A U.S. trade court has ruled that President Trump’s widespread tariffs on goods imported from nearly all foreign countries are illegal, representing a setback for his trade agenda and introducing further uncertainty for American consumers and businesses.
The U.S. Court of International Trade issued a ruling on Wednesday halting the tariffs that President Trump had imposed on most countries on April 2nd, a date he referred to as “Liberation Day.” Some trading partners faced significantly higher duties, with tariffs on Chinese goods rising to as high as 145% before a temporary easing earlier in May.
The court’s decision raises questions about the future of President Trump’s trade policies, which heavily rely on broad tariffs intended to restore U.S. manufacturing jobs and generate trillions of dollars in federal revenue. Simultaneously, the ruling is likely to offer some relief to U.S. businesses and consumers who typically bear the cost of these tariffs.
However, the decision also creates new uncertainty. The Trump administration has announced its intention to appeal the ruling to the Federal Circuit Court of Appeals. Additionally, experts suggest that President Trump might explore alternative methods for imposing tariffs.
Carl Weinberg, chief economist at High Frequency Economics, noted in a research brief that the future of these “very unpopular tariffs” remains uncertain pending potential reinstatement on appeal or by the Supreme Court.
Are any of President Trump’s tariffs still in effect?
Yes, the U.S. Court of International Trade’s ruling specifically applies to tariffs enacted under the International Emergency Economic Powers Act (IEEPA). However, the Trump administration has also implemented import duties using other trade regulations, which remain in place.
Analysts at Capital Economics pointed out that the tariffs still in effect include the Section 232 tariffs of 25% on automotive, steel, and aluminum imports, as well as the Section 301 tariffs on China that were initially imposed during President Trump’s first term and later expanded under the Biden administration.
President Trump invoked the IEEPA to announce the reciprocal tariffs on April 2nd, stating that trade deficits with other countries constituted a “national emergency.” However, the court ruled on Wednesday that these global tariffs were not authorized by the IEEPA, deeming it unconstitutional for Congress to grant the president blanket authority to set tariffs.
Could President Trump reinstate the tariffs?
According to Goldman Sachs economists, President Trump could potentially reinstate the tariffs if his administration prevails in the appeal. Alternatively, they could explore other legal avenues to reimpose these import duties. For example, Section 122 of the Trade Act of 1974 allows the president to impose tariffs up to 15% for a period of 150 days. Furthermore, a section of the Trade Act of 1930 permits the president to impose tariffs up to 50% on imports from countries that discriminate against the U.S. They also noted that the Section 232 tariffs, already used for steel, aluminum, and autos, could be extended to other sectors.
What does this mean for U.S. businesses and consumers?
Until the appeal is resolved, U.S. businesses will face continued uncertainty, as they are responsible for paying tariffs on imported goods upon arrival in the U.S., according to some economists. Economists generally agree that most or all of these tariffs are passed on to consumers through higher prices, leading to forecasts of increased inflation in 2025. Given that some of President Trump’s other tariffs remain active, U.S. businesses will still be subject to those import duties. While the overall effective tariff rate has decreased, it remains significantly higher than before the current Trump administration. Capital Economics estimates the effective tariff rate to be 6.5%, up from 2.5% at the start of the year but lower than the anticipated 15% rate if the IEEPA-related tariffs had remained in place.
Despite the ongoing uncertainty, U.S. investors reportedly reacted positively to the court’s ruling, with Wall Street expressing relief that the immediate pressure from these tariffs has been lifted, although potentially temporarily. Economists had previously projected that the tariffs increased the risk of a recession and were expected to contribute to inflation this year.
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