Tariffs voided in court ruling

President Donald Trump’s aggressive trade agenda hit a significant snag this week when a federal appeals court ruled that most of his “reciprocal tariffs” are illegal.

The U.S. Court of Appeals for the Federal Circuit held Friday that Trump overstepped his presidential authority when he imposed levies on virtually every country in the world as part of his April 2 “liberation day” announcement.

Before court action, Trump’s tariffs were set to affect roughly 69% of U.S. goods imports, according to the Tax Foundation. If struck down, the duties would impact just roughly 16%.

The ruling injects a heavy dose of uncertainty into a central tenet of Trump’s economic agenda, which has rattled the global economy since April.

For now, the appeals court ruling states the duties on goods from most countries — as high as 50% for a few countries — will stay in effect until Oct. 14, to allow the Trump administration time to appeal the decision to the U.S. Supreme Court.

Trump cited the 1977 International Emergency Economic Powers Act to justify his sweeping tariffs. He declared the United States’ trade deficit with other nations a national emergency, and invoked IEEPA to impose the steep levies.

The appeals court ruled, however, that IEEPA does not give him authority to implement the tariffs, stating that power resides solely with Congress.

“The core Congressional power to impose taxes such as tariffs is vested exclusively in the legislative branch by the Constitution,” the court said in its 7-4 ruling.

The ruling puts Trump’s levies, which took effect earlier this month after multiple delays, on shaky ground. Trump imposed the tariffs on more than 60 countries, including a 50% rate on India and Brazil. He also imposed a 10% baseline tariff on most other countries that were not hit with a specified reciprocal tariff rate.

The court also deemed Trump’s tariffs on China, Canada and Mexico — which the administration claimed were necessary because the countries were not doing enough to curb the alleged trafficking of fentanyl into the U.S. — were illegal.

Trump has said that he will appeal the ruling to the Supreme Court. “If allowed to stand, this Decision would literally destroy the United States of America,” he wrote on social media.

If the high court ultimately determines that the tariffs are illegal, there are still other ways for Trump to implement levies, but the scope would likely be much more restricted.

For instance, Trump could invoke the 1974 Trade Act, but that law caps tariffs at 15% and only for 150 days, unless Congress extends them.

Earlier this month, the Trump administration expanded its 50% steel and aluminum tariffs to include more than 400 additional product categories, according to the Department of Commerce.

Trump has relied on these sector-specific tariffs — often referred to as Section 232 tariffs — to bypass court proceedings.

“Section 232 tariffs are central to President Trump’s tariff strategy,” Mike Lowell, a partner at law firm Reed Smith, previously told CNBC.

“They aren’t the target of the pending litigation, and they’re more likely to survive a legal challenge and continue into the next presidential administration, which is what we saw with the aluminum and steel tariffs originally imposed under the first Trump administration,” Lowell said.

The Trump administration is reportedly planning to expand its sector-specific tariffs, including those on steel and aluminum, as a way of skirting the looming legal battles, according to The Wall Street Journal.

The tariffs that Trump imposed on China during his first term, which former President Joe Biden maintained, are also likely to remain in place despite the appeals court ruling.

Finally, the “de minimis” exemption was officially eliminated on Friday, so imports valued at $800 or less are now subject to tariffs and duties, another blow to small and medium-sized U.S. businesses, and a part of Trump’s trade agenda that appears safe from court action.