The U.S. federal judiciary has dealt a serious blow to former President Donald Trump’s expansive use of emergency powers to impose sweeping tariffs on America’s trading partners. At the heart of the decision is the U.S. Court of Appeals for the Federal Circuit, which ruled that Trump had overstepped his legal authority when he declared a national emergency to justify broad tariff measures on imports from nearly every country.

This ruling largely upheld a May judgment by the U.S. Court of International Trade in New York, which had already found Trump’s so‑called “Liberation Day” tariffs unlawful. However, the appeals court, in a narrow 7-4 decision, allowed the tariffs to remain in place temporarily while the Trump administration appeals to the U.S. Supreme Court.

That interim provision prevents immediate disruption of existing trade flows and avoids potentially forcing the Treasury Department to issue massive refunds of tariffs already collected.

The case revolves around tariffs Trump imposed in April of his presidency, under which he levied reciprocal tariffs of up to 50% on countries with which the United States ran trade deficits and applied a 10% baseline tariff on most others.

Trump defended these measures by invoking the 1977 International Emergency Economic Powers Act (IEEPA), framing trade deficits as a “national emergency” comparable to geopolitical or military threats.

Earlier, he had used the same statute to impose tariffs on Canada, Mexico, and China, tying them to what he described as a cross-border crisis of migrant flows and drugs. In doing so, Trump pushed the boundaries of executive power further than any of his predecessors, seeking to use emergency laws to reshape global commerce unilaterally, rather than waiting for Congress to authorise such taxes.

Opponents, including five businesses and 12 states that launched a combined legal challenge, argued successfully that tariffs are a form of taxation.

The Constitution clearly grants Congress—not the president—the power to tax. While Trump’s predecessors had been delegated some tariff discretion by lawmakers, courts concluded that his claim of nearly unlimited emergency authority was unprecedented and legally unsupported.

The trade panel in New York ruled that the tariffs exceeded any powers Congress had intended to transfer to the executive branch under IEEPA. The appellate court reinforced that reasoning, noting that it is “unlikely” Congress envisioned granting the president the unilateral authority to impose sweeping trade restrictions under that law. Still, a robust dissent insisted that IEEPA was a valid delegation of Congress’s authority, suggesting the matter remains far from settled.

The implications of this ruling are profound. In practical terms, Trump’s aggressive tariffs remain standing for now, meaning importers must still pay the duties until the Supreme Court either affirms or overturns the appeals court’s decision. If the high court ultimately strikes them down, the U.S. government may face immense financial pressure, as it might be obligated to refund billions of dollars in import taxes already collected.

By July, tariff revenues had ballooned to $159 billion—more than double the amount collected the previous year—creating a precarious financial situation should refunds be required. Government lawyers have even warned that stripping these revenues could approach “financial ruin” for the Treasury, depriving it of a significant source of income.

At the diplomatic and economic levels, the ruling weakens Trump’s negotiating leverage. Much of his trade strategy relied on wielding punitive tariffs as a blunt force tool to pressure trading partners into accepting deals skewed toward U.S. interests.

Several nations, including the United Kingdom, Japan, and the European Union, had struck concessions to avoid harsher penalties. Others, like Laos and Algeria, faced escalated tariffs for resisting. Without the ability to credibly threaten sudden emergency tariffs, foreign capitals may be less willing to yield to Washington’s demands and may even revisit deals already signed under duress. This could also embolden countries to delay compliance with U.S. trade agreements or seek renegotiation of previously settled terms.

Crucially, the case does not affect all of Trump’s tariff arsenal. Exempt from this challenge are tariffs imposed under different statutory frameworks, such as those on steel, aluminium, and Autos based on Section 232 of the 1962 Trade Expansion Act, which allows tariffs if imports threaten national security.

Nor does the ruling undo existing tariffs on China that stem from findings under the Trade Act of 1974, supported by evidence of unfair practices disadvantaging U.S. technology firms. President Biden, despite criticising Trump’s methods, chose to preserve many of these tariffs during his administration, highlighting a bipartisan consensus on tackling China’s trade policies.

Looking forward, Trump, or any future president pursuing aggressive trade measures, still retains alternative tools. However, these are far more constrained than IEEPA. For instance, the Trade Act of 1974 allows tariffs to counter trade deficits, but only up to 15% and limited to 150 days, thereby undercutting the sweeping scope of Trump’s “Liberation Day” tariffs.

Section 232 tariffs require a Commerce Department investigation and findings of national security harm, which greatly slows down implementation compared to Trump’s discretionary announcements. In short, while emergency tariff powers under IEEPA appear largely curtailed by this ruling, the executive still possesses narrower and more procedurally heavy instruments to manage trade.

Politically, the battle now heads to the Supreme Court, with Trump defiantly warning that if the decision stands, it would “literally destroy the United States of America.” Such hyperbolic rhetoric reflects his reliance on tariffs not merely as an economic policy but as a symbol of sovereignty and toughness against perceived free-riders in global trade.

Whether the high court agrees to hear the case will determine not only the fate of his contested tariffs but also the broader balance of power between Congress and the presidency when it comes to taxation through trade measures. A decision against Trump would mark a historic reaffirmation of legislative primacy over taxation, potentially limiting presidential discretion for decades to come.

While Trump’s tariffs are not immediately overturned, this court ruling casts immense doubt on their legality and threatens to strip future presidents of one of the most aggressive tools in reshaping international trade.

Businesses, consumers, and foreign governments now wait in a state of uncertainty—navigating a trade environment deeply unsettled by Trump’s legacy but increasingly constrained by constitutional checks on presidential power.

Based On Associated Press Report