President Trump’s sweeping tariffs on goods imported from almost every foreign nation have been ruled illegal by the U.S. Court of International Trade, marking a setback for the president’s trade agenda — and adding another level of uncertainty for U.S. consumers and businesses.
The Wednesday ruling from the court halted the tariffs Mr. Trump assessed on virtually every other country on April 2, a day he termed “Liberation Day.” Some trading partners faced substantially higher import duties, with the president hiking tariffs on China-produced goods to as high as 145% before easing them temporarily earlier this month.
The ruling raises a host of questions about what happens next, given that Mr. Trump’s trade agenda hinges on wide-ranging tariffs that he has promised will help bring back U.S. manufacturing jobs while also raising trillions in new revenue for federal coffers. Meanwhile, the court decision will likely provide a measure of relief to American businesses and consumers, given that they’re typically on the hook for paying the tariffs when imports reach U.S. soil.
But the ruling also introduces new layer of uncertainty. For one, the Trump administration said it intends to appeal the ruling to the Federal Circuit Court of Appeals. Secondly, Mr. Trump could seek alternate routes to deploy additional tariffs, experts say.
“At the moment, it is anyone’s guess as to whether these very unpopular tariffs will be reinstated on appeal or by the Supreme Court,” said Carl Weinberg, chief economist at High Frequency Economics, in a May 29 research note. “So, uncertainty is now poised to escalate.”
Here’s what to know about Mr. Trump’s tariffs following the ruling.
Are any of Mr. Trump’s tariffs still in effect?
Yes, the U.S. Court of International Trade’s ruling applies to the Trump administration’s tariffs that were issued under the International Emergency Economic Powers Act, or IEEPA. But the Trump administration has also levied additional import duties by tapping other trade rules, and those remain in effect.
“The tariffs that remain in place are the Section 232 tariffs of 25% on automotive, steel and aluminum imports and the Section 301 tariffs on China that were imposed during President Trump’s first term and expanded under the Biden administration,” analysts at research company Capital Economics noted in a May 29 note.
The president cited the IEEPA to announce the so-called reciprocal tariffs on April 2. At the time of the announcement, Mr. Trump said that trade deficits with other nations represented “a national emergency.”
But the court on Wednesday ruled that Mr. Trump’s global tariffs aren’t authorized by the IEEPA, and said it would be unconstitutional for any law passed by Congress to give the president blanket authority to set tariffs.
“The court does not read IEEPA to confer such unbounded authority and sets aside the challenged tariffs imposed thereunder,” the judges wrote Wednesday.
Could Mr. Trump reinstate the tariffs?
Mr. Trump could reinstate the tariffs if he wins on appeal, but his administration could also seek other routes to reimpose the import duties, according to Goldman Sachs economists.
For instance, the president could use Section 122 of the Trade Act of 1974 to impose tariffs of up to 15%, but they would be limited to 150 days, according to Goldman Sachs. A section of the Trade Act of 1930 would allow the president to impose tariffs of up to 50% on imports from nations that discriminate against the U.S., they added.
“Section 232 tariffs, which President Trump has already used for steel, aluminum and autos, could be broadened to cover other sectors,” they noted.
What does this mean for U.S. businesses and consumers?
Until the appeal is resolved, there will be some added level of uncertainty for U.S. businesses, which are on the hook for paying the tariffs when imported goods reach U.S. ports, some economists said on Thursday.
Most or all of the tariffs are passed on to consumers in the form of higher prices, economists say, which has prompted them to forecast higher inflation in 2025. But given that some of Mr. Trump’s other tariffs remain in place, U.S. businesses are still on the hook for those additional import duties. That means that while the effective tariff rate is now lower, it’s still significantly higher than it was prior to the current Trump administration.
“We calculate that the effective tariff rate is now 6.5%, up from 2.5% at the start of the year but far lower than the 15% rate based on our assumption of the IEEPA-related tariffs remaining in place,” noted Capital Economics.
Even so, U.S. investors cheered the ruling, signaling relief from Wall Street that the overhang from the tariffs has been removed, albeit perhaps temporarily. The tariffs had raised the risks of a recession and were expected to boost inflation this year, economists had forecast.
