Donald Trump tariffs: US trade court delivers hammer blow to President’s global tariff war

The bulk of President Donald Trump’s global tariffs were deemed illegal and blocked by the US trade court, dealing a major blow to a pillar of the Republican’s economic agenda.

A panel of three judges at the US Court of International Trade in Manhattan issued a ruling overnight Wednesday in the US siding with Democratic-led states and a group of small businesses that argued Trump had wrongfully invoked an emergency law to justify some of his levies.

Trump can appeal the ruling. The US Supreme Court may ultimately have the final say in the high-stakes case that could impact trillions of dollars in global trade.

The decision is one of the biggest setbacks in court for Trump amid a wave of lawsuits over executive orders in which he is testing the limits of presidential power.

Others are challenging Trump’s mass firings of federal workers, restrictions on birthright citizenship and efforts to slash federal spending already approved by Congress.

Global markets

Global markets have fluctuated wildly since Trump announced the levies in a sweeping executive order an April 2. Since then, trillions of dollars in market value have been shed and regained amid weeks of delays, reversals and announcements about potential trade deals, particularly with China.

The order suspends the vast majority of Trump’s tariffs — his global flat tariff, elevated rates on China and others, and his fentanyl-related tariffs on China, Canada and Mexico are all suspended by the ruling.

Other tariffs imposed under different powers, like so-called Section 232 and Section 301 levies, are unaffected, and include the tariffs on steel, aluminium and automobiles.

A White House spokesman said “it is not for unelected judges to decide how to properly address a national emergency”.

“Foreign countries’ non-reciprocal treatment of the Unites States has fuelled America’s historic and persistent trade deficits,” Kush Desai said in a statement.

“These deficits have created a national emergency that has decimated American communities, left our workers behind, and weakened our defence industrial base — facts that the court did not dispute.”

Trump’s executive order invoked the International Emergency Economic Powers Act to justify the sweeping global tariffs. The law grants the president authority over a variety of financial transactions during certain emergencies, typically with sanctions.

Emergency law

Trump said he was permitted to use the emergency law to implement tariffs because the nation’s “large and persistent” annual trade deficits across the globe constituted “an unusual and extraordinary threat” to national security and the economy.

The panel of judges concluded that Trump’s initial executive order announcing global tariffs and subsequent order dealing additional levies on countries that retaliated both exceeded the president’s authority under the emergency law. A third executive order, hitting Mexico and Canada with tariffs over concerns about drug trafficking, were deemed to be illegal by the court because those levies do not ultimately attempt address the trafficking problem.

A complaint brought by a conservative legal advocacy group on behalf of small businesses alleged Trump is misusing the law, essentially basing his tariffs on a bogus emergency.

The Liberty Justice Centre said the US trade deficits are “neither an emergency nor an unusual or extraordinary threat.” Even if it were, the group says, the emergency law doesn’t allow a president to impose across-the-board tariffs.

The Democrat-led states alleged the tariffs amount to a massive tax on American consumers and infringe on the authority of Congress. The states also challenged Trump’s tariffs on Mexico and Canada, which cite the same emergency law based on claims about cartel activity and drug trafficking.

Drug trafficking

The states alleged that the broad nature of Trump’s tariffs undercut his claims about the purported emergency because they don’t target goods or services connected in any way to drug trafficking.

New York Governor Kathy Hochul hailed the ruling on social media.

The US trade court is part of the nation’s federal court system and was created by Congress to handle specialised disputes around trade, including tariffs. Decisions are appealed on the same track as rulings from district courts, meaning a challenge by Trump would go to a federal appeals court and then the US Supreme Court. As with other federal courts, the judges are appointed by sitting presidents.

Republicans in Congress have advanced legislation that would give the president wide authority to impose so-called reciprocal tariffs, but concern about the impact of Trump’s widespread levies is expected to limit the appetite for moving that measure now.

’Second-guessing’

The Trump administration argued in court filings that the plaintiffs are improperly questioning his executive orders, “inviting judicial second-guessing of the president’s judgment.”

The government had asked the panel of judges to issue only a narrow ruling if they were to rule in favour of the plaintiffs, but the court concluded that wasn’t possible given the nature of the tariffs.

“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 panel said.

The court said it didn’t need to weigh in on the plaintiffs’ argument that Trump had declared a false national emergency, saying that argument is moot for now because the president had used the law improperly regardless.

Bloomberg