In a significant legal setback to former US President Donald Trump’s trade agenda, a federal court has ruled that his sweeping tariffs – imposed under emergency powers – exceeded presidential authority and must be revoked. The decision has lifted investor sentiment across global markets, with US futures and Asian indices rallying in early trade.
The court’s ruling means the April 2 tariffs – which were due to take effect on July 7 following the 90-day pause – will no longer proceed.
The ruling by a three-judge panel at the New York-based US Court of International Trade struck down two sets of Trump-era tariffs: the so-called “Liberation Day” duties, and a separate round targeting China, Mexico, and Canada in connection with the US opioid crisis. The court determined that Trump had overstepped the bounds of the International Emergency Economic Powers Act (IEEPA).
“The court does not read [IEEPA] to confer such unbounded authority,” the judges stated, annulling the tariffs in response to lawsuits filed by a coalition of 12 US states led by Oregon, and five American businesses.
This marks the most serious legal challenge yet to Trump’s trade policy and potentially undermines his controversial strategy of leveraging tariffs to pressure multinational companies into re-shoring production.
Responding to the decision, White House spokesman Kush Desai criticised the verdict as judicial overreach. “It is not for unelected judges to decide how to properly address a national emergency,” he said, adding that the administration remained committed to “using every lever of executive power to restore American greatness.”
In February, Trump had invoked IEEPA to declare a national emergency tied to fentanyl trafficking, slapping 20 percent duties on China, Mexico and Canada. Two months later, he expanded the levies to all trading partners, branding them “reciprocal tariffs” to counter what he described as unfair trade practices and a threat to national security from persistent trade deficits.
Though markets initially reacted negatively, Trump paused the new tariffs for 90 days, leaving a 10 percent duty in place across the board. Tariffs on Chinese goods remained in effect until a truce earlier this month saw them reduced to 30 per cent on imports from China and 10 per cent on US goods.
At an embassy event in Washington, Chinese ambassador Xie Feng cautiously welcomed the court decision, reiterating that China was “firmly against tariffs” but had been forced to respond. “We do not want a tariff war with any country, because we think it will be a zero-sum game,” he said.
Jeffery Schwab, representing the American businesses that challenged the tariffs, said the ruling was a win for the rule of law. “The verdict reaffirms that the president must act within legal boundaries,” said Schwab, a lawyer with the Liberty Justice Center. “It protects American businesses and consumers from the destabilising effects of volatile, unilaterally imposed tariffs.”
US Commerce Secretary Howard Lutnick and Secretary of State Marco Rubio had previously urged the court to uphold the tariffs, warning that a ruling against them would damage America’s global standing and provoke retaliation.
Trump’s legal team argued that tariff decisions stemming from national emergency declarations were inherently political and beyond the purview of judicial review. They maintained the measures were effective, pointing to China’s return to negotiations.
Democrats welcomed the ruling. Representative Gregory Meeks, the ranking Democrat on the House Foreign Affairs Committee, and a co-leader of an amicus brief supporting the 12 states, said: “Trump’s declaration of a bogus national emergency to justify his global trade war was an absurd and unlawful use of IEEPA,” said Meeks. “These tariffs were an illegal abuse of executive power.”
