The US Court of Appeals ruled that US President Donald Trump exceeded his powers by using the 1977 International Emergency Economic Powers Act to enact tariffs.
The ruling has a direct impact on the tariffs of 10-30% levied against goods imported from China, Canada and Mexico.
The sectoral tariffs for steel, aluminium, and automobile products remain unchanged.
The court ruled that the International Emergency Economic Powers Act does not authorize the President to unilaterally impose import tariffs of any kind.
This is particularly true when the stated national emergencies–including issues like drug trafficking, immigration, and trade deficits–are not directly resolved by the imposed tariffs, according to ING Group.
Not meeting the criteria
Analysts at ING Group stated that the court primarily based their decision on the reasoning that a trade deficit lasting 49 years did not meet the criteria for an “unusual or extraordinary threat”.
The decision of the court specifically affects tariffs between 10% and 30% for goods imported from China and Canada that are related to immigration and fentanyl concerns. It also impacts global surplus tariffs at 10% and more including temporary suspended reciprocal tariffs.
Analysts at ING Group believe that, on the basis of the court’s reasoning, the IEEPA doesn’t give the president power to unilaterally impose widespread import tariffs – especially when these tariffs don’t directly address the declared national emergency.
In the ruling, it was stressed that a trade deficit of 49 years, as cited in the decision, did not meet the IEEPA’s definition of “unusual or extraordinary threat”.
The court’s ruling does not apply to all tariffs that were imposed by the Trump Administration.
Steel (25%), Aluminum (25%), Automotive Products (25%), all of which have been enacted by different authorities under different laws, are still in force.
Consequences
The court ordered that the White House stop the tariffs in dispute within 10 days.
The administration appealed this decision already to the US Court of Appeals Federal Circuit.
This case is expected to be heard by the Supreme Court which has the final authority in determining the legality of tariffs imposed pursuant to the IEEPA.
If the decision stands, US Customs and Border Protection has reported that the US Government could be obligated by the ruling to refund around $13.7 billion of tariffs collected through April 30 under IEEPA.
According to ING, this $7.9 billion was spent on imports from China and Hong Kong.
Future Trade Policy
Analysts at ING said that regardless of the outcome of this recent ruling, it is likely to focus attention on tariffs enacted in accordance with other trade laws. These include Section 232, which deals with national security, and Section 301, which addresses unfair trade practices.
These laws, while requiring more thorough investigations, still allow the President to act unilaterally.
According to ING, several ongoing investigations could lead to new tariffs being imposed on industries such as aircraft and shipbuilding.
As previously mentioned, the administration can also use Sections 122 (balances of payments) or 338 (retaliatory duties), which provide additional tariff mechanisms.
Challenges to legal and political rights
This court judgment is a significant legal and political barrier to using emergency powers in US trade policy. It further complicates the US’s trade policy.
Analysts at ING said:
This also indicates that countries and companies will intensify their efforts to remove sector-based duties, which are now a favourite tool of US enforcement.
By April 30th, these tariffs generated 26.8 billion dollars in revenue from customs for the FY2025.
Analysts at ING added, “We anticipate the pace of tariffs based on sectors to accelerate. Additional measures are likely to be announced in the near future.”
The ongoing negotiations with China and the EU, who have the greatest impact on global economic and financial markets will be critical.
In this respect, we caution against complacency or too much comfort at this stage.
Tariffs in Europe are primarily aimed at the automobile industry and will be continued.
ING stated that if the US Administration moves forward with its intended tariffs and quotas for European pharmaceuticals, ING estimates the majority of European exports would be subjected to tariffs exceeding 20%.
The pushback towards President Trump may also lead to more aggressive tariffs and other announcements of economic policies, which could impact important trading partners.
The post Trump could bypass US courts and continue his tariff agenda, according to ING can be updated as new developments unfold.
