
Cutler, who spent nearly three decades as a diplomat and negotiator at the Office of the US Trade Representative, suggested that the administration’s concerns about trade deals might now be a reality.
India, hit by a 50 percent tariff, “must be rejoicing,” while China “must be weighing its stance in making concessions in ongoing talks,” she said.
“EU efforts to secure domestic approval of its deal may be called into question, while Japan and [South] Korea whom apparently have made oral deals with little in writing may choose to slow walk current efforts until there is more US legal clarity, while still pressing for lower auto tariffs,” Cutler said.
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