The Trump administration blamed “activist judges” on Thursday for blocking Donald Trump’s sweeping tariffs as it looks to overturn a major legal blow to the president’s signature economic policy.
On Wednesday a US trade court ruled Trump’s tariffs regime was illegal, in a dramatic twist that could block the US president’s controversial global trade policy.
The ruling by a three-judge panel at the New York-based court of international trade came after several lawsuits argued Trump had exceeded his authority, leaving US trade policy dependent on the president’s whims and unleashing economic chaos around the world.
Tariffs typically need to be approved by Congress but Trump has so far bypassed that requirement by claiming that the country’s trade deficits amount to a national emergency. This had left the US president able to apply sweeping tariffs to most countries last month, in a shock move that sent markets reeling.
The court’s ruling stated that Trump’s tariff orders “exceed any authority granted to the president … to regulate importation by means of tariffs”.
The judges were keen to state that they were not passing judgment on the “wisdom or likely effectiveness of the president’s use of tariffs as leverage”. Instead, their ruling centred on whether the trade levies had been legally applied in the first place. Their use was “impermissible not because it is unwise or ineffective, but because [federal law] does not allow it”, the decision explained.
Financial markets cheered the court’s ruling, with the US dollar rallying in its wake, soaring against the euro, yen and Swiss franc. In Europe, the German Dax rallied 0.9%, while France’s Cac 40 rose 1%. The UK’s FTSE 100 blue-chip index ticked up 0.1% at the start of trading. Stocks in Asia also climbed on Thursday, while in the US stock markets all rose marginally in early trading.
The court ruling immediately invalidates all of the tariff orders that were issued through the International Emergency Economic Powers Act (IEEPA), a law meant to address “unusual and extraordinary” threats during a national emergency.
The judges said Trump must issue new orders reflecting the permanent injunction within 10 days.
However, the Trump administration has already appealed against the ruling and asked for a pause because it “jeopardizes ongoing negotiations with dozens of countries”.
White House officials have hit out at the court’s authority. “It is not for unelected judges to decide how to properly address a national emergency,” Kush Desai, a White House spokesperson, said in a statement to Reuters.
Speaking to Fox, the White House’s economic adviser, Kevin Hassett, said three trade deals were nearly done and he expected more despite the ruling. “If there are little hiccups here or there because of decisions that activist judges make, then it shouldn’t just concern you at all, and it’s certainly not going to affect the negotiations,” Hassett said.
The ruling, if it stands, blows a giant hole through Trump’s strategy to use steep tariffs to wring concessions from trading partners, draw manufacturing jobs back to US shores and shrink a $1.2tn (£892bn) US goods trade deficit, which were among his key campaign promises.
Without the help of the IEEPA, the Trump administration would have to take a slower approach, launching lengthier trade investigations and abiding by other trade laws to back the tariff threats.
The decision is also likely to embolden other challenges to Trump’s policy. Last month, California’s governor, Gavin Newsom, filed a lawsuit against the tariffs, arguing they were “illegal, full stop”.
Any legal challenge to the IEEPA ruling will have to be heard at the US court of appeals for the federal circuit in Washington DC, and ultimately the US supreme court.
The court was not asked to address some industry-specific tariffs Trump has issued on automobiles, steel and aluminium, using a different statute, so these are likely to remain in place for now.
Analysts at Goldman Sachs noted that there could be other legal avenues for Trump to impose across-the-board and country-specific tariffs, saying: “This ruling represents a setback for the administration’s tariff plans and increases uncertainty but might not change the final outcome for most major US trading partners.”
Jim Reid, a Deutsche Bank strategist, said: “If the ruling did remain in place, preventing the use of tariffs under IEEPA, one option for the administration would be to expand the use of other tariff instruments, like the section 232 on national security grounds, which have been used for autos, steel and aluminium tariffs.”
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Other options for the president include sections under various trade acts that grant him powers to intervene on trade policy, albeit in an often slower and, in some instances, more limited way.
Stephen Miller, the White House deputy chief of staff for policy, hit out at the ruling in a social media post claiming “the judicial coup is out of control”.
Trump did not immediately post a response on Truth Social. Instead, he posted about what he characterised as a favourable ruling in another lawsuit, in which he is suing the Pulitzer board, which awards the US’s most prestigious journalism prizes.
At least seven lawsuits have challenged Trump’s border taxes, the centrepiece of Trump’s trade policy.
The court made its ruling in response to two cases. One was filed by a group of small businesses, including a wine importer, VOS Selections, whose owner said the tariffs were having a major impact and his company may not survive.
The other was filed by a dozen US states, led by Oregon. “This ruling reaffirms that our laws matter, and that trade decisions can’t be made on the president’s whim,” said the Oregon attorney general, Dan Rayfield.
The plaintiffs in the tariff lawsuit argued that the emergency powers law did not give the president the power to apply tariffs, and even if it had done, the trade deficit did not qualify as an emergency, which is defined as an “unusual and extraordinary threat”. The US has run a trade deficit with the rest of the world for 49 consecutive years.
Trump imposed tariffs on most countries in an effort to reverse the US’s massive and longstanding trade deficits. He also targeted imports from Canada, China and Mexico, claiming it was meant to combat the illegal flow of immigrants and the synthetic opioids across the US border.
His administration pointed to the court’s approval of the former president Richard Nixon’s emergency use of tariffs in 1971, and claimed that only Congress, and not the courts, could determine the “political” question of whether the president’s rationale for declaring an emergency complied with the law.
Trump’s “liberation day” tariffs shook global financial markets and led many economists to downgrade the outlook for US economic growth.
Reuters and the Associated Press contributed reporting
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