Updated May 29, 2025
Whew, are you ready? In another major head-spinning move to the trade war, on May 28th, 2025, the U.S. Court of International Trade (CIT) blocked President Trump’s administration from implementing sweeping tariffs, ruling that the President overstepped his authority by using emergency powers (specifically the International Emergency Economic Powers Act – IEEPA) to impose these duties.
The nitty gritty:
- What’s the court ruling – the U.S. Court of International Trade (a three-judge panel) issued an injunction against tariffs the Trump administration sought to impose in early April and other sweeping tariff executive orders. This includes a 10% global tariff, additional “reciprocal tariffs,” and specific tariffs targeting countries like China, Canada, and Mexico, which were justified under various national emergency claims (trade deficits, illegal immigration, drug trafficking).
- Their reasoning – the court found that the President does not have unilateral authority under IEEPA to impose such broad tariffs, stating that the U.S. Constitution grants Congress the exclusive power to regulate commerce and set tariffs. The court deemed the President’s use of IEEPA an overreach, particularly as longstanding trade deficits do not constitute a “sudden emergency” as envisioned by the act.
- The affected tariffs: the ruling impacts the broad tariffs announced in April 2025 and earlier levies on China, Mexico, and Canada that were also based on emergency powers. However, it’s noted that some tariffs imposed under different statutes (like Section 232 and Section 301, which cover steel, aluminum, and some auto tariffs) are not affected by this specific ruling.
- Trump administration’s response: the administration has already reportedly lodged an appeal within minutes of the ruling. The case could go to the U.S. Court of Appeals for the Federal Circuit and potentially the Supreme Court. White House officials have criticized the ruling, with some calling it a “judicial coup” and asserting that judges should not decide how to address national emergencies.
- What’s the Immediate effect: the court gave the White House 10 days to complete the bureaucratic process of halting the tariffs. However, many of these tariffs were reportedly already suspended or paused for negotiations. It’s also mentioned that for now, tariffs at the border might still have to be paid pending further clarity and the appeals process. If the ruling is ultimately upheld, businesses that paid these tariffs might receive refunds with interest.
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What Really Happened – Judges Draw the Line “President Exceeded His Authority”
The three-judge panel delivered a unanimous and unusually scathing rebuke. They ruled that while emergency powers exist for genuine crises, they don’t give presidents unlimited authority to rewrite trade policy on their own.
“The Constitution grants Congress the exclusive power to regulate foreign commerce,” the court emphasized, noting that Trump’s sweeping tariffs went far beyond what any emergency law permits. The judges specifically criticized Trump’s attempt to link the tariffs to the fentanyl crisis, arguing that broad import taxes weren’t a targeted response to drug trafficking.
Further, the court stressed they weren’t judging whether tariffs were good or bad policy – just that the president can’t impose them unilaterally under emergency powers. “Federal law does not allow the president to wield emergency economic powers as an open-ended tariff authority,” they wrote.
The ruling took effect immediately, with the administration ordered to formally revoke the tariff orders within 10 days. Of note, some Trump-era tariffs on steel, aluminum, and automobiles imposed under different national security laws remain intact.
Who Are the Winners and Losers? Business America Reacts
In the very immediate aftermath, the business world’s response are splitting predictably along import-export lines. Companies that rely on global supply chains – from Walmart and Target to tech giants like Apple – quietly celebrated the decision. These firms had been bracing for massive cost increases that would either crush their profit margins or force them to raise prices on consumers.
Small businesses were particularly vocal in their relief. The lawsuit was led by companies like a New York wine importer and a Virginia educational kit manufacturer who argued the tariffs would devastate their operations. Oregon Attorney General Dan Rayfield, who spearheaded the legal challenge, called it “a victory for working families, small businesses, and everyday Americans.”
Financial markets immediately cheered the news. Stock prices rallied and the dollar strengthened as investors bet on lower business costs and reduced economic uncertainty.
But not everyone was celebrating. Industries that benefit from trade protection – including some manufacturers and labor unions – viewed the ruling as a setback. They argued that Trump’s aggressive tariffs were finally leveling the playing field against unfair foreign competition and protecting American jobs.
The White House echoed these concerns, with a spokesman insisting that trade deficits constitute “a national emergency that has decimated American communities” and vowing to continue fighting for tariffs as a tool to put “America First.”
Economic Relief – Lower Prices and Smoother Supply Chains
For ordinary Americans, the court’s decision means avoiding a potential surge in prices at the checkout line. Everything from smartphones and furniture to food products would have faced Trump’s tariff taxes, costs that retailers typically pass on to consumers.
This comes at a time as the country continues grappling with inflationary pressures. By blocking what economists called a broad “tax on imports,” the ruling removes one significant threat to price stability.
