US President Donald Trump speaks during a proclamation signing in the Oval Office. Photo / Demetrius Freeman, The Washington Post
United States President Donald Trump has used the threat of tariffs as a bargaining chip with foreign leaders, counted on their revenue to raise trillions of dollars and even wielded them as part of an effort to head off international conflicts.
That could all be over for now.
A federal appeals court on Saturday NZT held that Trump does not have the authority to use emergency economic powers to impose taxes on imports, finding that power lies squarely with Congress or within existing frameworks to investigate trade imbalances.
The ruling is a major setback for the White House, and it threatens to stall much of Trump’s second-term agenda.
Trump has described tariffs as “the most beautiful word in the dictionary” and asserted that imposing the duties - which are most often paid by US consumers or businesses, not foreign producers or nations as he often suggests - will “Make America Rich, Strong, and Powerful Again”.
The tariffs, he has said, would offset the cost of his “One Big Beautiful Bill”, the massive tax and immigration package that a congressional estimate says will add US$4.1 trillion ($7t) to the national debt over the next decade.
The non-partisan Congressional Budget Office, which Trump and Republicans attacked for its estimated of the cost of the new law, later projected that the President’s tariffs would nearly pay for the whole measure through new revenue and lower interest payments on the national debt.
Attorney-General Pam Bondi said the Justice Department will appeal the ruling to the Supreme Court, and the federal circuit allowed the tariffs to remain in effect until the case is heard.
White House spokesman Kush Desai said Trump had acted lawfully, and “we look forward to ultimate victory on this matter”.
Success for the President is far from assured.
And in the interim, the appellate ruling may effectively neuter Trump’s ability to leverage access to the US market to bring friends and foes alike to heel.
“It’s a big setback, but it’s far from a complete foreclosing of tariffs,” said Scott Lincicome, vice-president of general economics and trade at the libertarian Cato Institute who has criticised the import taxes, “because the reality is there’s all these other laws that Trump can use to effectively reverse-engineer a global tariff regime”.
Trump used the International Emergency Economic Powers Act of 1977 to impose tariffs on goods from dozens of nations - from the US’ largest trading partners to uninhabited Antarctic islands.
That law allows a president leeway to respond to national economic emergencies.
The appeals court did not consider the question of whether a trade deficit is an authentic national emergency or the policy rationale for issuing the tariffs.
It found that the law did not grant the president the power to unilaterally impose permanent new taxes.
“The statute bestows significant authority on the president to undertake a number of actions in response to a declared national emergency, but none of these actions explicitly include the power to impose tariffs, duties, or the like, or the power to tax,” the court’s seven to four majority wrote.
Trump responded by calling the court “highly partisan” on social media. Eight of the judges on the panel were appointed by Democratic presidents, and three by Republicans.
The court ruling won’t affect tariffs on specific industries - steel, aluminium, copper, automotives - that Trump imposed under a different law, but it would block many of the sweeping country-by-country import taxes he set up.
The White House tactic - which relied on an untested interpretation of an old law - reflects the legal approach that has come to define Trump’s second term.
During his first stint in the Oval Office, the President often tested legal limits but was held back by advisers and lawyers who saw checking his impulses as part of their role.
This time, he is surrounded by deputies who execute and accelerate his instincts and have shown a willingness to drudge up arcane laws to that end.
“This time around, the philosophy has been ‘let’s have a more expansive interpretation of our statutory authority and let the courts decide,’” said Avik Roy, co-founder and chairman for Foundation for Research on Equal Opportunity, a conservative think-tank.
The White House could find a number of ways to get around the ruling even without a victory at the Supreme Court.
Trump could simply amend his executive orders instituting the tariffs to better hew to the appellate court’s ruling, said Todd Tucker, director of industrial policy and trade at the left-leaning Roosevelt Institute.
Or he could declare a narrower national emergency that justified specific temporary tariffs; the court took pains to avoid ruling on a president’s foreign policy powers.
Congress has delegated authority to the president to institute tariffs under separate laws, which is why the industry-specific or “sectoral” tariffs he imposed remain in place.
Those require trade investigations and public comment periods and can take months to implement.
Marc Short, who served as the chief of staff to Vice-President Mike Pence during Trump’s first term, said the President is undeterred by legal losses and will find other avenues if the Supreme Court rules against him.
“It does require the Administration to do more work to justify their tariffs, but if people think this is ultimate victory over his tariffs, I think that is mistaken,” he said.
Congress could also vote to authorise tariffs, though lawmakers have tried to steer clear of taking a vote that could later tie them to rising prices.
“Congress needs to pass that,” said Charles Benoit, trade counsel for the Coalition for a Prosperous America, a conservative pro-tariff group that filed an amicus curiae brief before the appeals court. “This is so much revenue they have to do it.”
While the Supreme Court is stacked in Trump’s favour, some experts expect the high court to abstain from this particular case or ruling against Trump’s interests.
Roy, a former policy adviser to former senator Mitt Romney (Republican-Utah), former Texas Governor Rick Perry (R) and then-Senator Marco Rubio (R-Florida), who is now the Secretary of State, pointed to a Supreme Court decision last year that sharply curtailed the power of federal agencies.
It was backed by the conservative bloc of the justices, and it served as part of the framework the appeals court used to strike down Trump’s tariff policy.
“Everyone has just been assuming Trump can do this,” Roy said of the tariffs.
“A bunch of us have said, ‘Well, let’s see what the courts say about this’, because it is far from clear that the courts will go along with this.”
Roy, who has been an outspoken critic of tariffs, said that if judges do find a way to effectively stymie Trump’s trade war, it could be to his political advantage.
The economy has shown signs of teetering under the weight of the new taxes, with sagging jobs numbers and rising prices in certain key sectors.
“Ironically, he will benefit a great deal from this fairly destructive economic policy being destroyed by the courts,” Roy said.
“The tariffs will be economically harmful for the working-class Americans the President believes he is fighting for.”
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