WASHINGTON (AP) – New York’s federal court on Wednesday put President Donald Trump in a major setback, preventing his bold plan to impose a large import tax on imports from nearly every country in the world.
A panel of three judges at the U.S. Court of International Trade ruled that Trump’s power exceeded his power when he invoked the 1977 International Emergency Economic Powers Act and proved the tariffs imposed.
Tariffs overturned decades of U.S. trade policy, undermining global trade, shaking financial markets, and increasing the risk of higher prices and recessions in the United States and around the world.
The U.S. Court of International Trade has jurisdiction over civil cases involving trade. Its ruling could appeal to the U.S. Court of Appeals for the Federal Circuit in Washington and ultimately appeal to the Supreme Court, where Trump’s legal challenge to Trump’s tariffs is widely expected to be finally reached.
What tariffs do the court have?
The court’s ruling prevented Trump from levying nearly all of his U.S. trading partners and taxes he raised last month in China, Mexico and Canada.
On April 2, Trump imposed so-called countdown tariffs of up to 50% on countries operating in the U.S. trade deficit, and almost everyone else imposed a benchmark tariff of 10%. Later, he suspended the countdown tariffs of 90 days to get countries to agree to reduce barriers to U.S. exports. But he kept the baseline tariffs. He claimed no extraordinary powers approved by Congress to take action, and he declared the long-standing U.S. trade deficit a “national emergency” that proved the tax under the IEPEA.
In February, he cited laws to impose tariffs on Canada, Mexico and China, saying that the illegal movement of immigration and drugs at the U.S. border is equivalent to a national emergency, and that all three countries need to do more to stop it.
The U.S. Constitution gives Congress the power to impose taxes, including tariffs. But lawmakers have gradually given the president greater power over tariffs – Trump has made the most of the tariffs.
At least seven lawsuits are challenging tariffs. In Wednesday’s ruling, the Trade Court merged two of the cases – one brought by five small businesses and the other brought by 12 U.S. states.
The ruling does leave other Trump tariffs, including foreign steel, aluminum and automobiles. However, these taxes are cited by different laws that require the Ministry of Commerce investigation and cannot be imposed at the President’s discretion.
Why did the court rule on the president?
The government argued that the court approved the emergency use of tariffs by then-President Richard Nixon during the 1971 economic and financial crisis that suddenly devalued the dollar when the U.S. abruptly ended its policy linking U.S. currency to the price of gold. The Nixon administration successfully cited its powers in its 1917 deal with the Enemy Act, which preceded and provided some of the legal language later used in the IEPPA.
The court disagreed, ruling that Trump’s massive tariffs exceeded his power to regulate imports under the IEPEA. It also said that tariffs did not address the issues they should have solved. In their case, the states pointed out that the U.S. trade deficit has few sudden emergencies. The United States has been cheering for 49 consecutive years in good times and bad times.
So, will this leave Trump’s trade agenda?
Wendy Cutler, now a U.S. trade official, now vice president of the Asian Association’s policy institute, said the court’s ruling “puts the president’s trade policy into turmoil.”
“During the 90-day tariff pause, partners working to negotiate may induce further concessions to the United States until there is more legal clarity,” she said.
Similarly, companies will have to reassess the way they run their supply chains, perhaps speeding up the speed of goods toward U.S. goods to offset the risk that tariffs will recover in appeals.
The Trade Court noted that Trump retained more limited powers to address the trade deficit under another regulation, the Trade Act of 1974. However, the law limits tariffs to 15%, and only within 150 days the United States operates a country with a large trade deficit.
Currently, the Trade Court ruling “destroys the reason the Trump administration uses federal emergency powers to impose tariffs that go beyond Congressional powers and violate any concept of due process,” said Eswar Prasad, a professor of trade policy at Cornell University. “The ruling clearly shows that the widespread tariffs unilaterally imposed by Trump represent an excessive amount of executive power.’
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AP writer Lindsay Whitehurst contributed to the story.