Supply chains also got immediate relief. Companies had been scrambling to adjust sourcing and inventory to deal with Trump’s rapidly changing tariff policies. The court’s injunction provides clarity, at least temporarily, allowing businesses to operate without the 10-50% cost penalty hanging over their heads.
Some importers may even rush to bring in goods during this window of certainty, knowing that tariffs could potentially return if Trump wins his appeal.
Only A Temporary Ceasefire?
The ruling’s impact extends far beyond America’s borders. By neutering Trump’s primary weapon in trade negotiations, the court may have fundamentally altered the dynamics of ongoing disputes with China, the European Union, and other major trading partners.
At the time of the court’s decision, the U.S. and China were in the middle of delicate negotiations. Trump had paused his threatened 50% “reciprocal” tariffs for 90 days while working toward a longer-term deal. Now, with his blanket tariff authority legally challenged, China and other countries may be less inclined to make concessions.
Former U.S. trade negotiator Wendy Cutler noted that trading partners “may be tempted to hold off making further concessions until there is more legal clarity.” In other words, why rush into unfavorable deals when America’s main source of leverage has been legally undermined?
Overnight initial reactions from Asia were cautiously optimistic. South Korea’s central bank projected that tariff rates on Korean exports to the U.S. would fall from 13.3% to 9.7%. Hong Kong’s financial secretary suggested the ruling would “bring President Trump to reason.”
Trump’s Next Moves: The Tariff War Continues by Other Means
Facing this legal roadblock, the Trump administration is already pivoting to a Plan B. Within hours of the ruling, they filed an appeal and signaled they won’t simply wait for the courts to decide.
A White House spokesman declared that Trump is “committed to using every lever of executive power” to pursue his trade agenda, hinting at alternative strategies that don’t rely on the now-blocked emergency tariffs.
Trump still has several tools at his disposal:
Targeted Legal Tariffs
The court didn’t touch tariffs imposed under other laws, like Section 232 (national security) or Section 301 (retaliation against unfair practices). Trump, for example, could launch new investigations to justify tariffs on specific products or countries through these narrower channels.
More on these below:
- Section 122 (Trade Act of 1974): This allows quick action without a formal investigation, letting the administration impose tariffs up to 15% for a maximum of 150 days. However, any extension would require approval from Congress.
- Section 301 Investigations: Trump could initiate these investigations against key trade partners. Although this approach requires a bureaucratic process taking several weeks, it lays solid groundwork for targeted tariffs.
- Section 232 Expansion: Currently used for steel, aluminum, and autos, this provision could potentially be expanded to other industries.
- Section 338 (Trade Act of 1930): Although never previously used, this section empowers the president to impose tariffs up to 50% against countries seen as discriminating against the U.S.
Non-Tariff Barriers
Instead of taxing imports, the administration could impose quotas limiting how much foreign goods can enter the country. They could also tighten regulations, citing health or security concerns to restrict certain imports – essentially creating hidden trade barriers.
Export Controls
The U.S. has already been restricting exports of high-tech goods to China, and Trump could dramatically expand these efforts. Recently, the government ordered companies to stop shipping advanced semiconductors and chemicals to China without licenses.
Diplomatic Pressure
Even without tariff threats, the U.S. can still negotiate deals by offering other incentives or using different forms of pressure, from visa restrictions to financial sanctions.
Comparison: Tariff vs. Non-Tariff Measures
| Angle | Tariffs | Non-Tariff Measures |
|---|---|---|
| How it Works | Taxes on imported goods | Limits imports or applies regulations |
| Consumer Impact | Directly increases prices | Indirectly affects availability/prices |
| Visibility | Highly visible | Less visible but impactful |
| Legal Issues | Strictly regulated by law/WTO | Often allowed under security/safety rules |
| Business Impact | Immediate cost increases | Disruptive, with compliance challenges |
A Constitutional Crisis in Trade Policy?
The legal battle is far from over. Trump’s appeal will work its way through higher courts, potentially reaching the Supreme Court. The ultimate decision could reshape how much power future presidents have in trade policy.
The Court of International Trade’s ruling represents a rare judicial check on presidential authority in trade matters, historically an area where courts have been hands-off. The three judges – appointed by Obama, Reagan, and Trump respectively – delivered a unanimous decision that may carry extra weight with higher courts.
If upheld, the ruling would establish a important precedent limiting how presidents can use emergency powers for trade policy. Cornell trade policy professor Eswar Prasad observed that it “makes it clear that Trump’s broad tariffs represent an overreach of executive power.”
But if the Supreme Court’s conservative majority disagrees and overturns the decision, it could greenlight expansive executive tariff powers for future presidents of both parties.
