On May 28, the US Court of International Trade, a federal trade court based in New York, made a ruling that US president Donald Trump's administration has been exceeding its authority when it comes to implementng tariffs with a major judgment.
The judgment came after 12 states filed a lawsuit against the Trump administration saying it was overstepping its authority by introducing sweeping tariffs which are traditionally approved by Congress. The states listed as plaintiffs in the lawsuit were Oregon, Arizona, Colorado, Connecticut, Delaware, Illinois, Maine, Minnesota, Nevada, New Mexico, New York and Vermont.
“The Worldwide and Retaliatory Tariff Orders exceed any authority granted to the President by IEEPA to regulate importation by means of tariffs,” the court wrote, referring to the 1977 International Emergency Economic Powers Act, which Trump has been using after declaring a national emergency.
The Court argued that trade imbalances are not an emergency and therefore the sweeping tariffs announced on 'Liberation Day' on April 2, currently reduced to 10% for 90 days, should be introduced under non-emergency legislation. The Court also argued that other tariffs imposed by the US on Canada, Mexico and China over the fentanyl crisis should also be blocked. The 25% tariffs on autos, auto parts, steel and aluminium, are not impacted by the judgment as they were issued under Section 232 of the Trade Expansion Act.
The Court has issued a permanent injunction and given the Trump administration 10 calendar days to comply.
However the administration has already appealed the ruling to the Federal Circuit Court of Appeals which has given Trump a temporary reprieve as it looks into the matter; the case could eventually end up in the Supreme Court.
David Chao, global market strategist, Asia Pacific at Invesco, commented: “It’s entirely possible that the Supreme Court rules in Trump’s favour, handing him back the power granted under the IEEPA. And even if the final judgment goes against the administration, Trump still has other means to enact his tariffs. We don’t believe that the latest ruling reduces any uncertainty related to tariff developments."
Chao added: “It’s possible that we could see Trump escalate trade tensions further in response to the court’s ruling against him. It’s this uncertainty of not knowing what’s going to happen next, that is likely to reduce business and household sentiment, leading to diminished capex expenditure and consumption.”
In another major development Elon Musk has said he is leaving the Trump administration in a post on X, formerly known as Twitter. He thanked Trump for giving him the opportunity to reduce wasteful spending at his time at the Department of Government Efficiency (DOGE).
This story has been updated.
