Tariff Turmoil: Federal Court Halts Trump’s Sweeping Import Duties — But the Fight Isn’t Over

A federal trade court has delivered a major blow to former President Donald Trump’s economic agenda, ruling that he exceeded his legal authority when he imposed sweeping tariffs under the International Emergency Economic Powers Act (IEEPA) of 1977. The U.S. Court of International Trade (USCIT), in a 49-page decision issued late Wednesday, struck down a wide range of duties, effectively halting most of the tariffs levied under IEEPA — including the 10% baseline rate and so-called “reciprocal” tariffs targeting U.S. trading partners.

The ruling could void roughly three-quarters of the dollar value of tariffs implemented by the Trump administration this year and would require refunds for duties already paid. Markets initially surged on the news, with equity futures jumping and investors welcoming a potential cooling in inflationary pressure. However, the White House immediately filed an appeal, signaling this is likely just the beginning of a lengthy legal and political saga.

What the Ruling Covers—and What It Doesn’t

The court’s decision invalidates tariffs imposed on nearly every country under IEEPA, including recent levies on China, Mexico, and Canada tied to drug trafficking claims and trade imbalances. However, it leaves untouched tariffs imposed under different authorities—specifically Section 232 of the Trade Expansion Act of 1962, which covers steel, aluminum, and auto imports based on national security concerns.

Importantly, the ruling does not apply to sector-specific tariffs already in place. The judgment also does not restrict the administration from pursuing other legal frameworks for imposing new tariffs. That said, it calls into serious question the legitimacy of any future effort to use IEEPA for broad-based economic restrictions.

Court’s Reasoning and Jurisdiction

The USCIT, a specialized federal court based in Manhattan with exclusive jurisdiction over international trade and customs disputes, ruled unanimously. In its opinion, the three-judge panel determined that IEEPA does not provide the president “unbounded authority” to levy tariffs. The statute, intended for addressing national security threats like cyberattacks or terrorism, was never meant to justify a global trade war.

The court specifically dismissed the argument that trade deficits or fentanyl trafficking met the statutory definition of a national emergency under IEEPA. “There is no such association between the act of imposing a tariff and the ‘unusual and extraordinary threat’ that the Trafficking Orders purport to combat,” the judges wrote.

Appeal and Potential Supreme Court Involvement

The administration moved swiftly to appeal to the U.S. Court of Appeals for the Federal Circuit and is expected to request a stay of the lower court's decision. If granted, this would allow tariffs to continue while litigation proceeds.

Legal experts say the Supreme Court may ultimately weigh in. The high court is already scheduled to rule on a related question—whether judicial injunctions may apply nationwide. If SCOTUS narrows the scope of such injunctions, it could weaken the USCIT ruling. But the panel appeared to anticipate that argument, writing: “If the challenged Tariff Orders are unlawful as to Plaintiffs, they are unlawful as to all.”

Trump’s Tariff Playbook: What’s Next

While this decision blocks one path, others remain open. Goldman Sachs analysts highlighted four alternative authorities:

• Section 122 of the Trade Act of 1974: Allows the president to impose tariffs up to 15% for 150 days to address balance-of-payments issues. Crucially, it requires no formal investigation.
• Section 301 of the Trade Act of 1974: Targets unfair trade practices by foreign governments but entails a lengthy investigative process.
• Section 232: Justifies tariffs on national security grounds—already used for steel and aluminum and could be expanded to new sectors.
• Section 338 of the Tariff Act of 1930: Permits retaliation against countries that discriminate against U.S. goods, though this authority has never been invoked.

Despite these options, each comes with procedural hurdles and political risk. Unlike IEEPA, which allowed the president to act unilaterally via executive order, most of these alternatives involve public comment periods and formal investigations.

Political and Legislative Backlash

The ruling arrives at a politically sensitive moment. The administration is trying to pass a major tax-and-spending package through reconciliation. Trump officials had counted on tariffs as a major funding source, estimating they could generate up to $3.3 trillion over 10 years. That justification has now been severely undercut.

There’s speculation that Congress could amend the reconciliation bill to retroactively authorize the tariffs, though this is considered unlikely. Any such effort would be politically divisive and likely face additional legal challenges.

Markets React but Remain Cautious

Equities initially cheered the news, with the Dow jumping over 450 points in early futures trading and the Nasdaq surging nearly 2%. Chipmakers and multinationals led the rally, bolstered by easing trade tensions and a bullish earnings print from Nvidia.

Still, gains faded slightly as the implications of the appeal—and the reality that Trump’s tariff strategy is far from dead—set in. Bond yields also climbed, reflecting renewed concerns about fiscal policy, particularly if the government loses tariff revenue while pushing through a $3.9 trillion spending plan.

Impacts on Global Trade and Diplomacy

The court’s decision could complicate ongoing trade negotiations with Europe, Asia, and North America. Trump’s “Liberation Day” tariffs, set to activate in July, are now in legal limbo, weakening U.S. leverage at the bargaining table.

Foreign governments are expected to press the U.S. for clarity, and some—like South Korea and Japan—could seek assurances that future military cooperation won't be tied to trade policy. China, Canada, and Mexico may also revisit recent concessions made under threat of tariffs.

In a broader sense, the decision highlights how legal limits still apply to presidential power, even amid claims of national emergency. Analysts say it may reset the terms of U.S. trade diplomacy going forward.

Temporary Win or Structural Shift?

Whether this ruling marks the end of Trump-era tariffs or merely a pause is still unclear. The administration is likely to pursue alternative legal avenues, and the case could stretch well into the 2025 election cycle.

What is certain is that the ruling from the Court of International Trade has shifted the legal ground. Trump’s ability to impose sweeping duties with the stroke of a pen has been curtailed—for now. For businesses, consumers, and investors, that means a temporary reprieve. But for the global trading system, the uncertainty remains.

The next major developments to watch: the Federal Circuit’s decision on the appeal, whether the Supreme Court intervenes, and how quickly the administration pivots to Section 122 or other tools. Tariffs may be down—but they are far from out.