US trade court invalidates Donald Trump’s reciprocal tariffs

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A US court invalidated Donald Trump’s “liberation day” tariff scheme, dealing a heavy blow to the White House that could throw the president’s global trade policy into disarray. 

The US Court of International Trade found on Wednesday that the president did not have the authority to introduce the levies using the emergency economic powers legislation he cited when he imposed sweeping tariffs on countries around the world last month.

The ruling represents a dramatic twist in the trade wars that Trump launched in the early months of his presidency, adding legal uncertainty to the financial and economic clouds that have surrounded the new era of American protectionism. Even if the ruling is appealed, it will for now embolden opponents of the tariffs in corporate America, foreign capitals and the US Congress who have been trying to persuade Trump to roll back the levies.

The court’s order, entered by the panel of judges in the Court of International Trade where the tariff schemes were challenged, were unequivocal.

The executive orders in which Trump announced the tariffs “are declared to be invalid as contrary to law”, the court ruled.

“The Worldwide and Retaliatory Tariff Orders exceed any authority granted to the President . . . to regulate importation by means of tariffs,” the order said.

US stock index futures rose after the court invalidated Trump’s tariffs, extending a rally that was also fuelled by upbeat earnings from chipmaker Nvidia. S&P 500 futures were up 1.5 per cent in the New York evening. The US dollar also rose about 0.5 per cent against a basket of six peers following the court decision.

A White House spokesperson criticised the ruling, saying “it is not for unelected judges to decide how to properly address a national emergency”. He added: “President Trump pledged to put America First, and the Administration is committed to using every lever of executive power to address this crisis and restore American Greatness.”

The decision by the Court of International Trade will have far-reaching implications for Trump’s trade policy because it appears to stop the president from imposing tariffs using the justification he has claimed.

The administration plans to appeal, according to a court filing.

Trump’s April 2 tariff regime sparked weeks of financial market turmoil, which eased only as he pulled back from some of the most aggressive levies on trading partners, including China.

Trump has delayed the imposition of other tariffs, depending partly on countries’ willingness to reach trade deals with the US. 

Democrats cheered the ruling. “I argued from the start that Donald Trump’s claim that he could simply decree sky-high new taxes on imported goods depended on mangling the Constitution beyond recognition,” said Ron Wyden, the senator from Oregon.

“Trump’s trade taxes jacked up prices on groceries and cars, threatened shortages of essential goods and wrecked supply chains for American businesses large and small.”

The court heard two separate but similar challenges to Trump’s tariffs in May. One was from a group of US businesses that said the levies had harmed them, led by wine importer VOS Selections. The second was from 12 US states led by Oregon, which said tariffs would raise the cost to publicly funded organisations of buying essential equipment and supplies. 

During the Oregon hearing, Department of Justice lawyer Brett Shumate said an injunction against the tariffs “would completely kneecap the president” when he was on the world stage trying to strike trade deals. Judge Jane Restani replied that the court could not for political reasons allow the president to do “something he’s not allowed to do by statute”.  

During the VOS Selections hearing, government lawyer Eric Hamilton said the announcement of tariffs had led countries to start negotiating trade deals with Trump. “Don’t argue policy with the court, that’s not our business,” Restani responded. 

Under the US constitution, Congress has the power to set tariffs. But the Trump administration has said the International Emergency Economic Powers Act gives the president the power to do so if there is a declared national emergency. 

He declared a national emergency in an executive order on April 2, saying factors including a lack of reciprocity in bilateral trade relationships, and US trading partners’ policies that suppress domestic wages, amounted to an “unusual and extraordinary threat” to the US economy and to national security.  

In reaction to the ruling, a White House spokesperson reiterated that claim: “Foreign countries’ nonreciprocal treatment of the United States has fuelled America’s historic and persistent trade deficits. These deficits have created a national emergency that has decimated American communities, left our workers behind, and weakened our defence industrial base — facts that the court did not dispute.”

The court cases challenged his use of those powers. Jeffrey Schwab, a lawyer for VOS Selections and the other four businesses challenging the tariffs, accused the president during a hearing of an “unprecedented and unlawful expansion of executive authority”. 

In the past few days Trump has agreed to delay his threatened 50 per cent tariffs on the EU after talking to European Commission president Ursula von der Leyen. He told reporters: “We had a very nice call . . . and I agreed to move [the date].”

The US and China have agreed to lower tariffs for 90 days in a major de-escalation. Smartphones and other electronics imported to the US from China had been exempted, but Trump has signalled that this will be temporary.