President Donald Trump’s bold trade agenda just hit a massive roadblock with a federal appeals court ruling that could unravel much of his tariff strategy.
CNBC reported that the U.S. Court of Appeals for the Federal Circuit decided on Friday that most of Trump’s “reciprocal tariffs” are illegal, shaking the foundation of an economic plan that’s been disrupting global markets since April.
Let’s rewind to earlier this month when Trump, after several delays, rolled out tariffs impacting over 60 countries, with jaw-dropping rates as high as 50% on nations like India and Brazil, and a baseline 10% on others.
This was part of his “liberation day” announcement on April 2, justified under the 1977 International Emergency Economic Powers Act by calling the trade deficit a national emergency. It was a classic Trump move—big, brash, and unapologetic.
But the appeals court, in a tight 7-4 decision, said not so fast, ruling that the power to slap on tariffs belongs exclusively to Congress, not the Oval Office.
Their statement was crystal clear: “The core Congressional power to impose taxes such as tariffs is vested exclusively in the legislative branch by the Constitution.” Well, that’s a constitutional haymaker if there ever was one, reminding everyone that even a fighter like Trump can’t rewrite the rulebook.
These tariffs, which before the ruling affected a whopping 69% of U.S. goods imports per the Tax Foundation, could shrink to just 16% if the decision stands. That’s a seismic shift for an administration banking on these levies to reshape trade dynamics.
Specific tariffs on Mexico, Canada, and China, some tied to claims of curbing fentanyl trafficking, were also deemed illegal by the court. It’s a bitter pill for a policy meant to protect American interests, now caught in a legal quagmire.
For now, the court has kept these tariffs, some as high as 50%, in place until October 14, giving the Trump administration a narrow window to appeal to the U.S. Supreme Court. That’s a small mercy, but the clock is ticking.
Trump didn’t hold back, posting on social media, “If allowed to stand, this Decision would literally destroy the United States of America.” Hyperbole? Maybe, but it’s hard to ignore the passion of a leader who sees trade as a battlefield for American prosperity, even if the courts disagree.
If the Supreme Court upholds this ruling, Trump might pivot to the 1974 Trade Act for tariffs, though they’d be capped at 15% and limited to 150 days without Congressional approval. That’s a far cry from the sweeping measures he’s pushed, showing how the legal guardrails can cramp even the boldest agendas.
Not all is lost for Trump’s trade vision, as sector-specific levies like those on steel and aluminum remain untouched by this ruling.
Earlier this month, the administration expanded these Section 232 tariffs to cover over 400 additional product categories, according to the Department of Commerce. It’s a clever sidestep, bypassing the legal challenges hitting the broader tariffs.
Mike Lowell, a partner at Reed Smith, previously told CNBC, “Section 232 tariffs are central to President Trump’s tariff strategy.” He’s not wrong—these focused levies are a lifeline, likely to endure legal scrutiny and even carry into future administrations, just as they did after Trump’s first term.
Lowell also noted, “They’re more likely to survive a legal challenge and continue into the next presidential administration.” It’s a rare bit of good news for Trump supporters who see these measures as vital to protecting American industries from unfair foreign competition.
Meanwhile, tariffs on China from Trump’s first term, sustained under the Biden administration, are expected to persist despite the ruling.
Add to that the elimination of the “de minimis” exemption on Friday, which now subjects imports valued at $800 or less to duties, and it’s clear the trade war isn’t over yet.
Reports from The Wall Street Journal suggest the administration is already planning to expand sector-specific tariffs further, especially on steel and aluminum, to dodge future legal hurdles. It’s a pragmatic, if narrower, approach—less grandstanding, more groundwork.