Businesses have been hoping for clarity as President Trump’s trade war enters its eighth month. Instead, they’re getting more confusion and prolonged uncertainty as legal challenges upend a fundamental premise of the whole scheme.
A federal appeals court ruled on Friday that most of the tariffs Trump has imposed so far are illegal. Many trade experts expected that outcome, yet it still leaves importers facing a chaotic situation likely to weigh on the economy for the rest of the year and possibly well into 2026.
The appeals court ruled that Trump’s use of a 1977 law to impose tariffs on an emergency basis is invalid. That affirmed a May 28 ruling by a lower court. The case will probably now go to the Supreme Court, with the outcome and timing of a decision uncertain.
In dozens of instances this year, Trump has claimed he has the authority to impose tariffs as president because a “national emergency” exists. He repeatedly cites the 1977 law, known as IEEPA, that Congress passed to provide firm guidelines on a president’s emergency powers. The national emergency he typically cites is a deficit in goods with a trading partner.
President Trump on “Liberation Day.” · Reuters / Reuters
But IEEPA doesn’t even mention tariffs, or say anything about a president’s power to impose taxes, which is normally up to Congress. The appeals court cited that in striking down the tariffs, while also pointing out that trade deficits that have existed for years aren’t exactly an emergency.
Trump has used the emergency justification to impose import taxes at a far faster pace than he did during his first term. Emergency tariffs account for 78% of the new tariff revenue importers are paying, according to the Tax Foundation. So if the Supreme Court strikes them down for good, Trump will basically have to start over as he tries to rewire the global trading system.
As a rule of thumb, the emergency tariffs are the “reciprocal” tariffs Trump has levied on imported goods from virtually every nation. Those range from 10% to 50%, with the biggest change being in an increase of more than 30 percentage points in the tax on goods from China, the second-largest source of American imports. The table below lists the current import tax for each trading partner.
Trump has been negotiating trade deals nation by nation, to lock in those tariff rates and secure better terms for American firms exporting to those countries. Those deals would essentially be moot if the Supreme Court invalidates the emergency tariffs. Trump would also lose the ability to use tariffs as leverage for other purposes.
He recently slapped a 50% tariff on imports from India, to try to force the south Asian nation against buying Russian oil. Trump also put a 50% tariff on Brazilian imports, partly as pressure to end the prosecution of former President Jair Bolsonaro. Without emergency tariffs, Trump would lose those levers.
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