Trump's Tariffs 'Illegal'? What Court Say In Its Ruling, Citing US President's Emergency Powers

(MENAFN- Live Mint) A federal appeals court ruled Friday that US President Donald Trump lacked the legal authority to impose broad tariffs on nearly every country, dealing a significant legal setback to his protectionist trade agenda.

The U.S. Court of Appeals for the Federal Circuit found that Trump exceeded his powers under an emergency authority law, largely affirming a May decision by a specialised federal trade court in New York.

However, the ruling allows the tariffs to remain in place for now, as reported by the Associated Press.

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“It seems unlikely that Congress intended to ... grant the President unlimited authority to impose tariffs,” the judges wrote in a 7-4 ruling.

But they did not strike down the tariffs immediately, allowing his administration until mid-October to appeal to the Supreme Court.

The president vowed to do just that.“If allowed to stand, this Decision would literally destroy the United States of America,” Trump wrote on his social media platform.

White House spokesman Kush Desai said Trump had acted lawfully, and“we look forward to ultimate victory on this matter.”

An attorney for small businesses affected by the tariffs, meanwhile, said the ruling shows Trump doesn't have unlimited power to impose tariffs on his own.“This decision protects American businesses and consumers from the uncertainty and harm caused by these unlawful tariffs,” said Jeffrey Schwab, director of litigation at the Liberty Justice Center.

The government has warned that overturning the tariffs could force it to refund a significant portion of collected import taxes, potentially dealing a major financial blow to the U.S. Treasury.

Tariff revenues have reached $159 billion, more than twice the amount collected at the same time last year. In a recent legal filing, the Justice Department cautioned that removing the tariffs could lead to“financial ruin” for the country.

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“For all the tariffs that have been collected under IEEPA, you're going to see folks request refunds and more refunds,” said trade attorney Ryan Majerus, a partner at King & Spalding and a former White House economic adviser.

Attorney General Pam Bondi, meanwhile, accused the judges of interfering with the president's central role in foreign policy and vowed to appeal.

What tariffs are in question?

The ruling concerns two sets of import taxes that President Trump implemented under the justification of a national emergency declared through the 1977 International Emergency Economic Powers Act (IEEPA):

The first set includes the sweeping tariffs announced on April 2-dubbed“Liberation Day” by Trump-when he imposed“reciprocal” tariffs of up to 50% on countries with which the U.S. had trade deficits, along with a“baseline” 10% tariff on nearly all other nations. These rates were later adjusted by Trump, in some cases following trade negotiations, and largely took effect on August 7, AP reported.

The national emergency underlying the tariffs, Trump said, was the long-running gap between what the U.S. sells and what it buys from the rest of the world. The president started to levy modified tariff rates in August, but goods from countries with which the US runs a surplus also face the taxes.

The“trafficking tariffs” he announced Feb. 1 on imports from Canada, China and Mexico, and later refined. These were designed to get those countries to do more to stop what he declared a national emergenc : the illegal flow of drugs and immigrants across their borders into the United States.

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The Constitution gives Congress the power to impose taxes, including tariffs. But over the decades, lawmakers have ceded authority to the president, and Trump has made the most of the power vacuum.

But Trump's assertion that IEEPA essentially gives him unlimited power to tax imports quickly drew legal challenges - at least seven cases. No president had ever used the law to justify tariffs, though IEEPA had been used frequently to impose export restrictions and other sanctions on U.S. adversaries such as Iran and North Korea.

The plaintiffs argued that the emergency power law does not authorise the use of tariffs.

They also noted that the trade deficit hardly meets the definition of an“unusual and extraordinary” threat that would justify declaring an emergency under the law. The United States, after all, has run trade deficits - in which it buys more from foreign countries than it sells them - for 49 straight years and in good times and bad.

Emergency powers

The Trump administration argued that courts approved President Richard Nixon's emergency use of tariffs in a 1971 economic crisis that arose from the chaos that followed his decision to end a policy linking the U.S. dollar to the price of gold. The Nixon administration successfully cited its authority under the 1917 Trading With the Enemy Act, which preceded and supplied some of the legal language used in IEEPA.

In May, the U.S. Court of International Trade in New York rejected the argument, ruling that Trump's Liberation Day tariffs“exceed any authority granted to the President” under the emergency powers law. In reaching its decision, the trade court combined two challenges - one by five businesses and one by 12 U.S. states - into a single case.

In the case of the drug trafficking and immigration tariffs on Canada, China and Mexico, the trade court ruled that the levies did not meet IEEPA's requirement that they“deal with” the problem they were supposed to address.

The court challenge does not cover other Trump tariffs, including levies on foreign steel, aluminium and autos that the president imposed after Commerce Department investigations concluded that those imports were threats to US national security.

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Nor does it include tariffs that Trump imposed on China in his first term, and President Joe Biden kept, after a government investigation concluded that the Chinese used unfair practices to give their own technology firms an edge over rivals from the United States and other Western countries.

Trump could potentially turn to other, more limited legal authorities to impose import taxes. For example, Section 122 of the Trade Act of 1974 permits the president to levy tariffs of up to 15% for a maximum of 150 days on imports from countries with which the U.S. runs significant trade deficits.

Similarly, Section 301 of the same law allows the president to impose tariffs on countries found to be engaging in unfair trade practices, following an investigation by the Office of the U.S. Trade Representative. Trump previously relied on this provision to initiate his first-term trade war with China.

(With inputs from AP)

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