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Federal Court Blocks Trump’s Global Tariffs, Resets Trade Landscape

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Federal Court Blocks Trump's Global Tariffs, Resets Trade Landscape

In a resounding blow to one of Donald Trump’s most aggressive economic strategies, a U.S. federal court has blocked the President’s sweeping global tariff plan, ruling it unconstitutional. The U.S. Court of International Trade found that Trump exceeded his authority under the 1977 International Emergency Economic Powers Act (IEEPA) when he imposed tariffs on nearly all U.S. trading partners.

Trump’s “Liberation Day” tariffs, touted as a way to force better trade deals and protect American jobs, now face serious legal and logistical challenges. The court emphasized that only Congress has the constitutional authority to regulate trade and impose taxes, and that this power cannot be overridden, even in the name of economic emergency.

The decision undercuts a core element of Trump’s economic identity: using executive power to unilaterally reshape global trade. What began as a defiant attempt to rebalance deficits has now become a landmark moment in defining the limits of presidential economic power.

Judges Reject ‘Emergency’ Justification for Global Tariffs

The court’s decision stemmed from two lawsuits—one brought by a coalition of small businesses, the other by 12 U.S. states—challenging the legality of the tariffs. A unanimous three-judge panel ruled that Trump’s claim of a national emergency based on long-standing trade deficits was legally inadequate. The court concluded that the IEEPA was never intended to support such sweeping economic interventions without congressional backing.

This isn’t the first time presidents have invoked emergency powers for economic reasons. Nixon did so in 1971. But the court drew a sharp distinction, stating that Trump’s tariffs were both too broad and not grounded in any sudden crisis. Forty-nine years of trade deficits, the judges said, do not constitute an emergency.

While the decision leaves intact other tariffs, such as those on steel and autos—imposed under different legal statutes—it effectively ends Trump’s attempt to establish a global tariff regime through executive order alone.

Global Markets Breathe as Trade Tensions Ease

Financial markets responded almost instantly. After weeks of volatility tied to escalating trade wars, investors greeted the ruling with relief. Asian stock markets rallied, U.S. futures surged, and the dollar gained strength against the yen and Swiss franc.

The message was clear: with the immediate threat of expansive tariffs lifted, a measure of predictability had returned to global commerce.

Still, the White House wasted no time in criticizing the court’s decision and announced plans to appeal. Deputy Press Secretary Kush Desai argued that “unelected judges” should not obstruct presidential action in times of national urgency, reinforcing Trump’s belief in strong executive authority.

Yet, many observers—including business leaders and trade partners—see this ruling as a return to legal normalcy. In New York, Attorney General Letitia James, whose office helped bring the case, said the decision “defends American families, small businesses, and our constitutional balance of power.”

Diplomatically, the ruling throws Trump’s international negotiations into limbo. The U.S. had been pressuring nations to make trade concessions during a 90-day tariff suspension. But with the legal footing now eroded, foreign governments may choose to wait and see how the appeals process plays out before returning to the table.

Refunds Pending, But Confusion Reigns at Borders

While the ruling is clear, its implementation will take time. Former Customs and Border Protection (CBP) official John Leonard noted that the White House now has ten days to initiate the rollback process. In the meantime, businesses are still required to pay the contested tariffs.

If the ruling is upheld on appeal, importers could be entitled to refunds, with interest, for duties paid under the invalidated tariff rules. These include the headline-grabbing reciprocal tariffs, which had reached up to 145% for Chinese goods and 10% for most other countries.

However, until higher courts—potentially including the Supreme Court—make final determinations, legal uncertainty will linger. The CBP cannot issue new guidance until the appeal process is resolved, and for now, importers remain in limbo, caught between legal clarity and operational confusion.

Tariff Turmoil Poses Risks for Trump’s 2025 Agenda

Beyond the legal implications, the political fallout may be even more significant. Trump’s trade strategy has long been central to his pitch to voters, promoting economic nationalism, job growth, and a tough stance on China. But this ruling could reshape that narrative.

Wendy Cutler, former trade negotiator and current vice president at the Asia Society Policy Institute, noted that the court’s decision “throws the president’s trade policy into turmoil.” Countries previously negotiating with the U.S. may now pause, reassessing their willingness to make concessions in the face of legal instability.

For Trump, who has already seen European Tesla sales plummet amid backlash to his political affiliations, the tariff ruling adds to a growing list of challenges. With ongoing protests, investor concern, and mounting legal battles, his efforts to project global economic dominance are faltering.

And while the administration is banking on a more favourable ruling from higher courts, the broader message is unmistakable: the judiciary is not willing to let the Oval Office function as a solo actor in trade policy.

The path ahead is unclear. What is clear, however, is that this ruling reasserts the role of Congress, offers some relief to global markets, and forces a rethink of what economic leadership in the U.S. should look like, especially when it’s driven by unilateral force.

Trump’s ambitions to rebuild the global trade order now face a constitutional reality check. And for the first time in years, America’s trading partners—and businesses at home—are watching with cautious optimism.