A federal court has found President Donald Trump does not have the authority to impose his sweeping tariff strategy, in a victory for the small business owners who brought the case.
The US Court of International Trade’s three-judge panel was unanimous in its ruling on Wednesday, declaring that the tariffs imposed by the Trump administration would be vacated.
The court said in its ruling that the Trump administration will be given up to 10 days to comply with the order.
The federal government has filed a notice of appeal on the court’s decision in the US Court of Appeals for the Federal Circuit. Any subsequent appeal will be heard by the Supreme Court.
The ruling is a legal victory for a group of small business owners who sued the Trump administration over its aggressive tariff plan. Companies both large and small have objected to Trump’s trade strategy due to the increased import costs and subsequent uncertainty in the market, which Treasury Secretary Scott Bessent described as “strategic.”
The lead plaintiffs in the case, Victor Schwartz and his daughter Chloe Schwartz, who own and run the New York-based specialty wine and spirits importing company VOS Selections, previously told Business Insider the tariffs were catastrophic for their company. They dampened consumer sentiment and decreased sales by 16% compared to the first quarter of 2024.
“Importing and sourcing things you don’t find everywhere, I really thought that was going to be my edge in the business,” said Victor Schwartz, whose small business sources around 600 types of wine and spirits from 350 different producers around the world. “But the tariffs hit us in so many different ways.”
The lawsuit argued that the president’s use of the International Emergency Economic Powers Act of 1977 to bypass Congress was an overreach of his executive power, and that persistent trade deficits with countries he’d imposed tariffs upon did not constitute an “unusual and extraordinary threat” under which the act could be deployed.
“The Worldwide and Retaliatory Tariff Orders exceed any authority granted to the President by IEEPA to regulate importation by means of tariffs,” the court ruled Wednesday.
White House spokesperson Kush Desai told Business Insider in a statement after the ruling was released that foreign countries’ “nonreciprocal treatment of the Unites States has fueled America’s historic and persistent trade deficits.”
“These deficits have created a national emergency that has decimated American communities, left our workers behind, and weakened our defense industrial base — facts that the court did not dispute,” Desai’s statement said. “It is not for unelected judges to decide how to properly address a national emergency. President Trump pledged to put America First, and the Administration is committed to using every lever of executive power to address this crisis and restore American Greatness.”
Ilya Somin, a lawyer on the case and a law professor at George Mason University, in a statement published in Reason magazine and shared with BI, described the court’s ruling as “a major victory in the legal battle against these harmful and illegal tariffs.”
“From the very beginning, I have contended that the virtually limitless nature of the authority claimed by Trump is a key reason why courts must strike down the tariffs,” wrote Somin. “I am glad to see the CIT judges agreed with our argument on this point!”
The decision comes amid ongoing trade negotiations between the administration and countries around the world. On Friday, Trump threatened a new tariff on the European Union, but backed down from the plan over the weekend.
Prices of futures went up after the court issued its ruling. Dow futures went up by 1.27% and Nasdaq futures climbed by 1.90% early Thursday.
Business Insider previously reported that Trump’s trade strategy contributed to price instability and supply chain snarls. Major brands, including Macy’s, Walmart, and Shein, said the tariffs were pushing them to raise prices for consumers. Logistics experts and shipping industry insiders said the effects were expected to intensify as trade tensions continued.
No ‘unbounded authority’
The Constitution grants Congress the exclusive power to levy tariffs and duties. However, BI previously reported that, in recent years, lawmakers have taken a less active role in doing so, instead allowing the executive branch to execute tariff policies within the guidelines defined by Congress.
Six different statutes control how the president can use tariffs. Only three carve-outs allow the president to impose tariffs without a congressional investigation. Still, only the IEEPA has ever been used.
Trump argued that he had the authority to impose his tariff strategy under the IEEPA, which allows the president to declare an emergency under the National Emergency Act to regulate or prohibit imports. The Court of International Trade disagreed.
“The court does not read IEEPA to confer such unbounded authority and sets aside the challenged tariffs imposed thereunder,” the ruling read.
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